Stimulus Round 2: A Booster Shot for Retail?
In the ongoing fight against the COVID-19 pandemic, an additional $900B of stimulus relief funds were signed into law on December 27th, exactly nine months after and at roughly half the size of the original $2.2T stimulus package that Congress passed in March 2020.
The new funds include direct stimulus payments of $600/$1200 to individuals/couples (vs. the first round’s $1200/$2400) plus an additional $600 per child (vs. the first round’s $500). It also includes $300 per week in unemployment insurance through March 14th (vs. the first round’s $600 which lasted until the end of July), renewed small business loans, funding for schools, eviction protection, increased SNAP benefits, and aid for vaccine production and distribution, among other grants.
In continuation of our ongoing stimulus research, this analysis* focuses on the second round of direct stimulus payouts the IRS began delivering to taxpayers around December 30th. We cohorted this group in order to understand how and where payouts are currently impacting consumer spending. Here’s what we found.
- The second round of stimulus payments were distributed much faster (100% of direct deposits spanned just eight days), and were sent to 28% fewer recipients, relative to the first round.
- The stimulus cohort outspent non-recipients by 22% YoY across our total consumer universe in the initial week (similar to the 25% YoY in the first round). Put another way, the cohort lifted YoY growth a full 15 points (similar to the 14 points in the first round). This lift subsequently decreased to 11 points and then to 9 points in the next two weeks respectively.
- Sector beneficiaries included Restaurant Delivery, Sporting Goods, and Home with 25+ points of added growth, mirroring the first round. However, unlike the first round, this round included Apparel, Beauty, and Department Stores, with ~15 to 25 points of added growth, primarily because stores are now open in contrast to April’s lockdown. Indeed, in-store sales growth among stimulus recipients was +12% YoY vs. the 27% YoY decline among non-recipients.
- Merchants that most benefited from the stimulus included Peloton, DoorDash, Academy Sports, Etsy, Ross, Lowe’s, and Lululemon; the least benefited were Sprouts, McDonald’s, and Restaurant Brands, among other Fast Food and Grocery chains. In contrast to the first round, Wayfair and Amazon were not at the top of the list this time around. New top additions this round included Ross, Peloton, Ulta, TJX, and Gap.
Faster Rollout; Smaller Payout
Both the distribution schedule and size of recipient pool differed in the second stimulus rollout compared to the first.
- Shortened rollout time: The second round of distribution spanned days (vs. months in round one). 100% of direct deposits were sent in a period of 8 days, between 12/30 and 1/6 (prepaid debit cards began to rollout on 1/7). In contrast, 80% of round one deposits were sent in the initial week of 4/9, and most of the remainder by the end of May (with a bit more sprinkling in throughout the rest of the year).
- Fewer recipients: There were 28% fewer recipients this time around relative to April, primarily due to the sliding income scale to determine eligibility, which gradually phased out the payment amount until a specified annual gross income (AGI) level was reached. Since round two’s payout size was lower than round one, the AGI limit (for single filers) hit sooner, at $87K vs. round one’s $99K. Additionally, while round one’s AGI was based on 2018 or 2019’s tax return, round two’s was based solely on 2019, potentially disqualifying more individuals.
Considering the dynamics of eligibility and payout size, we looked at the net composition of cohort size as it stands today. 59% of panelists received a stimulus check and 41% did not. Of the 59% that received payouts, 40% received both rounds, 17% received the first round but not the second, and 2% received the second but not the first.
Another 15% Lift in Spending Growth
Both stimulus checks (and weekly UI benefits) heavily impacted consumer spending. In the first round, peak impact was seen during the week of 4/16 (payments began 4/11), when the cohort outspent by 25% YoY (cohort’s +14% – non-recipients’ -11%), and lifted** total spending growth*** a full 14 points. Naturally, this impact faded over the subsequent weeks and months, particularly once UI benefits expired at the end of July.
Because of the efficiency and advanced notice of the second rollout, the peak impact was felt almost immediately, during the week of 12/31 (payments effectively began 12/31), where the cohort outspent by 22% YoY and lifted total spending growth 15 points again.
This lift continued through the most recent two weeks, fading to 11 points in the week ending 1/13, then to 9 points during the week ending 1/20.
Delivery, Home, and now Apparel
As with the first stimulus, Restaurant Delivery, Sporting Goods (Hunting & Fishing/Sports Gear), and Home Improvement/Furnishing all benefited from the second round of payments with 25%+ of increased growth.
The striking difference this round is that Apparel, Beauty, and Department Stores were clear beneficiaries; in contrast they saw minimal to no benefit back in April. Footwear, General Cosmetics, Active & Athleisure, Off-Price Department Stores, and General Apparel all saw increased growth of 17% to 26% this stimulus round vs. a minimal lift in the last round.
The still struggling Movie Theaters and Air Travel, as well as the essential Supermarket sector, were once again least impacted from the stimulus cohort—though we note that they still received slightly more of a benefit this time around relative to the first round.
Comparing the magnitude of the lift this time around vs. the first round, as depicted below, it’s apparent that Apparel, Beauty, and Department Stores were the clearest round-two beneficiaries. Additionally, Home Fitness saw 10 points of an increased lift this time around.
Interestingly, it’s evident how much Home Improvement, Online Marketplaces (Amazon, Etsy, etc.), and Restaurant Delivery benefited from the nation’s lockdown during the first round, as the benefit the second time—though strong—was still 10 to 15 points lower.
Why Did Apparel, Beauty, and Department Stores benefit?
Looking at Apparel, Beauty, and Department Store performance by channel makes it clear why this sector saw a benefit this time around, in contrast to the first. In-store spending was non-existent back in April, and thus any stimulus impact happened solely through the still relatively small online channel (the cohort actually outspent by 64% online during the week of April 16th).
With most stores now open, stimulus recipients were able to take their checks to these retailers, and indeed they did: in-store spending was +12% YoY for the cohort vs. -27% for non-recipients, and online was +37% for the cohort vs. +1% for non-recipients.
Peloton and Ulta Replace Wayfair and Amazon
Finally, digging into the largest retailers**** among the above sectors, the round two cohort contributed the most growth to Peloton, Doordash, Academy Sports, Etsy, Ross, Lowe’s, and Lululemon; the least growth was seen by Sprouts, McDonald’s, and Restaurant Brands, among other Fast Food and Grocery chains.
In contrast, Wayfair, the largest beneficiary back in April, was [only] number twelve this time around. Similarly, Amazon was number seven in April but is now number fifteen. Top new growth additions this time around included Ross, Peloton, Ulta, TJX, and Gap.
*The data is limited to direct deposits and does not include mailed stimulus checks nor mailed prepaid debit cards. The data under-represents single filers. Further, our logic focuses on the specified amounts per filing type (single, married, married with children etc.) and excludes the potential $5 incremental deductions, in order to accurately reflect stimulus payments and minimize noise in the data. We estimate that our logic captures ~90% of payments in the data.
**“Lift” is calculated as the total spending growth for the entire panel minus the growth for those that did not receive the stimulus. This captures, in other words, how much the cohort of people who received the stimulus contributed to (i.e. ‘lifted’) overall growth.
***Total spending here utilizes our improved taxonomy, and includes our entire Query coverage universe excluding the Finance, Gig Economy Income, and Charitable Giving categories. This is different from our initial analysis in April (before we launched our improved taxonomy), which included a custom basket of our largest ~1000 retailers under coverage. The trends, however, are identical.
****Analysis done at the parent merchant level.