Home Market News UBS Research: Softgoods sales, stock prices to decline when student loan payments resume

UBS Research: Softgoods sales, stock prices to decline when student loan payments resume

0
UBS Research: Softgoods sales, stock prices to decline when student loan payments resume
Worried woman looking at her online bank account on mobile phone

SrdjanPav/E+ via Getty Images

According to UBS analysts, the resumption of student loan payments in October is expected to lead to a decline in consumer spending for softgoods and a subsequent decrease in related stock prices.

UBS estimates that the total annual student loan repayment for all U.S. consumers over the next year will range between $65–$70 billion, compared to when it was paused.

A recent survey conducted in September revealed that 40% of respondents plan to reduce their spending on apparel in order to afford their student loan payments.

UBS analysts stated, “If the student loan issue causes consumers to reallocate $10 billion away from softgoods out of the estimated $500 billion total U.S. sales, this would result in a 2% decline in industry sales.”

The survey also found that adults with student loans make up 14.7% of the U.S. population, with 38 million adults. During the Covid-19 pandemic, 65.2% of these adults (25 million) did not make any loan payments.

Of those adults, approximately 78.8% (or roughly 20 million) stated their intention to resume loan payments, which are estimated to have a monthly average minimum of $225.

The annualized average monthly minimum per U.S. adult with student loans who will resume payments after the pandemic is $2,696. The total annualized amount for all U.S. adults resuming payments is $53 billion, although the estimated total annualized actual amount is $67.5 billion, according to the data.

UBS analyses indicate that earnings per share estimates for softline stocks are 13% below consensus for the average stock in fiscal year 2024.

While some investors believe that student loan repayment is an insignificant issue and that borrowers will not have to start repaying their loans, UBS warns that this could result in a significant deceleration in softgoods industry sales growth rate.

UBS classifies stocks like (VSCO), (CRI), (TPR), (GPS), (TJX), (CROX), (PLCE), (DBI), (VFC), and (AEO) as having high leverage for consumers who are starting to repay their student loans.

UBS also rates stocks like (UAA), (ATZ), (AEO), (PVH), (ONON), (NKE), (LEVI), (KTB), (GIL), (RL), (DECK), (SKX), and (SIG) as “buys,” and stocks like (M), (VSCO), (BURL), (JWN), (ROST), (KSS), (URBN), (FL), (GPS), and (DDS) as “sells.”

Further Insights into U.S. Student Loan Payments: