US retail sales fall short of forecasts in May; 3 new bankruptcies

US retail sales missed expectations in May amid a sharp decline in consumer spending at gasoline stations and restaurants.

Retail and food services sales were up 0.1% from April, according to US Census Bureau data released June 18. Sales underperformed expectations for a second consecutive month as economists had anticipated a 0.3% increase for May, according to data compiled by Econoday.

The median default risk for all retail categories remained unchanged between mid-May and mid-June, with three retailers filing for bankruptcy over the monthlong period.

Retail sales

US retail and food sales amounted to $703.1 billion in May, only slightly above the revised $702.5 billion in sales recorded in April and up 2.3% from May 2023.

Consumers spent 2.2% less at gasoline stations and 1.1% less at furniture and home furnishing stores in May compared to April, while building material and garden equipment retailers saw a 0.8% reduction in sales.

Sporting goods, musical instrument and bookstores was the only retail category to exceed 1% sales growth in May, with a 2.8% increase for the month. Still, the category's sales were down 2.6% year over year and down 3.7% from March to May compared to the year-ago period.

Sales at clothing stores grew by 0.9% in May, while nonstore retailers and motor vehicle and parts dealers both achieved 0.8% higher sales for the month.

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On an annual basis, furniture stores and building material retailers recorded the greatest decline in sales, falling 6.8% and 4.3%, respectfully, compared to May 2023.

Bankruptcies

Three retailers filed for bankruptcy during the month ended June 18, bringing the year-to-date total of US retail bankruptcies to 17. More retailers have sought bankruptcy protection so far in 2024 than by the same point in any other year since 2020.

Pharmacy operator Optio RX LLC, clothing retailer National Wholesale Co. Inc. and furniture retailer Oka Usa LLC all filed for bankruptcy in June. Optio RX filed for Chapter 11 bankruptcy, which involves a reorganization of assets and debts, while both National Wholesale and Oka Usa opted to terminate operations and liquidate their assets through Chapter 7 bankruptcies.

In a legal filing, Optio RX said declining earnings coinciding with a dramatic increase in the company's debt service due to rising interest rates had necessitated the filing. The company operates 18 locations across seven states.

Default risk

The median default risk for all retail categories rose slightly in mid-June to 2.31% from 2.29% in mid-May as the majority of sectors registered an increase.

Household appliances retailers and other specialty retailers saw the greatest rise in default risk over the monthlong period with increases of 2.06 percentage points and 1.04 percentage points, respectively. Along with drug retail, the two categories topped the list of industries with the greatest default risk by mid-June.

Ongoing struggles in the furniture retail sector also contributed to a 0.74-percentage-point rise in default risk for home furnishing retail.

Personal care products recorded the most significant drop in default risk between mid-May and mid-June, falling from 4.40% to 3.61%.