Retail sales rise for second straight month

Retail sales rose for the second straight month as shoppers trickled back into stores, but economists warn that a recovery could be short-lived as coronavirus cases rise. Sales increased 7.5% in June from the prior month, beating estimates of 5% from economists surveyed by Refinitiv. That compares to an 18.2% jump in May after revisions, the Commerce Department said Thursday. Gains last month were driven by a jump in sales at clothing stores, electronics and appliance stores and home furnishing outposts. “Retail sales showed better-than-expected improvement in June and continued to move in the right direction after May’s dramatic rebound,” Jaime Ward, head of retail finance at Citizens Bank, said in an email Thursday. But he added that “there are warning signs as some parts of the country where [coronavirus] cases are surging have halted or reversed their reopening plans.” Plus, retail analysts and economists say US consumers could become less willing to spend on discretionary items like clothing, especially as jobless claims rise. Foot traffic to North American retail stores decreased by 43% during the week ending Wednesday, according to data from Bernstein. “The pace of recovery has slowed in recent weeks,” Bernstein analysts said in a research note Wednesday. “As cases spike in some states and local governments roll back reopening plans, we will watch to see if traffic begins to reverse course in the coming weeks.” Additionally, the federal government’s stimulus package and enhanced unemployment benefits of an additional $600 a week have boosted retail sales, economists say. The enhanced benefits are scheduled to end at the end of the month. The “phase out of the Federal unemployment benefit boost of $600 [a week] looms large,” especially in light of slowing consumer trends in the face of infection resurgence, Jefferies analyst said in a research note this week. Overall, the pandemic has slammed the retail industry. So far in 2020, more than 4,000 stores have said they will permanently close, according to a report released last week by Coresight Research, a retail research and advisory firm. It anticipates closures will snowball and set a new annual record this year of as many as 25,000, breaking last year’s record 9,302 closures tracked by the firm. Pier 1 Imports (PIRRQ), JCPenney (JCP) and Tuesday Morning (TUES), which have all filed for bankruptcy, have announced intentions to close hundreds of stores. GNC (GNC) and Victoria’s Secret are closing hundreds more. In just the past few weeks, major companies including Brooks Brothers and Heritage Brands have all filed for bankruptcy while Levi Strauss and others have detailed hundreds of job cuts.