Early IRS data show an 8% decline in the size of the average tax refund in 2019 as a result of the tax code changes from the 2018 Tax Cuts and Jobs Act, compared to 1% growth at this same point last year. There is also a 24% decline in the number of refunds processed to date. A deal to avoid another government shutdown may mitigate the magnitude of a refund delay, but smaller refund checks loom as a potential headwind for consumer spending in 1Q.

To identify companies sensitive to variability in personal income tax refunds, we used the Query Insights feature in the Amenity Viewer NLP platform to search 2017 earnings calls; the last time refunds were delayed due to certain tax credits.

Lesson Learned: Be on Alert in Consumer Discretionary and Mall-Based Retail

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WalMart (2/21/17):

• "While sales have been slower than expected to start the year, which we believe is due in part to the delay in tax refunds versus last year, we expect comp sales to increase between 1% and 1.5%."

Carter's (2/23/17):

• "We believe we’re seeing a meaningful impact from the delay in tax refunds to families with young children."

Cracker Barrel (2/21/17):

• "I think the comment I’m making is really more of a macro issue, which is, I doubt, surprising to anybody listening to this, which that the consumer just seems anxious and the problem is they all seem to be anxious about different things, whether it is an increase in healthcare cost, a potential for increasing healthcare costs, the timing of tax refunds, the size of the tax refunds."

Signet Jewelers (5/25/17):

• "We recognized that a portion of our performance softness is being driven by overall weakness in the retail environment as well as some one-off impacts like the delay in tax refunds which impacted our Valentine’s Day sales."

Big Lots (5/26/17):

• "February was a very challenging month due to the delays in tax refund activity."

Conn's (4/4/17):

• "During the first quarter, delays in processing tax refunds for this year’s tax season had impacted portfolio results."

Visa (4/20/17):

• "There was a small impact from – some effects in February around delayed tax refunds going to people. So debit was a little softer this quarter than credit was."

Dollar General (3/16/17):

• "Well, as you know, as you look at the tax refund, you could definitely tell early in the quarter, John indicated we saw some general softness around not having those tax returns out there."

Burlington Stores (3/2/17):

• "This reflects the impact of the significant delay in the processing of income tax refund this year compared to last year."

The Finish Line (3/24/17):

• "February sales were severely impacted by the IRS’ decision to delay income tax refunds compared with last we did not begin to see a meaningful sales lift until February 22, which was a couple of days before the end of our fiscal year."

Shoe Carnival (5/24/17):

• "With the headwinds of a later tax refund season and a later Easter behind us, we look forward to a more normalized calendar as we navigate our way through the remainder of the year."

Steven Madden (2/28/17):

• "In terms of tax refunds, I think that there is some impact to us."

Genesco (3/10/17):

• "Journeys and Lids are impacted in particular by delays in tax refunds making current into our sales more limited."

Zumiez (2/1/17):

• "We expect the delay in IRS income tax refund to negatively impact February and benefit March."

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This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.

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