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Autos and Gas Distort Canadian Retail Sales

Recent headlines imply that Canadian retail sales are on a hot streak. Indeed, sales were up an impressive 6.0% in Q1 2017 year-over-year on a not seasonally adjusted basis, according to the latest numbers from Statistics Canada. As the above chart shows, Canadian retail sales trends appear to be improving.

A closer look however reveals that much of this growth comes from the Automotive & Related sector, due to strong sales increases at both vehicle dealers and gas stations. Automotive & Related sales gained 12.0% in Q1, over 4 times higher than the rest of retail. The trend picture for Store Retail (i.e., excluding automotive) is decidedly less rosy, as the chart below shows.

Store Retail sales were up a modest 2.7% year-over-year in Q1 2017, the lowest such gain in 3 years. The 3 month trend (orange line in the above chart) continues to track below the underlying 12 month trend (green line), indicating the potential for further weakness ahead. If you're not selling cars or gas, things are not getting better, and may even be getting worse.

Food & Drug

The Food & Drug sector has had a rough start to 2017, with Q1 retail sales up only 1.5% year-over-year, the lowest such increase since 2011. The 3 month trend has taken a significant downturn, and the underlying 12 month trend is weakening right behind it.

Food & beverage stores are leading the downward trend. Their retail sales were actually down 0.2% for Q1 overall. But February was better than January, and March was better than February, so perhaps the bottom of the current cycle has been reached.

Health & personal care stores' sales gains more than offset the weak results for food & beverage retailers, as usual. Even so however, retail sales at health & personal care stores were up "just" 5.2% in Q1 after an annual gain 13.8% in 2016.

Store Merchandise

The 3 month trend (orange line in the above chart) in the Store Merchandise sector continues to be somewhat erratic, but the net result appears to be a slow decline in the underlying 12 month trend (green line). Store Merchandise retail sales in Q1 2017 were up a lukewarm 3.8% versus a year ago, but on a par with their 3.9% annual gain for 2016 overall.

General merchandise stores account for 1/3 of the dollars in this sector, but their Q1 2017 retail sales were flat with a 0% change from a year ago. The next weakest group was jewellery, luggage and leather goods stores which had a 1.3% gain, followed by clothing stores with a modest 1.9% gain.

A number of home goods retailers however had a good 2017 first quarter, thus averting total disaster. Sales at electronics & appliance stores were up 9.8% year-over-year, their best consecutive 3 months in almost a decade. Building material & garden equipment/supplies dealers' sales were up 8.8%, and furniture stores gained 8.6%.

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the table below are estimates based on previous trends.

Automotive & Related

The Automotive & Related sector was certainly firing on all cylinders in Q1, with a year-over-year sales gain of 12.0%. This significantly improved the apparent results for retail overall.

Gasoline stations led the way with a nose-bleed 22.0% retail sales increase in Q1, all due to higher prices at the pump.

New car dealers represent over half of the dollars in this sector, and their sales were up a healthy 8.4% in Q1 2017 versus a year ago.

By The Numbers

For definitions of store types, see Statistics Canada NAICS.

New Canadian E-Commerce Stats

StatsCan is now providing new data on ecommerce retail sales. There is not enough information yet to consider trends, but we can add up the figures to at least get some sense of size and share. Here are the results.

Overall, e-commerce represents about 2.3% of Canadian retailers' sales for the 12 months ending March 2017, including both pure play operators as well as the online efforts of brick & mortar stores. Canadian consumers however also buy online from foreign websites, spending which is not captured in these numbers.

The Q1 2017 results show that Canadian e-commerce sales were up 38.5% from a year ago, a much higher gain than for retail in general.

Note that location based retail is the same as that in the preceding large "By The Numbers" table. It's what's normally reported as Canadian retail sales. Except that it isn't. Location based retail does not include another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which is where (mostly) pure play e-commerce players are. For the 12 months ending March, electronic shopping and mail-order houses had an estimated $7.6 billion in e-commerce sales.

But that's not the only source of e-commerce retail sales, because (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending March, this group had an estimated $5.2 billion in e-commerce sales. Added to electronic shopping and mail-order houses gives a grand total of $12.9 billion in e-commerce sales by Canadian operators over a 12 month period. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include purchases made by foreigners at Canadian e-commerce businesses.

For electronic shopping and mail-order houses, an estimated 82.5% of their sales are allocated to e-commerce. For the (mostly) bricks & mortar crowd, it can be estimated that just 0.9% of their total sales come from e-commerce.

In the final section of the above table, it is seen that (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generate an estimated 59.3% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 40.7%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.

Monthly Update Notification

This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification of when an update becomes available (and you've read this far), please connect with Ed Strapagiel on LinkedIn.

26 May 2017