Retail Trends In August Illustrated Consumers’ Resilience And Shifts In Spending


The impact of the pandemic on the U.S. retail sector has resulted in a wide variety of unexpected dynamics (for example, the demand for products that enhance life at home). We paid special attention to the benefits consumers received from the federal government (from either stimulus checks or supplemental unemployment benefits) through the spring and early summer months. Many retailers and restaurants reported significant upticks in demand when these benefits were distributed (Walmart Inc. reported a pop in sales of discretionary items at the end of their fiscal first quarter driven in large part by the stimulus).

Given the support from extra dollars, logic would suggest removing those benefits could significantly hurt demand. Our ratings, two-thirds of which have negative outlooks, partly reflect the risk that consumers will pull back meaningfully on spending after these benefits run out. We have therefore been keenly tracking trends in August, the first month since April without the full benefit of $600 in supplemental unemployment insurance benefits from the federal government. The U.S. Census Bureau’s advance retail sales for August illustrate continued strength in certain pockets such as groceries and home goods, and slowing growth in others such as sporting goods equipment, and as expected, continued stress in the hardest hit areas. This confirms our outlook on the sector.


We believe consumers will continue spending at some level on these basic and discretionary areas, even though government support has dried up. This is partly because consumers are saving money that would have been spent on vacations and dining out (see chart 2).


Pockets of retail are well-positioned to benefit from our continued home-centric lifestyle. Consumers are reallocating dollars not spent on travel, entertainment, and dining to their homes in the form of décor, exercise equipment, crafting materials, and entertainment systems, among others. Until consumers return to pre-pandemic behavior patterns, including spending on travel and entertainment activities and working in offices, the demand for these products will likely continue. In addition, consumers may be less conservative with discretionary spending than in past recessions because the nature of this economic slowdown feels within our control (that is, if we can shut down the economy, we should be able to reopen it) . Also, consumers may be hoping for additional aid from the federal government beyond the temporary deferral of $300 in payroll taxes. For any or all of these reasons, August trends were better than we expected. We have collected some examples of public statements from rated issuers on the trends they have observed in the month (see table 1).

Public Statements On August Trends
Company Sector Comments Source Date

Abercrombie & Fitch Co.

Apparel “… we are planning Q3 sales trends to be consistent with Q2, in that down 15% to 20% range…” Transcript: Earning call Q2. Aug. 27, 2020

L Brands Inc.

Apparel “…as we’ve moved into August, we’ve seen results continue to be very strong…We had consistent business throughout the quarter, and that has continued so far into August.” Transcript: Earning call Q2. Aug. 20, 2020

Advance Auto Parts Inc.

Auto “… we obviously benefited from stimulus and unemployment benefits. But we know that in the back half, we’re going to get less benefit from that. That said, the strength has continued, as we indicated…” Transcript: Earning call Q2. Sept. 18, 2020

Murphy USA Inc.

C Store …”I don’t know if that’s a function of having some additional stimulus or they’re just not spending somewhere else, maybe not eating out as much, saving by buying groceries more. But we have not seen any sort of down-purchasing behavior from customers as well, which has been positive…” Transcript: Goldman Sachs 27th Annual Global Retailing Conference, Sept. 10, 2020

Brinker International Inc.

Casual Dining “Top of mind for all of us, right, as those $600 checks kind of disappeared. We were nervous and curious as to how it’s going to impact the business. You saw our July results. I’ll just say we’re almost 2 weeks now into our August and the results have gotten better. Our trends have strengthened, and so now we’re several weeks past those unemployment checks rolling off, and we haven’t seen any indication that it’s having an impact on our business.” Transcript: Earning call Q4. Sept. 12, 2020

The Michaels Companies Inc.

Craft “August demand has remained very strong as we exited Q2 into Q3.” Transcript: Earning call Q2. Sept. 3, 2020

Dollar General Corp.

Discount “Since the end of Q2 and through August 25, we have continued to experience elevated same-store sales, which have increased by approximately 15% during this time frame. “ Transcript: Earning call Q2. Aug. 27, 2020

BJ’s Wholesale Club Holdings Inc.

Grocery “We exited the quarter with July merchandise comp growth of 24%, and trends remain strong in August, which is running at a 20% comp so far. “ Transcript: Earning call Q2. Aug. 20, 2020

Costco Wholesale Corp.

Grocery “… net sales for the 4-week month of August came in at $13.56 billion, an increase of 15.0% from $11.79 billion last year [relative to 14% growth in July]…” Transcript: Pre Recorded Sales/ Trading Statement Call Sept. 2, 2020

Target Corp.

Grocery “.. so far in August, due largely to softer sales in our Back-to-School categories, month-to-date comp sales have been running in the low double digits.” Transcript: Earning call Q2. Aug. 19, 2020

At Home Group Inc.

Home “In terms of Q3, our quarter-to-date trends have remained strong. Comps are relatively in line with Q2 and have been consistent throughout the month of August. Similar to Q2, the strength is geographically broad and both everyday and seasonal categories are performing well.” Transcript: Earning call Q2. Sept. 2, 2020

Best Buy Co. Inc.

Home “Trends have remained strong in August, with sales up approximately 20% for the first 3 weeks of Q3 [relative to 4% growth in Q2], as customers’ demand for products that help them work, learn, cook and entertain from home continues…” Transcript: Earning call Q2. Aug. 25, 2020

Home Depot Inc.

Home “Home Depot reported second quarter results recently with comps up over 23% with broad-based strength throughout the quarter. All months were over 20%, and every region comped double digits, and strong demand was carried through to the first 2 weeks of August with comps still at similar levels.” Transcript: Goldman Sachs 27th Annual Global Retailing Conference, Sept. 10, 2020

Lowe’s Cos. Inc.

Home “In August, we’ve continued to see the strong broad-based sales trend that we experienced in July with strength across both DIY and Pro customers. Month-to-date, August U.S. comp sales trends are materially consistent with July’s performance levels.” Transcript: Earning call Q2. Aug. 19, 2020

Signet Jewelers Ltd.

Jewelry “Strength continued into August, with preliminary same-store sales up 10.9%, which includes 65.2% growth in e-commerce versus August of last year.” Transcript: Earning call Q2. Sept. 3, 2020

GameStop Corp.

Specialty “From a top line perspective, the third quarter will see several key software titles moved into Q4. And while the August sales trends are consistent with Q2, those shifts will create somewhat of a headwind for us in September and October. With the new product launches that generally drive our business as a specialty video game retailer” Transcript: Earning call Q2. Sept. 10, 2020

We are now turning our attention to the cooler weather and the risk of a resurgence of COVID-19 which poses meaningful additional risk to retail and restaurants. We are also closely watching unemployment trends and the government’s effort to support consumers. While the consumer appears to be in decent shape so far, we are under no illusion that spending will continue if the economic recovery falters. In our view, the strength of the third quarter is at significant risk (See “U.S. Real-Time Economic Data Continues To Paint A Mixed Picture“, Aug. 14, 2020).

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