Parents Buying Fewer Baby Clothes as Financial Woes Emerge for American Households

American customers are pulling back on spending at Old Navy and Gap, particularly in one specific category that shows just how much families in the United States are feeling the pinch of inflation.

Parents in tough times typically do not spend on themselves and instead focus on meeting the needs of their growing kids. That is not the case now with Gap and Old Navy saying on Thursday that they are now seeing less spending on kids' and babies' items.

Neil Saunders, who is the retail industry analyst and managing director of Globaldata, said that spending on kids is one of the last areas most parents cut back on. He noted that the softness at Gap and Old Navy suggests that some households are now under significant financial strain.

Parents still feeling the pain of inflation in the U.S.

These brands particularly cater to mid-to-low income shoppers in the United States, meaning this decline in spending is a very real indicator of how American households are feeling the pain of higher prices and are deeply budget-conscious now.

Overall inflation is up 7.7 percent compared to last year, even as the latest numbers on prices that households pay for discretionary purchases and necessities showed a slight slowdown, according to the Associated Press.

The reduction in kids' clothing spend at Gap Inc., which operates Banana Republic, Old Navy, Athleta, and its namesake Gap stores under its corporate umbrella, was part of the third-quarter earnings that were released by the company on Thursday.

The retailer noted that sales growth at both Old Navy and Gap were offset by weaker sales in baby and kids categories. Bobby L. Martin, who is Gap Inc.'s interim CEO, told analysts during Thursday's earnings call that Old Navy customers still have a propensity to buy but the brand continues to experience softness in shopping frequency and spending from its lowest-income consumers.

Parents turning to resale platforms to buy babies' clothing

This problem is not exclusive to Gap, though. Market research firm NPD said that purchases of toddler and infant clothing are down this year with sales of clothing for infants and toddlers declining by 3 percent in revenue and 6 percent in units sold versus the same period from January through October last year.

Marshal Cohen, who is NPD's chief retail industry analyst, told CNN that this is a huge indicator of financial strain. He added that they have to look at the total picture. He wants to find out whether families are trading down to less expensive products and stores now or are they pulling back in general?

With parents purchasing fewer new items, they are now turning instead to resale platforms to buy kids clothing and other necessities to save money. According to resale platform Mercari, a survey of more than 2,000 parents conducted by Globaldata back in March found that 62 percent of them bought secondhand items for their kids sometime in the past year.