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U.S. retail sales for June showed unexpectedly robust performance, with overall sales remaining flat above expectations of 0.3% month-over-month. Excluding autos, sales increased by 0.4%, above flat expectations, while the key control group, which excludes volatile categories like autos, gas, building materials, and food services, surged impressively by 0.9%.

Revisions to prior months were positive, with May’s overall sales adjusted from +0.1% to +0.3%, and ex-autos from -0.1% to +0.1%. The control group’s growth for May was unrevised at +0.4%, but April’s figure was revised upward from -0.5% to -0.3%. This data suggests that second-quarter demand appears stronger than initially anticipated.

Looking at category performance, auto sales were notably weak, declining by 2.0% ($2.657 billion). Gas station sales also fell by 3.0% ($1.594 billion). On the positive side, non-store retailers saw a substantial 1.9% increase (+$2.274 billion), while gains were more modest for building material and garden suppliers (+1.4%, $563 million), general merchandisers (+0.4%, $336 million), health and personal care stores (+0.9%, $318 million), and restaurants and bars (+0.3%, $256 million).

The control group’s strong performance, which serves as a direct input into GDP calculations, underscores underlying demand health. Year-on-year growth for this group rose from +3.4% to +4.1%.

Overall, these figures are notably stronger than earlier expectations, reflecting a more resilient consumer demand landscape than previously thought.

Exhibit 1: U.S. Retail Sales – June 2024

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Source: LSEG IFR Markets

Outlook – Q2 2024 earnings growth: retail/restaurant industries

For Q2 2024, the LSEG Retail/Restaurant Index is looking at a 6.8% blended estimated earnings growth rate, and a 3.9% blended estimated revenue growth rate. Both growth rates represent a significant slowdown in consumer spending, compared to Q1 2024.

Five out of the ten consumer-related industries have turned positive. The Broadline Retail sector continues to be on track to record one of the highest estimated earnings growth rates in the second quarter, a 51.0% surge over last year’s level (Exhibit 2). On the flip side, the Personal Care Products is on track to post the weakest estimated earnings growth rates in the second quarter at -4.9%.

Exhibit 2: Q2 2024 Earnings Growth Rates Estimates: LSEG Retail and Restaurant Index

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Source: LSEG I/B/E/S

Discount levels – U.S. online retailers

The discount penetration (how much of the assortment is on sale) has risen to its highest point this year. LSEG discovered this in a collaboration with Centric Market Intelligence, formerly StyleSage, which analyzes retailers, brands, online trends and products across the globe. The rise in discount penetration correlates with Amazon Prime Week.

Exhibit 3: Average Discount Penetration: U.S. Online Retailers

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Source: Centric Market Intelligence, formerly StyleSage Co.

Accordingly, the average percent discount in July has also risen to 36%, below last year’s 39.0%.

Exhibit 4: Average Discount: U.S. Online Retailers

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Source: Centric Market Intelligence, formerly StyleSage Co.

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