A boost in U.S. retail sales during October is a step in the right direction ahead of an anticipated busy holiday season, industry watchers said.
October sales reversed a decline in the previous month, while the sector posted slight job gains during the month and no new retailers filed for bankruptcy during the late October through early November period, according to an analysis by S&P Global Market Intelligence.
U.S. retail and food services sales increased over the previous month by 0.3% on a seasonally adjusted basis to $526.54 billion in October, according to a report released Nov. 15 by the U.S. Census Bureau.
The increase in sales follows a 0.3% drop in September.
"Despite the gradual slowdown in the U.S. economy, consumers are in a good place, and October’s retail sales are a step forward into the all-important holiday season," Jack Kleinhenz, chief economist at the National Retail Federation, said in a statement.
Kleinhenz added that while uncertainty around trade policy has impacted consumer sentiment, "ongoing job growth, low interest rates, low inflation and the stock market hitting record highs provide support for consumer spending."
Stephen Stanley, chief economist at Amherst Pierpont Securities, said the October sales figures "were softer than expected, though not a disaster."
"At face value, the retail sales report points to relatively soft consumer demand in October," Stanley said in a research note, adding: "At no point over the past five or six years has it paid to have a negative outlook for the consumer, and with the underlying fundamentals so good, it would take a lot for me to lose faith in the American consumer."
Lindsey Piegza, chief economist at Stifel, said the October figures are "hardly an indicator of solid spending as we head into the key holiday shopping season." However, she said the gain in consumer spending "is a welcomed step in the right direction."
"The consumer was the sole support to the economy in [second quarter] and [third quarter], but the question remains whether or not consumption can continue to provide indefinite support without improvement in other key areas," Piegza said.
Gasoline stations registered a month-over-month sales increase of 1.1%. Sales in the subsector were $43 billion for the month.
Nonstore sales, the category that includes e-commerce, rose 0.9% to $67.91 billion.
Sales at food and beverage stores grew 0.5% month over month in October to $65.56 billion. At motor vehicle and parts dealers, sales advanced 0.5% to $105.63 billion.
Clothing and clothing accessories stores registered a sales decline of 1%. Sales in the subsector were $22.26 billion for October.
The consumer price index rose 0.4% in October from the previous month, according to a monthly report released Nov. 13 by the U.S. Bureau of Labor Statistics.
Prices advanced 1.8% on a year-over-year basis.
Prices for apparel decreased by 1.8% month over month in October, with men's and boys' apparel falling 1.2%. Prices for women's and girls' apparel declined by 3.3%.
Footwear prices decreased by 0.5%, while the prices of jewelry and watches rose 0.6% during the month.
The retail sector added 6,100 jobs in October, reaching 15.8 million jobs, according to a Nov. 1 monthly report from the U.S. Bureau of Labor Statistics. October's figure represents a 0.04% gain over the previous month.
Employment at electronics and appliance stores increased by 6,300 jobs, a 1.4% increase from September to 469,700 jobs.
Health and personal care stores added 5,100 jobs, up 0.5% from September to 1.05 million jobs.
Jobs at clothing and clothing accessories stores declined by 7,700, or 0.6% month over month, to 1.3 million jobs for the month. Nonstore retailers shed 3,000 jobs during October, down 0.5% to 566,900 jobs in total.
Miscellaneous store retailers registered a decline of 0.2% or 1,800 jobs during the month to 822,300 jobs.
Destination Maternity Corp. continues to be the latest S&P Global Market Intelligence-covered U.S. retail company to file for bankruptcy. The New Jersey-based maternity apparel retailer filed a voluntary petition for reorganization under Chapter 11 on Oct. 21 and plans to close 213 underperforming stores.
The bankruptcy count for 2019 now stands at 31.
The total includes companies with a primary industry classification of retailing, household and personal products, or consumer durables and apparel, and secondary classification of retailing. Public companies included in the list of companies with public debt must have at least $2 million in either assets or liabilities at the time of the bankruptcy filing, while private companies must include at least $10 million.
Mobile Addiction LLC, which filed for bankruptcy in July, has been removed from Market Intelligence's current list.
The company distributes and sells wireless mobile phones and accessories. Market Intelligence discovered that its total assets and liabilities did not reach the threshold requirement for inclusion.
Mann's World LLC, which does business as The Rifleman and operates a gun dealership, was added to the list. The company had an involuntary petition for liquidation under Chapter 7 filed against it in May.
A November analysis of the one-year probability of default scores identified 15 U.S. department stores and apparel companies with scores ranging from 13.9% to 2.3% and corresponding implied credit scores of "ccc+" to "b+."
Specialty retailer Christopher & Banks Corp. continued to top the list as the company's one-year probability of default was unchanged from October's iteration.
Centric Brands Inc. moved to the No. 4 spot now as its probability of default increased to 8.5%, up from 6.9% the month prior. The move pushed several retailers down the list.
DGSE Cos. Inc., a leading precious metal and jewelry retailer, fell to the No. 13 spot as its one-year probability of default decreased to 3.5%.
S&P Global's Fundamental Probability of Default Model provides a fundamentals-based view of credit risk for corporations by assessing both business risk — including country risk, industry risk, macroeconomic risk, company competitiveness and company management — as well as financial risk, such as liquidity, profitability, efficiency, debt service capacity and leverage. For a more thorough review of the model, see the PD Model Fundamentals - Public Corporates whitepaper.