Total retail sales increased just 2.4% year-over-year in November 2014 on a not seasonally adjusted basis, according to the latest numbers from Statistics Canada. This seems to be a typical correction from immediately prior months. For the 3 months ending November, retail sales were still up 4.9% versus the same period a year ago. Nevertheless, it appears that Black Friday has topped out in and is no longer providing an extra boost.
The underlying 12 month trend (green line in the above chart) has now been improving for about a year and a half. The 3 month trend is still running ahead (orange line), indicating the up trend will continue.
The lackluster November gain was mostly due to an unusually slow month in the Food & Drug sector. Automotive & Related was also off from its previous pace, which was expected due to lower gasoline prices. Store Merchandise however continues to show improving retail sales gains.
The big recent news of course is that Target has decided to pull out of Canada, as quickly as possible it would seem, after burning through billions of dollars. Volumes have been written about what Target Canada did wrong. A more economical discussion would be: What did Target Canada do right?
Food & Drug Stores
The Food & Drug sector has a history of sales ups and downs, and in November 2014 "downs" from its two largest store types coincided. The result was that sector sales were down 0.3% for the month versus November last year, and this dragged down the overall retail average. For the 3 months ending November 2014 nevertheless, retail sales increased 2.5%. Although this is a very modest gain, the underlying trend (green line in the above chart) is still slightly better than it was a year or two ago, despite the November setback.
Supermarkets & grocery stores had a poor November, with retail sales down 1.0% year-over-year. While health and personal care stores gained 1.4% for the month, this was well off their previous year-to-date sales increase of 7.4%. Even beer, wine and liquor stores were down 2.8% in November. The only positive picture in this sector was in convenience stores, with sales up 6.1% for the month.
Retail sales growth in the Store Merchandise sector is still continuing to improve. The 3 month trend (orange line in the chart) continues to lead the underlying 12 month trend (green line), which is now at a 6 year high and still heading up.
Most store types in this sector had above average sales gains in November 2014, especially other general merchandise stores, clothing stores, shoe stores, and sporting goods, hobby, book & music stores. Only jewellery, luggage & leather goods stores and miscellaneous retailers had a sales decline.
In general, Store Merchandise appears to have strong positive momentum heading into 2015.
Automotive & Related
Sales growth in the Automotive & Related sector is flattening out, although at a level above the total retail average, at least for now. This is the net result of trends in its two largest store types.
New car dealers' sales were up "only" 5.7% in November, but this came after two months of very strong gains. For the 3 months ending November, sales were ahead a stunning 11.0% from the same period a year ago. The recent slight decline in Canadian interest rates may extend this hot streak a little longer.
Gasoline station sales, on the other hand, declined 2.7% in November and are heading down fast due to the collapse in pump prices. This could be the scenario for up to year as comparisons will be to the relatively high gas prices that prevailed for the first part of the year. While many gas stations are also convenience stores, this side of the business is not nearly enough to make up the difference.
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.