Student debt repayments could weigh on sales at some of students' favorite stores.
With monthly student loan payments set to resume in October, consumers are planning to spend less money at retailers, according to new research from Jefferies.
In a survey of more than 600 US consumers that have outstanding student debt, nearly 90% of respondents said they were at least "somewhat concerned" about meeting all their monthly expenses. Half of those surveyed said they were "very concerned."
Read more: Worried about when student loan repayments resume? These programs could help
The bottom line: Jefferies said the return of student loans could be a "key pain point" for consumer stocks through the end of 2023.
Jefferies found more than half of respondents plan to spend less on apparel and accessories, while restaurants and footwear were the second and third most frequently listed categories where consumers plan to spend less.
"We believe there could be meaningful headwinds to growth in these categories, particularly in 2H23 [which includes the crucial holiday season]," Jefferies' US consumer team wrote in a new research note on Monday.
The survey comes in line with concerns voiced by retailers over the reemergence of payments. Jefferies believes some value retailers like Costco (COST), Walmart (WMT), and TJX (TJX) could benefit from respondents saying they'd be looking to trade down.
The firm downgraded Foot Locker (FL), Urban Outfitters (URBN), and Nike (NKE) all to Hold from Buy and slashed the price target on each. For example, roughly one-third of respondents said they'd plan to shop less at Urban Outfitters due to the return of loan payments, while Nike and Foot Locker's footwear sector is one of the most exposed to a consumer slowdown due to student loan repayments, according to Jefferies' survey.
Importantly, Jefferies flagged that these companies already had other headwinds weighing on their businesses. Foot Locker's turnaround strategy hasn't gone smoothly this year, and the footwear giant recently flagged "softening" trends amid a "still-tough consumer backdrop" during its most recent earnings call in August.
The company pushed back its full-year sales guidance in August to a decline of 9%-10%, compared to an early forecast of a 7.5%-9% decline. Its stock is down more than 50% this year.
Meanwhile, at Urban Outfitters, its Anthropologie business segment reported same store sales up 10.6% in the second quarter, but the flagship Urban Outfitters brand saw sales decline 14.10% in the same quarter.
"We believe US consumers are likely to curtail spending ahead, with apparel & footwear being the most likely areas of pullback," Jefferies analyst Corey Tarlowe wrote in a research note released on Monday. "With the resumption of student loan repayments, we believe this could be a catalyst that weighs further on already soft sales at some of our specialty apparel coverage."
Jefferies also sees the return of student loans negatively impacting Nike. There could be wholesale issues if a store like Foot Locker — where Nike makes up more than 60% of the company's sales — sees a decline.
The company's direct-to-consumer business could also be at risk as 39% of respondents said they plan to buy cheaper alternatives in apparel and accessories and 35% said the same for footwear.
"We believe these results suggest that NKE could face incremental headwinds in higher-priced areas of its assortment," Jefferies equity analyst Randal Konik wrote in a note on Monday.
Correction: A previous version of this article misstated quarterly revenue for Anthropologie and Urban Outfitters. We regret the error.
Josh Schafer is a reporter for Yahoo Finance.
