Using a slightly different unit configuration…
A thought experiment:
Britain attacks w/ a cruiser, 3 subs, and 1 fighter and 3 empty transports or a carrier.
Germany defends with a carrier, 2 planes and 5 transports.
Britain scores hits 3 sub hits and 1 other hit. Germany immediately removes the CV, a tt, and a selects a plane to take the non sub hit (only legal target).
Germany rolls 2 defense hits from its planes. The UK loses the cruiser and a plane.
At the end of the first round of combat:
UK has 3 subs remaining and 3 transports remaining.
Germany has a plane and 4 transports. Germany has a DD in range to counterattack that seazone on their turn.
At this point, the UK COULD choose to stay or retreat, and the transports are NOT immediately removed, because the attacker retains the option to retreat and the german plane could AT MOST hit one transport each round of combat.
So the UK could snipe with the subs, wittling the transport stack down, using the UK transports as fodder (transport fodder, woooo!) to stay in the fight, and THEN choose to retreat.
So if it’s the case that you can snipe in this manner (using transports to take the only legal hits, or a carrier), then it seems as though the rules SHOULD allow transport sniping and retreating.
I do realize this won’t come up often, and I do realize this might suggest an underhanded style of play, but it does seem intuitive that you can choose to attack a stack and retreat whether it’s one transport or 10, and it seems as though if you want to instead roll on the transports, gambling them lower so you can retreat… well, why would that not be allowed? That’s how other combats work, is it not? It seems like the kill-all-transport rule was created so that if you wanted to kill them ALL, you could do so without rolling, but I’ve never seen a response that suggested how a tactical retreat works with them, when you just want to kill as many as possible and beat a hasty retreat to a home port.
Also, I apologise if I just broke the game ;)