Moody's report says outlook for US retail remains stable

By

Cassidy Mantor

Published
Oct 31, 2017

Moody's Investors Service has reported US retail remains stable, despite lower operating income expectations. While certain retailers have been hit hard, they account for a small part of the overall US retail landscape.

Moody's Vice President Mickey Chadha said, "Specialty retailers, discounters and warehouse clubs, department stores, and apparel and footwear retailers are exerting the greatest pressure on the US retail industry, and although still a small part of our rated universe, the list of distressed names is growing."

Target and Walmart lead next year's more optimistic focus as they start to see their investments pay off. While Moody's lowered operating income growth forecast to only 1% to 2% this year, they expect to see "somewhat better" US retail numbers of 3.5% to 4.5% growth again next year. Holiday growth for 2017 should be 3% to 4%.

In addition to Target and Walmart giving a boost to the overall US retail landscape, department stores will start to see their decline taper off. Online retailers, off-price retailers, dollar stores and home improvement retailers will continue to see growth. Specialty retail, apparel and footwear are among categories that will also help retail growth rebound next year.

Moody's also highlighted e-commerce sales which represent only 10% to 12% of total US retail sales and are dominated by Amazon. The report found online sales will outpace in-store sales as more retailers embrace omni-channel selling. Moody's expects online operating profit growth for 2018 to be better than 2017.