Key Points:
- 2026’s back-to-school / to-college season (B2S) was strong, reflective of a consumer that was in the mood to meet both their child’s needs and wants, plus there were timing shifts and other idiosyncratic tailwinds.
- Stand-out successes include Target, Five Below, Academy, and Ross
2026’s back-to-school / to-college season (B2S) was strong despite the upward move in gas prices and interest rates. First, it’s important to recognize that since 2022, when there is a season, there is a mood to spend; following the season / mood there is a retraction. Back-to-school is an emotive one, as such, the mood was strong. Second, wealth growth has been strong and employment stable; as such, there were budgeted dollars, and maybe a little extra, to be spent on extra notebooks to dorm fridges. Third, we think three comparative influences helped lift this year’s spending. First, the later Labor Day allowed one more week. Two, this year’s Prime Day was pulled from July to June; as such, few B2S dollars were spent during Prime Day, resulting in more dollars spent at physical retail. And third, there was less disruption from tariffs, allowing retailers to focus on the B2S execution and sharper price points (IEEPA refunds). On the consumer side, in 2026, there was no consumer pull-forward into June / July to get ahead of tariff pricing, unlike in 2025 when fears of such drew forward spending.
OK. Back to the B2S season and observed traffic.
Shopping Malls:
- Our index of shopping mall REIT traffic accelerated +30bps to 1.4% for the period.
- The individual REITs themselves were robust, SPG shockingly so (+9%).
General Merchants:
- Walmart’s store traffic accelerated +170bs from the FQ2 trend, which was held back in May due to the spike in gas prices. Traffic then began to soften into late August and early September as the shopping period was extended by a week (i.e. same amount of peanut butter, but one additional slice of bread to be spread upon). That said, the current T28D run rate is still above FQ2’s (+60bps). We fully expect average ticket to be under pressure as Walmart, and nearly all retailers, are using their tariff refunds to invest into price to further bolster their “value” positioning and drive traffic. That investment (broadly) is perhaps what’s behind the traffic acceleration, better deals and more shopping around to snatch them.
- Target store traffic accelerated +310bps from the FQ2 trend. Like Walmart, the extra week pushed the rate of traffic growth lower for the latter part of the period; that said, the current T28D run rate is +260bps above FQ2’s. To put it bluntly, Target crushed it on B2S.
Dollar Stores
- Five Below’s traffic softened (-140bps) from FQ2’s rate, a lot of that is the high comp, which is much more difficult both on a 1- and 2-year basis. For example, if it delivered a +6.0% comp for FQ3 vs. +14.1% in FQ2, that’d leave the 3-yr comp-CAGR at +6.5%. What we’re focused on is whether they can continue to push conversion rate and UPT higher, which have been strong comp drivers for over a year and which indicate its merchants and store teams are surprising and delighting shoppers. Given that management thinks they're still early in what their new initiatives and in all the “cultural zeitgeists” to be had, we think they’ll be able to comp-the-comp and drive an acceleration in the 2- and 3-yr comp-CAGRs
- Dollar General traffic is in line with FQ2’s level and there hasn’t been a dip due to the spike in gas prices. That resilience was the case during FQ2 as well. (Our Q2 take.) We’ve seen no reason to not expect at least a 200bps contribution to comps from average ticket; in fact, the compare is easier.
Sporting Goods
- Dicks Sporting Goods’ traffic lifted a little in July, but not enough to demonstrate a change in trend. Recall that the athletic category is under pressure due to weaker-than-expected demand and too much inventory. As such, average ticket is likely down. For the broader view, see our report on Lululemon.
- Academy Sports and Outdoors experienced a stronger B2S lift and traffic (per store) increased +1%. Recall also that on its FQ2 results call, CEO Steve Laurance said, “We're pleased to end Q2 on a high note, with July being our best month of the quarter… which translated into a modest positive comp… As we've seen in the past, when the customer is under pressure, they shop episodically and aggregate their purchases around the key events on the calendar as a way to expand their spending power. This held true this past quarter with events such as Memorial Day, Father's Day, 4th of July, and Back to School performing well. These also happen to be the time periods where the promotions traditionally are at their sharpest.”
Off-Price / Treasure Hunt
- Marmaxx’s traffic modestly improved by +10bps from FQ2 (which is what they said during the FQ2 call). The big negatives from FQ2 results (+1% comp-sales), per our analysis, were the declines in conversion rate and UPT. Our narrative on Marmaxx’s soft year is that its buyers underappreciated the very large amount of goods that Burlington and Ross were sourcing (from the same vendor pool), which left Marmaxx short of compelling merchandise at compelling prices. When shoppers came into Marshalls or TJ Maxx, they weren’t wow ’ed, surprised, or delighted. And so, fewer shoppers bought, and those that did buy, bought fewer items. Per management’s intended plan to put more value into the offer and add more impulse items, and further enhance the assortment, we’re looking for FQ3 to show an improvement in conversion rate and UPT, and we expect little from AUR.
- Ross’ B2S traffic was in line with FQ2’s pace, but beneath the surface that’s impressive, as the comparison base is 110bps more difficult. More difficult is also true for comp-ticket. Recall that FQ3’25 comp-sales were +7% (vs. +2% in the prior quarter). On that call, executive Michael Hartshorn said, “During the quarter, we had a very strong back-to-school and held the trend throughout the quarter… I said in a previous commentary that [the comp] was driven by increases in traffic, UPT, and AUR, with the traffic or transactions, for us, the biggest of those. Traffic and the basket were very similar.”
In other categories of consumer spending, we also wrapped up the destination theme park season last week; Disney had very strong results in Florida and Universal had much better results in California. Additionally, RH’s / Macy’s / Bloomingdale’s results and commentary didn’t indicate any soft patch; Bloomingdale’s is picking up loads of brands and market share from Saks / Neiman. Lastly, full-service restaurants are maintaining the better pace of traffic growth that they enjoyed during the World Cup. Another view confirming our take is Visa’s CEO Ryan McInerney on the US, “Consumers and businesses do have a lot of uncertainty. You see that in the consumer confidence measurements. There are uncertainty about some of the affordability issues. They're uncertain about the elections. They're uncertain about a lot of things. But if you actually look at our business and how they're spending, it's strong and stable. In the U.S. for the last … 1.5 years, let's call it, our business in the US has been growing about 6% to 8% roughly. This is on a roughly $7 trillion business. That's the size of our business in the U.S. So it's very broad-based, as you said. In the last quarter, our US business grew 10%. If you look at quarter-to-date through the end of August, it's been growing about 9%.”
