As the number of bankruptcies continued at an even pace in late February and early March, retail employment in February fell following a rebound in U.S. sales in January, according to a new analysis by S&P Global Market Intelligence.
Three S&P Global Market Intelligence-covered U.S. retail companies filed for bankruptcy in the late February to early March period.
The filings bring the bankruptcy count in 2019 to 11.
The bankruptcy count includes companies with a primary industry classification of retailing, household and personal products, or consumer durables and apparel, and a secondary classification of retailing.
New York-based jeans and accessories retailer Diesel USA Inc. filed for Chapter 11 bankruptcy protection March 5. The company listed assets in the range of $50 million to $100 million and liabilities in the range of $10 million to $50 million.
Payless Inc. revealed that it had voluntarily filed for Chapter 11 bankruptcy protection Feb. 18. The company listed both its assets and liabilities in the range of $500 million to $1 billion.
Home decor retailer Z Gallerie LLC filed for bankruptcy protection March 11. The company listed its assets and liabilities both in the range of $100 million to $500 million.
U.S. retail and food services sales rose 0.2% on a seasonally adjusted basis to $504.44 billion in January from the previous month, where sales dropped 1.2%, according to a report released March 11 by the U.S. Census Bureau.
The Census Bureau delayed the release of the January retail sales report due to a 35-day partial shutdown of the U.S. federal government that ended Jan. 25. The February sales report is scheduled for release April 1.
National Retail Federation Chief Economist Jack Kleinhenz said: "American consumers regained confidence as concerns over the government shutdown and stock market volatility faded and trade talks moved in a positive direction."
James Bohnaker, associate director at IHS Markit told S&P Global Market Intelligence that it is ordinary to see a bounce-back in the month following a large drop.
"We saw a lot of spending in October and November and looking through the volatility everything else is pointing to really strong consumer market at the moment," Bohnaker said.
Bohnaker also said that despite the fact that there was positive growth in January, it probably was not as strong as it could have been if retail sales were up during the government shutdown because several hundred thousand federal employees missed paychecks during the period.
"So, underlying growth is probably even stronger than what we saw in January," the IHS Markit associate director said. "I would expect, over the course of the year, for growth to remain at that pace or even stronger."
Sales at building material and garden equipment and supplies stores saw the sharpest sales growth during the month, increasing 3.3% to $34.33 billion.
Nonstore retailers, a category that includes e-commerce companies, registered a month-over-month sales increase of 2.6%. Sales in the subsector were about $57.89 billion for January.
Health and personal care stores posted a 1.6% increase, with sales totaling $29.05 billion.
Meanwhile, motor vehicle and parts dealers registered a 2.4% decline in sales to $101.61 billion in January. Clothing and clothing accessories stores sales dropped by 1.3% to $22.64 billion.
Consumer prices increased 0.2% in February from January, according to a monthly report released March 12 by the U.S. Bureau of Labor Statistics.
Prices rose 1.5% year over year.
Prices for apparel increased by 0.3% month over month in February, with men's and boys' apparel increasing by 3.4%. Prices for women's and girls' apparel, however, dropped 0.9%
Footwear prices rose by 0.1%, while jewelry and watches' prices dropped by 3.4% during the month.
The retail sector lost 6,100 jobs in February, down to 15.8 million jobs. That is a decrease of 0.04% from January, according to a March 8 monthly report from the U.S. Bureau of Labor Statistics.
"February's employment numbers are another surprise, but I really doubt these figures are indicative of the strength of the economy given the overall trends," NRF Chief Economist Jack Kleinhenz said.
Health and personal care stores lost 11,700 jobs to 1.0 million jobs, a decrease of 1.10%.
General merchandise stores shed 3,100 jobs in February, a month-over-month decrease of 0.10% to 3.1 million.
Meanwhile, employment at electronics and appliance stores rose by 2,400 jobs, a 0.51% increase to 474,200. Employment at building material and garden supply retailers also rose by 0.25%, or 3,200 jobs, to 1.3 million over the same period.
Home Depot Inc. said March 5 that it will hire 80,000 workers for the spring season. The openings are for seasonal, part-time and full-time positions at approximately 2,000 stores and over 100 distribution centers in the U.S.
Online retail giant Amazon.com Inc. is hiring 3,000 remote workers in the U.S., CNBC reported March 11. The company will reportedly pay $15 per hour for the seasonal work from home jobs to support its customer service.
A March analysis of the one-year probability of default scores identified 15 U.S. department stores and apparel companies with scores ranging from 9.9% to 1.8% and corresponding implied credit scores of "ccc+" to "bb-."
No companies shifted positions from February, but Stage Stores Inc.'s calculated one-year probability of default ticked up to 5.9% from 5.5%.
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.