Digging Through a Surprisingly Weak Retail Sales Report

Inflation data earlier this week came in as expected or slightly better depending on the data set, but the July Retail Sales report came in much weaker than expected.

By any of the various headline figures associated with the Retail Sales report, be it retail and food services, retail ex-motor vehicles, retail ex gas or just starting retail, they were all compared to June. Given the timing of Amazon’s (AMZN) Prime Day 2026 in late June versus July 2025, we warned there could be some downside risk to the July 2026 retail sales report. Even we were surprised by the 0.8% month-over-month fall in retail-only sales.

But, as you know, our preferred way of analyzing the Retail Sales report is on a year-over-year basis. When we compare the July figures against the comparison between those for May to July 2026 against May to July 2025, it’s pretty clear July was the weakest month in the last three. For example, that trailing three quarter look at retail-only sales between May to July 2026 versus May to July 2025 was up 6.6%. Factor in the 7.1% year-over-year increase for retail only in June, and it becomes clear the 5.0% figure for July is the weakest one. Again, part of that is likely due to the pull forward of Amazon’s Prime Day and competing offers from others, but also the signals we continue to collect about consumers being more selective with their spending.

While we saw that pattern for a number of line items in the July Retail Sales report, there were a few that bucked the trend. Clothing and accessory retail sales was one with its 5.0% year-over-year increase, up from 4.3% in June. Building Materials was another, up 6.7% compared to 5.5% in June.

We those as favorable data points for the Portfolio’s positions in TJX (TJX) and Builders FirstSource (BLDR). And even though year-over-year non-store retail sales figure for July was 7.7% compared to 10.4% for the May to July period, compared to the year-over-year 5.0% increase for Retail only sales, it’s clear digital shopping continues to win wallet share.

That’s good for Amazon, but when we think of the adjusted 18.2% digital shopping comp sales figure put up by Costco (COST) for July, it’s really taking share on that front. But so is Costco’s warehouse business with its 6.9% adjusted U.S. comp sales figures for July.

Data points like those, the rebound in gas prices and other inflation tailwinds keep us bullish on TJX, AMZN, and COST shares, especially as we move through the heart of the back to school shopping season.

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At the time of publication, TheStreet Pro Portfolio was long AMZN, BLDR, COST and TJX.