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Trade News

Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Canadian Consumers are in High Spirits Despite Modest Sales Growth

Thursday, October 23, 2014 > 10:49:22
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(J.C. Williams Group)

Some retailers had a bumpy ride in August while it was smooth sailing for others. All Stores sales averaged out to a 2.5% increase, and All Stores Less Automotive, Food, and Pharmacies was up 3.5%.

Consumers’ spirits remained on a high note as the summer season drew to a close. Consumer confidence jumped two points in August to end up at 88.3 points. Looking forward, confidence fell slightly in September to 87.9 points while the long-term trend continues to move in an upward direction. The unemployment rate remained at 7.0% this month.

Department Stores continued to benefit from additional Target store openings, and it saw a 5.2% sales increase this month. Growth of Other General Merchandise Stores remained high (7.7%). Three new Target stores opened in August, bringing the total number of stores to 130. Earlier this year, Target’s major competitor, Walmart Canada, announced its $500 million investment plan for fiscal 2015 (calendar year 2014), which includes opening six new supercentres, expanding 10 existing stores, adding fresh food to 19 stores, and a $91 million budget to ramp up the distribution network to better service the customers.

Health and Personal Care Stores had another good month in August with a healthy 4.3% growth, although it fell below its year-to-date growth average of 7.6%. A year after Loblaws acquired Shoppers Drug Mart, the store now carries fresh meat, vegetables and fruit in a number of pilot stores with the hope of integrating more grocery items into all of its stores.

The growing presence of produce items in both General Merchandise Stores and Health and Personal Care Stores means more pressure for the Supermarkets and Other Grocery Stores. The category experienced a -3.3% sales decline, performing below its year-to-date growth average of 0.3%. Consumers now value convenience more and more, and it was reflected in the 5.8% sales growth of the Convenience Stores category.

Both Furniture Stores (7.9%) and Clothing and Accessories Stores (3.8%) posted above annual average growth rates, signaling a strong back-to-school season; however, a sizable portion of sales is likely derived from promotional selling, which puts in question the size of gross profit margin from each sale.

Looking forward to the holiday season, J.C. Williams Group anticipates a 4.0% sales growth for All Stores less Automotive, assuming no extreme seasonal weather. Sales during the 2013 holiday season was particularity low due to the onset of the ice storm immediately before and during the holidays in parts of Canada, meaning the 2014 holiday sales will be up against weaker comparables.

Looking forward to the fall season, gasoline prices steadily decline in the next few months. Will consumers go on more shopping trips and spend more with the savings from lower gas prices? Join us next month to find out.


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