Retailers squeeze more sales from their physical spaces

Article originally posted on CoStar on July 22, 2026

U.S. retail sales moved higher again in June, reinforcing the view that consumers remain willing to open their pocketbooks even as they become more selective about where, when and with whom they spend.

Advance retail and food services sales increased 0.2% in June to a record $768.6 billion, according to the U.S. Census Bureau. The gain followed an upwardly revised 1.0% increase in May and left total sales 6.7% above year-earlier levels. Sales during the second quarter were 6.4% higher than the second quarter of last year, a solid result given the continued drag from elevated borrowing costs and persistent concerns over household finances.

The headline figure actually understated the underlying strength of spending because gasoline station receipts fell sharply as pump prices declined. Sales at gasoline stations dropped 5.3% during the month, weighing on total retail sales as lower fuel costs effectively shifted wallet share back toward other categories.

Even with that decline, gasoline station sales were up nearly 20% from a year earlier, meaning fuel costs continue to absorb a larger share of household budgets than they did last year. While larger tax refunds have helped consumers absorb that pressure, that tailwind has largely faded, leaving spending more dependent on labor market stability, wage growth and household wealth effects.

June’s report was also more encouraging when viewed against the backdrop of slowing goods inflation. Retail sales are reported in nominal terms, so softer goods prices should mechanically weigh on sales growth. That total retail and food services sales still rose 6.7% from a year earlier suggests the underlying demand environment remains healthier than the headline consumer narrative implies.

Still, performance by category continues to show that consumers becoming increasingly discerning.

The strongest monthly gains in June were concentrated in categories tied to promotions, vehicles and seasonal demand. Sales at non-store retailers increased 1.9% in June, supported in part by Amazon Prime Day, which ran from June 23 through June 26 and generated more than $26.4 billion in U.S. online spending, according to Adobe Analytics. That was 9.3% higher than last year, though the increase was largely driven by discounts, suggesting consumers are still spending but are increasingly timing purchases around promotional events. Sales at motor vehicle and parts dealers also increased by 1.9%, while sporting goods, hobby, musical instrument and book stores rose 1.3%.

The underperformers were more concentrated in store-based discretionary categories and restaurants.

Sales at health and personal care stores fell 0.8%, clothing and accessories stores declined 0.3% and miscellaneous retailers slipped 0.3% in June. Food services and drinking places increased just 0.1% during the month and 3.8% over the past year, the slowest growth rate in several years.

Home-related categories remain another area of underperformance, as sales of building materials and furniture and home furnishings are constrained by weak housing turnover and elevated mortgage rates.

For retail real estate, the more important takeaway is not simply that consumers are still spending, but that sales tied to the physical retail footprint continue to grow much faster than the amount of occupied retail space.

After excluding autos, gasoline and e-commerce, adjusted retail sales reached $418.6 billion in June, up more than 37% since the fourth quarter of 2019. Over that same period, occupied retail space increased by only 1.7%.