Risk.net: The Retail Apocalypse Continues

US retailers appeared to have turned a corner in 2018. The Trump administration’s tax cuts lifted consumer spending and retail sales grew by more than 6% that summer. After a period of steady decline, the credit ratings of major US retailers began rising again. 

The optimism was short-lived. The industry’s fortunes deteriorated sharply in 2019, with 23 major bankruptcies…According to Credit Benchmark data, sourced from financial institutions, credit quality in the US retail sector has dropped 5% since April 2019. 

The UK retail sector has fared even worse. With Brexit uncertainty sapping consumer sentiment, and no fiscal stimulus to boost spending, the credit risk of UK retailers has increased by 13% since 2017. 

A sustained turnaround is unlikely.

In this series of monthly articles from Risk.net, David Carruthers, head of research at Credit Benchmark, examines the effect of the ‘retail apocalypse’ on the credit quality of US and UK general retailers.

Also showing recent signs of deterioration, we take a look at the credit activity and distribution of a group of Global Airlines. Not all industries are faring badly though, with positive trends observed in the leisure and recreation industries globally. Plus, notable Sovereign credit movement that you won’t find in the news.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.