Statistics Canada indicates that retail sales increased 2.5% in August 2014 over the same month a year ago on a not seasonally adjusted basis. This was a low point for the year, mostly caused by a particularly poor month at supermarkets and other grocery stores. Other retail store types however picked up some of the slack.
For the 3 months ending August, total retail sales were still up 4.6% versus a year ago. The 3-month trend (orange line in the chart above) is running at above the average for the last 4 years, and is still slightly ahead of the underlying 12-month trend (green line).
Among the major retail sectors, Food & Drug has softened and Automotive & Related is very slowly declining, mostly due to moderating gas prices. On the other hand, Store Merchandise appears to be significantly improving.
2014 Holiday Season Retail Looks "Okay"
Store Merchandise retail sales were up 5.3% year-over-year for the 3 months ending August 2014. This is the highest it's been at this time of the year since 2007, or, in other words, since before the Great Recession. This indicates significant positive momentum going forward, and Store Merchandise is the retail sector that benefits most from holiday season shopping.
Another positive factor is the weakening Canadian dollar, which recently dipped to just under 90¢ US. This should dampen cross-border shopping and add to Canadian retailers' sales potential.
Yet another positive is declining gasoline prices. The less money that consumers pour into their gas tanks, the more they may leave at a retailer near you.
While the above factors indicate favourable conditions, there's also the other side of the coin. For many retailers not selling cars or gasoline, 2014 got off to a slow start. To make their numbers for the year, they will have to become more aggressive over the holidays, which means more specials, deals and discounts. So while the sales might materialize, profitability may be modest at best.
Finally, the weather is always a wildcard, as last year's ice storm in Eastern Canada showed.
Food & Drug Stores
Retail sales at supermarkets and other grocery stores were down 3.4% in August on a year-over-year basis, after being up the same 3.4% the month before. This choppy pattern of ups and downs is not unusual for supermarkets and grocers.
At the same time, there were also retail sales declines at specialty food stores and beer, wine & liquor stores. Health & personal care stores (i.e., drug stores) were up 4.3%, which would normally be a solid gain except that it was their lowest year-over-year monthly increase thus far in 2014. In fact, of all the retailer types in this sector, only convenience stores did better than their previous year-to-date average.
Just bad luck that the declines all came together? Quite possibly, but we'll have to wait and see ...
Retail sales for the Store Merchandise sector were up 5.3% for the 3 months ending August versus a year ago, a level not seen for several years. The 3 month trend (orange line in the chart above) is well ahead of the underlying 12 month trend (green line), indicating positive momentum going forward.
With one exception (miscellaneous store retailers), all store types in this sector had positive year-over-year retail sales increases for the 3 months ending August 2014. The biggest gainers were other general merchandise stores at 9.4%, home furnishings stores at 6.9%, sporting goods, hobby, book and music stores at 6.5%, and clothing stores at 6.1%. Even electronics and appliance stores ("the basket case of Canadian retail") managed to eke out a 0.1% gain.
Automotive & Related
Sales trends are slowly softening for Automotive & Related, although it's still the highest gaining major sector in Canadian retail.
After going up 10% in the first half of 2014, gasoline station retail sales increased only 2.5% in August. With pump prices still in decline, this is bound to go into negative territory in Q4.
On the other hand, automobile dealers' sales are still robust, up 6.3% year-over-year in August. This is on a par with the previous pace set a year ago, and well above the overall retail average.
Other motor vehicle dealers and automotive parts, accessories & tire stores had sales declines in August, but they are only a minor portion of total Automotive & Related sector sales.
By The Numbers
Ed Strapagiel is a consultant specializing in applied marketing, business development and strategic planning. [Ed Strapagiel's Website]
For definitions of store types, see Statistics Canada.