Retail sales got a boost in July, but employment remained stagnant within the industry as more than a dozen companies experienced continued vulnerability, according to a new analysis by S&P Global Market Intelligence.

The analysis, released monthly by S&P Global, calculated the one-year probability of default among S&P Capital IQ-covered, publicly traded U.S. apparel retail companies and department stores, identifying the 15 most vulnerable. The probability of default among these companies ranged from 44.38% to 6.20%, effectively corresponding to a credit score of "cc" and "b-."

The list of companies remained unchanged from S&P Global's July 18 report, which included the same probability of default range and implied credit score.

Bankruptcies

Some of the bigger names that remained on the list included Sears Holdings Corp., which continued to post a one-year probability of default rate of 24.58% as it shutters stores throughout the country. Also on the list were apparel stores dELiA*s Inc. and Bebe Stores Inc., which are facing one-year probability of default rates of 16.19% and 10.17%, respectively, during a tough period for brick-and-mortar mall staples.

Among S&P Capital IQ-covered U.S. consumer discretionary retail companies and direct marketing retailers, 32 have filed for bankruptcy so far in 2017, a figure higher than in all of 2014 and only four less than the total U.S. retail bankruptcies in 2015. A total of 47 such companies filed for bankruptcy in 2016.

Peekay Acquisition LLC, an Auburn, Wash.-based lingerie and wellness specialty store, is the latest addition to the list, filing for Chapter 11 protection Aug. 10.

Sales and prices

The retail sector saw some positive news in July, with seasonally adjusted retail sales increasing for a second consecutive month, rising by 0.6% to $478.90 billion, according to a monthly report released by the U.S. Commerce Department on Aug. 15.

The positive sales figures, which beat economists' expectations of a 0.4% increase, were driven in part by strong sales at motor vehicle and parts dealers, as well as nonstore retailers, which includes e-commerce. Nonstore retailers saw a monthly sales increase of 1.3% to $52.74 billion, marking an 11.5% increase year over year in July compared with a year earlier.

Ten of the 13 business types measured by the Commerce Department experienced gains in August, the only exceptions being gas stations, clothing stores, and electronics and appliance stores. The National Retail Federation expected August to be a record-setting month for imports at retail shipping container ports, driven strongly by back-to-school shopping.

The department also revised its June sales figures in the Aug. 15 report; the revised numbers reveal a 0.3% increase to $476.01 billion in June, compared with the previously estimated 0.2% drop to $473.51 billion.

Consumer prices rose 0.1% in July on a seasonally adjusted basis, a very slight rise driven by increases in shelter, medical care and food indexes, according to the monthly Consumer Price Index released by the U.S. Department of Labor's Bureau of Labor Statistics on Aug. 11.

Medical care commodities were up 1.0%, while the shelter index rose 0.1% and the food index rose 0.2% in July, offsetting a 2.0% dip in the energy index.

Declines were also seen for new vehicles, communication, used cars and trucks, and household furnishings and operations.

Employment

Retail employment recorded a seasonally adjusted increase of 900 jobs in July, according to an Aug. 4 report from the Bureau of Labor Statistics.

The biggest employment drops came from food and beverage stores, which lost 2,100 jobs in July, as well as clothing and accessories stores, which shed roughly 10,000 jobs on a seasonally adjusted basis.

This marked a slowdown from June, when retail trade added a seasonally adjusted 1,800 jobs after four months of declines.

Editor’s Note: S&P Global altered its methodology for the August iteration of this Data Dispatch, adjusting the scope and type of companies reflected in the announced U.S. retail bankruptcies portion of the analysis. To better align with our broader retail coverage, this data set now includes internet and direct marketing retailers and excludes automotive retailers. As a result, the numbers have changed for some of the years covered in the chart from prior iterations.

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, refer to the PD Model Fundamentals - Public Corporates whitepaper.