US corporate distress will rise as retail sales slow

Significance

The surge of retail sales during the pandemic is fading as consumers again spend on services at the expense of goods, while persistently high inflation and rising interest rates are squeezing shoppers' discretionary spending.

Impacts

• The pandemic may have changed shopping behaviour less than anticipated but it has accelerated pre-existing trends such as e-commerce.
• Margin-squeezed retailers will switch focus in the short term from new customer acquisition to customer retention to cut marketing costs.
• Distressed retailers will favour Chapter 11 bankruptcy reorganisation over liquidation as the long-running 'retail apocalypse' continues.