June's US retail sales fall short of expectations; 3 new bankruptcies

US retail sales underperformed economists' forecast for June.

Retail and food service sales grew 0.2% month over month in June, adding to a 0.3% increase in May, according to US Census Bureau data released July 18. On the heels of stronger-than-expected results in May, economists had anticipated June spending to grow by 0.5%, according to data compiled by Econoday. US retail sales continued to rise amid cooling inflation and expectations for additional interest rate hikes from the Federal Reserve.

Three companies filed for bankruptcy protection from mid-June through July 18, and the median default risk for retailers decreased, according to S&P Global Market Intelligence data.

Retail sales

The advance estimate for US retail and food services sales totaled $689.50 billion in June, up from a revised $688.16 billion in May, according to Census Bureau data. June sales increased by 1.5% on an annual basis.

Nonstore retailers registered one of the largest monthly increases among major retail categories, with a 1.9% growth in sales for June. Furniture and home furnishing stores and electronics and appliance stores also saw increased sales, which were up 1.4% and 1.1% from May, respectively.

On an annual basis, nonstore retailers also booked the most sales growth, with a 9.4% increase, while health and personal care stores expanded their sales by 6.3%.

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Gasoline stations logged the largest monthly decline in sales at 1.4% and the biggest annual drop at 22.7%. The decrease weighed on the monthly total, said Oren Klachkin, lead US economist for Oxford Economics.

"There were signs that interest-rate-sensitive components of spending felt the pressure of tighter lending standards and higher interest rates," Klachkin said in a July 18 note. "Food services and drinking places were flat, a possible sign that leisure and hospitality spending is starting to lose steam."

Bankruptcies

Home arcade machine seller iiRcade Inc., media company iMedia Brands Inc. and health and wellness retailer Golden Developing Solutions Inc. all filed for bankruptcy over the past 30 days through July 18. All three companies offer their products online, while iMedia Brands also operates television shopping networks.

As of July 18, 18 retailers filed for bankruptcy, more than the yearly total for 2021 and 2022 but only half the number of bankruptcies over the same period in 2020.

Default risk

Median default risk across all retail categories fell to 2.3% as of July 18 from 2.8% on June 13, according to Market Intelligence's Market Signal probability of default model. Default risk decreased across most retail categories, with home furnishing and personal care product retailers registering the most significant declines. The default risk for drug and computer and electronics retailers was unchanged from the previous month.

Scores produced by the model represent the odds of default within a year and are based primarily on the volatility of share prices for public companies in the sector, accounting for country- and industry-related risks.