March marked the second-straight month that US consumers spent less at retailers than predicted, though the decline followed a stronger-than-expected start to the year. Meanwhile, four retailers filed for bankruptcy in the month through mid-April, and default risk fell across the category.
Retail and food services sales fell 1.0% month over month in March, according to seasonally adjusted data released April 14 by the US Census Bureau. Economists expected a 0.4% drop, according to consensus estimates compiled by Econoday.
The fresh data also revealed a stronger showing in February, with sales revised upward to negative 0.2% month over month from the 0.4% drop first reported in government data. January's exceptionally strong result — 3.1% growth from December 2022 — gave consumer spending a much-needed bounce back from a worse-than-expected holiday season and made the following two months look worse by comparison.
"From that height in January, sales were not going to grow anywhere near that rate" in February and March, said Michael Zdinak, an economist who leads the US consumer markets service at S&P Global Market Intelligence.
Retail sales
The advance estimate for US retail and food services sales totaled
Sales fell across most retail categories during the month.
Gasoline stations registered the largest monthly and annual declines. March sales in the category fell 5.5%, while the year-over-year drop was 14.2%. Falling gas prices contributed to the drop.
Nonstore retailers — a category that includes e-commerce, door-to-door sales, vending machines and other businesses without a physical store — registered the highest monthly and annual gains among retail categories excluding bars and restaurants, rising 1.9% month over month and 12.3% year over year.
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Bankruptcies
Four retailers filed for bankruptcy from mid-March through April 13, according to Market Intelligence data. The nine retail bankruptcies filed in 2023 represent an uptick from 2022 as broader filings are rising.
A notable bankruptcy during the month was Boxed Inc. The e-commerce grocery retailer filed for bankruptcy April 2, seeking to sell its software-as-a-service business to first-lien secured lenders and wind down its retail operations, according to a company statement.
Default risk
Default risk broadly crept lower in the month through April 13, according to Market Intelligence's Market Signal Probability of Default model. The median probability of default score among publicly traded retailers fell to 2.5% as of April 13, from 2.9% on March 14.
Most retail categories, except for personal care products and apparel, accessories and luxury goods retailers, recorded lower scores in April than in March. Drug retail was the most at-risk retail industry, with a median score of 10.1% among the five companies in the category, down from 11.1% on March 14.
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.