Retail gains may fade as tax refunds and BNPL support ebb

Retail’s first quarter looked stronger than many expected, but the lift may have been temporary. CNBC said on June 1 that higher-than-usual tax refunds and heavier use of buy now, pay later likely helped buoy spending and mask underlying consumer weakness, even as profits and sales held up. Wall Street is now watching second-quarter guidance from Walmart, Ross Stores and TJX Companies for a clearer read on how shoppers behave once refund season passes.

At Walmart, chief financial officer John David Rainey said higher tax returns helped offset elevated gas prices in the first quarter, and he warned that consumers may feel more strain as those refunds fade in the second quarter. Target separately said tax returns may have fueled some of its first-quarter growth. That combination matters for Big Lots because a value retailer lives on the edge of shoppers’ cash flow, where a strong quarter can turn quickly if the customer is leaning on seasonal money rather than steady demand.

For store teams, the practical signal is simple: if refunds fade and BNPL stops cushioning purchases, baskets can get smaller and traffic can get choppier from week to week. That can change how managers set schedules, time markdowns and decide how much inventory to lean into on the next truck or feature. It also puts more weight on the basics on the sales floor, from keeping price points clear to maintaining in-stocks and steering shoppers toward cheaper substitutions that still feel like a win.

Big Lots is entering that kind of consumer slowdown from a far weaker starting point than most chains. The company filed for Chapter 11 bankruptcy in September 2024 and entered into a sale agreement with Nexus Capital Management LP that same month. When that deal fell apart in December 2024, Big Lots announced going-out-of-business sales, underscoring how fragile the chain had become.

A later transaction with Gordon Brothers Retail Partners and Variety Wholesalers kept part of the business alive. Gordon Brothers said the deal preserved the Big Lots brand, kept hundreds of stores operating and prevented thousands of layoffs. Variety Wholesalers acquired 219 Big Lots locations and had reopened all 219 by June 2025.

That rebuilt footprint means every traffic swing carries more weight. Big Lots is no longer a broad national chain absorbing soft weeks across thousands of stores; it is a smaller operation where a weak second quarter would put even more pressure on execution, staffing and inventory discipline. If the post-refund consumer gets choppier, the stores that stay sharp on price, presentation and conversion will have the best chance of holding their ground.