According to the latest numbers from Statistics Canada, total retail sales increased 5.4% year-over-year in October 2014 on a not seasonally adjusted basis. The 3 month trend is sticking at around the 5% growth level (orange line in the first chart, below), and the underlying 12 month trend (green line) is continuing to move up. Somewhat remarkably, this performance is being maintained despite collapsing gasoline station sales as pump prices decline. The slack is being taken up by improving sales in the Store Merchandise sector.
On the basis of current trends, total retail should be up about 4.8% for 2014 overall, a notable improvement on the modest 3.2% annual gain in 2013. For 2015, retail sales growth is projected at 4.9%, which at first blush seems like hardly any progress over 2014. But there's a twist. The Automotive & Related sector is likely to slow down while Store Retail should pick up. The two effects would offset each other so that total growth in 2015 would be about the same as 2014, but the balance among the major retail sectors will be better. Those not selling cars or gasoline stand to benefit more.
The numbers estimated for 2014 and projected for 2015 are as follows.
Food & Drug Stores:
The Food & Drug sector is continuing its "two steps forward, one step back" pattern. The underlying trend (green line in the above chart) however does seem to be crawling upward compared to its 2014 levels.
The big laggard in this sector is supermarkets & grocery stores. Although their retail sales increased 2.2% year-over-year in October, they are up only a rather miserable 0.6% year-to-date after 10 months in 2014. This reflects the heavy competition in the food business, and things are likely to get even tighter as retailers try to pass on higher imported food prices due to the weakened Canadian dollar.
On the other hand, health & personal care (drug) stores are enjoying above average growth. Retail sales were up 5.4% in October 2014 year-over-year, and have gained 7.4% year-to-date. It's likely this trend will continue into 2015.
One more note is that specialty food stores' sales appear to be falling off. After increasing 8.0% in the first half of 2014, retail sales gained only 0.8% for the 3 months ending October 2014.
Store Merchandise is earning the title of "most improved major retail sector of 2014". The 3 month trend (orange line in the chart) continues to lead the underlying 12 month trend (green line), which itself has been rising steadily since the first half of 2013.
All store types in this sector had positive year-over-year sales gains in October 2014. Even electronics & appliance stores posted a whopping 10.7% gain, their best single month in over 6 years. Another strong performance was in the other general merchandise group (mostly large combination stores) whose sales were up 8.0% in October, although this was on pace with their year-to-date results.
It's difficult to see that these trends in Store Merchandise will change much going into 2015. The economy is improving, and the many new retailers entering this sector are poised for a "honeymoon year" (albeit after some awkward courtships). If nothing else, sales will apparently increase as the cost of imported goods rises.
Automotive & Related:
Canadians are continuing to buy vehicles at a high rate. New car dealer sales were up 9.7% year-over-year in October 2014, and up 8.1% year-to-date. In large part, this is due to low interest rates, as cars (like houses) are mostly financed rather than purchased outright. Nevertheless, the boom in vehicle sales will cool down eventually, possibly in the second half of 2015.
Gasoline station sales however are slowing significantly. Their sales are about 13% of total retail, and gas prices are now down roughly 25%. This frees up about 2% to 3% of total retail sales for spending at other stores, which is a lot when total retail is rising at just under 5%. Note however that most gas stations double as convenience stores which shores up the business. Nevertheless, going into 2015 actual declines in gasoline station retail sales are likely.
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.