S&P: Apparel Retailers In Default Risk Hot Seat

The default risk for apparel retailers in September rose higher than the overall average for all retail categories.

Apparel retailers posted the largest increase in median default risk among all retail categories, rising to 2.9 percent Sept. 16 from 2.2 percent on Aug. 14, according to data from S&P Global Market Intelligence. The data points are from mid-month to mid-month. The latest data has apparel retailers nearly reaching its 3.0 percent default risk back in July.

The overall median default risk for retail was 2.3 percent, down slightly from last months 2.4 percent. Broadline retailers fared even better, falling to 2.1 percent from last month’s 2.7 percent. Footwear retailers was another category that saw a slight bump up, inching up to 0.7 percent from last month’s 0.6 percent. Median default risk represents the chance of default within a year.

Since the last report on Aug. 14, there were three retail bankruptcies. Heritage Collegiate Apparel filed on Aug. 16. Metro Mattress Corp filed on Sept. 4, while Big Lots Inc. filed its petition on Sept. 9. The S&P tracks debt for publicly traded U.S. retailers.

As the holiday season approaches, retail in general could see some pressures. Consumers are expected to be on the hunt for value, according to Salesforce. That means consumers will be price sensitive, checking price tags and promotions and thinking twice before they buy.

Deloitte Consulting has forecasted holiday retail sales from November 2024 to January 2025 to increase between 2.3 percent and 3.3 percent, a range that is “in line with trends over the past decade,” according to Deloitte’s retail and consumer products leader Michael Jeschke.