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Canadian Retail Sales Strengthen Just in Time for Sears

Total Canadian retail sales were up 7.8% year-over-year for the 3 months ending August 2017 on a not seasonally adjusted basis, according to the latest Statistics Canada data. That's close to a record high for the last 10 years. Furthermore, this strength is fairly broadly based across store types.

The underlying 12 month trend (green line in the chart) is up 6.4% year-over-year, the highest such result since early 2008, and it's on track to strengthen further.

While vehicle sales and gasoline prices are keeping up the retail growth level, the real "extra" push is coming from the Store Merchandise sector. Their year-over-year retail sales increases have been above average for about the last 5 months.

... which brings us to Sears Canada's liquidation. This is about the best time for it, given the relative strength of Canadian retail sales. Many other retailers' holiday season sales will still be impacted, but not by nearly as much if the market was weak. Later on, in 2018, these other retailers stand to benefit from Sears Canada's demise.

Food & Drug

After a soft patch in Q1 2017, the Food & Drug sector has stabilized at about 4% year-over-year retail sales growth. This is shown in both the 3 month trend (orange line in the above chart) and in the underlying 12 month trend (green line).

Retail sales at food & beverage stores were up 3.0% for the 3 months ending August 2017. This is about equal to their annual gains recorded in 2015 and 2016 – in other words, it's business as usual..

Health & personal care stores continue to boost the sector. Their retail sales were up 6.9% year-over-year for the 3 months ending August 2017. Although this is a solid result, it's still a cooling off compared to the unusually high 13.8% annual gain achieved in 2016.

Store Merchandise

Store Merchandise is easily the most improved sector in Canadian retail. Sales were up 8.8% year-over-year for the 3 months ending August 2017. This was the second highest such gain in 10 years, with the highest gain made the month before. The 3 month trend (orange line in the above chart) has climbed steeply, and the underlying 12 month trend (green line) is also on the rise. At this pace, Store Merchandise could end the year with over 5% annual sales growth for the first time since 2007. Sears Canada's liquidation could also help boost the numbers in the next few months.

Almost all store types in this sector recorded a positive year-over-year retail sales increase on a last 3 months basis. Double digit increases included building material & garden equipment/supplies dealers (up 14.8% year-over-year), jewellery, luggage & leather goods stores (up 12.0%), electronics & appliance stores (up 11.5%), and shoe stores (up 10.1%).

General merchandise stores gained 6.8% for the 3 months ending August 2017, their highest such growth in 3 years. This sets the stage for relatively less pain to accommodate Sears Canada liquidation sales than might otherwise be the case.

Most retailer types had good to outstanding sales increases in the latest numbers. The one exception was home furnishings stores, whose retail sales declined 1.2% for the 3 months ending August 2017.

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 is showing the combined effect of record-breaking automobile dealer sales plus continuing increases in gasoline prices. Sector sales were up 9.7% for the 3 months ending August 2017.

New car dealers' retail sales were up 11.2% on a last 3 months basis in August 2017, and up 10.1% for 2017 year-to-date.

Gasoline station retail sales increased 6.9% year-over-year for the 3 months, and are up 13.4% year-to-date.

By The Numbers

For definitions of store types, see Statistics Canada NAICS.

Canadian E-Commerce Stats

StatsCan started providing ecommerce retail sales data in January 2016. While the amount of data is limited, some trends appear to be emerging. Here are the results.

Overall, e-commerce represents about 2.5% of Canadian retail sales for the 12 months ending August 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.

Year-to-date results for 2017 (8 months) show that Canadian e-commerce sales are up 42.7% 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 excludes another section called Non-Store Retailers (NAICS code 454), which covers electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce players are. For the 12 months ending August, electronic shopping and mail-order houses had an estimated $8.4 billion in e-commerce sales.

But that's not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending August, this group had an estimated $6.4 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $14.8 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 82.6% of their sales are allocated to e-commerce. For the (mostly) bricks & mortar crowd, it can be estimated that just 1.1% of their total sales come from e-commerce.

In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generate an estimated 56.5% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 43.5%.

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.

23 October 2017