While consumers trade down across fashion and general retail, spending by younger consumers in fashion is said to be “resilient”.
This is according to a recent note to investors from investment bank UBS, which claims that apparel and footwear is of higher importance to younger consumers.
This – along with striking results from a 1,000-strong survey over consumer behaviour – has led the investment bank to give buy ratings to publicly listed youth-heavy fashion retailers including Accent Group, Premier Investments (Peter Alexander) and Universal Store.
The survey results showed that while consumer spending has moderated from a peak in the fourth quarter of 2024, spending expectations were relatively stable in the second quarter of 2025. It was strikingly lower for high income earners (above $150k), but higher for middle (A$60-150k) and low (below A$60k) income earners.
“Income expectations moderated marginally, yet remain strong, with the robust outlook driven by inflation stabilisation & improvement in real wage growth,” the note read.
“Spending categories remain skewed to essentials (groceries, utilities, fuel, insurance & healthcare) but the rate of growth slowed vs pcp & vs Mar-25, while across non-essentials, spending intentions were mixed, with positive intentions being led by home improvement, domestic travel and clothing & footwear, whereas negative intentions were greatest amongst entertainment (gambling & music), alcohol and food takeaway/eating-out.”
UBS added that cost of living pressures increased for all incomes but moderated to be skewed to 'a little' rather than 'a significant' increase.
The note also indicated that the Australian consumer in aggregate has managed cost of living pressures by being more discerning and recalibrating spend. This was mostly through trading down in food and liquor, in-home consumption away from food out-of-home, and apparel and general merchandise.
UBS analysts said this trading down is benefitting Kmart, “although youth spend in apparel & footwear resilient given its high importance to that consumer cohort.”
Australian consumers are also reducing participation in big ticket items.
UBS noted that aggregate retail sales growth was resilient due to population growth, a strong labour market, and a buoyant baby boomer and property-owning consumer.
“Looking forward, cost of living pressures remain (with the impact varied across consumers) but these are moderating slightly while tailwinds exist across further interest rate cuts.”
The UBS survey also asked respondents about which online retailer they plan to shop at in the next 12 months, with Kmart coming second behind Amazon in first place, and relatively on par with eBay which was in third place.
This was followed by Temu (25 per cent), Big W (24 per cent), Bunnings (16 per cent), JB Hi Fi (16 per cent), Target (15 per cent), Shein (15 per cent), Myer (12 per cent), Kogan (8 per cent), Harvey Norman (8 per cent), Rebel (6 per cent), Temple & Webster (6 per cent), and Cettire (3 per cent).