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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.


Canadians love with Costco

Monday, March 07, 2016 > 09:20:48

(The Siver Times)

Over the past six months, Costco has increased its comparable sales in Canada of 10% compared to the same period a year earlier. This is a key input in the retail industry because it excludes volatile factors like gasoline prices and the change in the number of stores. In short, we compare apples to apples.

This result is not a one-off blip. It rather is part of a trend. Costco Canada has indeed comparable sales increases of at least 7% for six quarters, since September 2014. The earlier data have not been disclosed by the US company.

Competitors have reason to be jealous. During those 18 months, Wal-Mart, Loblaw (Provigo and Maxi), Sobeys (IGA) and Metro (Super C) saw an increase in comparable sales oscillating between 0.9 and 4.5%. Which recently said the analyst Keith Howlett of Desjardins Capital Markets, the continual leap in sales of Costco is “exceptional”. The expert estimates that 55 to 60% of the merchandise that is offered is also in supermarkets.

A look at the most recent quarterly results of these retailers clearly demonstrates the gap between Costco and its competitors.

Increase in comparable sales of the top five food retailers in Canada (last reported quarter)

Sobeys + 0.9%

Loblaw ** + 2.8%

Metro + 2.8%

Wal-Mart Canada 4.3%

Costco *** + 10%

* Earnings excluding gasoline sales

** Result excluding gasoline and tobacco sales

*** Results excluding the impact of the Canadian dollar against the US dollar and the impact of gasoline prices.

Sources: Desjardins capital and corporate financial reporting Market

The steady increase in sales of Costco (90 stores nationwide) has enabled it to gain market share in the Canadian grocery sector, says analyst Peter Sklar, BMO Capital Markets. It measures 10% (tied with Wal-Mart) and notes that these are major threats to traditional grocers.

“What is fascinating is that there are almost twice as Costco per capita in Canada (1/400 000) and the US (1/666 000). Canadians are more receptive, even if it’s a US retailer. It must be said that there is no Sam’s Club Canada [similar concept that belongs to Wal-Mart], “says Craig Patterson, director of research at the School of Retailing of the University of Alberta.

Inflation and bargains

How to explain the popularity of Costco? Does the company have changed its strategy, its offerings, its merchandising, pricing? Canadian officials have refused to answer the question.

Part of these increases is necessarily due to inflation, especially food. According to Metro, it would have reached 2.8% in the quarter ended in mid-December. Last week, Loblaw said that inflation during the 4th quarter ended January 2 was “slightly above” the figure of 4.1% calculated by Statistics Canada for the period.

But the price increase does not explain everything. The climate of austerity and economic slowdown promote Costco says JoAnne Labrecque, expert in retail at HEC Montreal.

“The consumer disposable income is not increasing for years, although it declined last year. So the popularity of discount stores segment is growing much. ”

Even the wealthy are seduced by the idea of ​​doing good business, says the academic. “It’s not because you have money you’re going to agree to pay a dollar more for your tomatoes. ”

Thank you to Sears, Target and Wal-Mart

For Jean-Daniel Brisson, business strategy consultant specializing in the food sector, food inflation is certainly part of the answer. “With the food basket costing more and more, especially meat and vegetables, consumers think they will be able to save at Costco. I do not see anything else. ”

The starting Target, there is one year, as “the weakness of Sears’ avantagent Costco, analysis Francois Desrosiers, President of Interim Marketing expert and the food sector. The retailer can also say thank you to Wal-Mart, which multiplies the openings Supercenters (stores including a grocery store), he believes. “There’s a ripple effect. They open more Supercenters, plus they educate customers to the fact that we can put food in a supermarket. It is not against-productive to Costco. ”

As already written the specialized magazine Canadian Grocer, Costco has perhaps only one weakness: they do not know how to build big enough parking.

Comparable sales Costco and Wal-Mart Canada

Last quarter: + 10% / + 4.3%

previous quarter: + 9% / + 4.3%

There are two terms: + 7% / + 3.9%

There are three trimesters: +9% / + 1.8%

There are four quarters: +9% / + 1.8%

There are five quarters: + 8% / + 0.6%

Sources: Desjardins Capital Markets, Wal-Mart and Costco

Results Costco

(2nd quarter ended February 14, 2016)

Retail sales: 27.6 billion US (+ 3%)

Sale of membership cards: 603 million US (+ 3.6%)

Net income: 546 million US (- 8.7%)

Comparable sales in the United States: 4% (excluding the impact of gas prices)

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