Promising Picture for Most Canadian Retailers Heading Into 2015

By Ed Strapagiel

Although the media headlines declared a large drop in Canadian retail sales in December, much of this has to do with plunging gas prices and Christmas shopping starting earlier. In fact, total December retail sales were still up a healthy 4.6% from a year ago on a not seasonally adjusted basis. The November plus December 2014 combination was up 3.5% from 2013, and Q4 2014 overall was up 4.1% year-over-year. 

For 2014 overall, total Canadian retail sales increased 4.7%, the highest annual growth since 2010, which was a bounce back year from the Great Recession. The 4.7% growth in 2014 was also a significant improvement over the 3.2% gain recorded in 2013. Total Canadian retail sales in 2014 were $505.6 billion (although this excludes unreported non-store retailers). 

The underlying 12 month trend for total Canadian retail sales (green line in the above chart) has been improving for almost two years. But the 3 month trend (orange line) has now ticked downward, indicating a plateau ahead, and this is mostly due to steep sales declines at gasoline stations. 

Fortunes vary by retail sector. Food & Drug had a recovery in December after a weak November. Store Merchandise is continuing its hot streak and had the highest sector growth in Q4 2014. While Automotive & Related weakened with lower gasoline prices, Canadian consumers must still have money in their pockets because they continue to buy new vehicles at a torrid pace. 

Food & Drug Stores

December 2014 was one of those months in which all Food & Drug sector store types had positive sales gains. In some cases, especially supermarkets and other grocery stores, this was rebound from a weak November. Even convenience stores were up 8.5%, their highest single month annual gain in seven years. As for Christmas spirits, beer, wine and liquor store sales were up 7.9% in December year-over-year, compared to a decline of 3.3% in 2013. 

Overall, the Food & Drug sector was up 2.9% for the year 2014. While this appears relatively modest, it was still the highest annual gain for Food & Drug in four years. 

Store Merchandise

he Store Merchandise sector ended 2014 on a positive note with retail sales up 4.3% for the year overall. This was the best year for Store Merchandise since 2007. For Q4 2014 alone, sales were up 5.2%. 

The trend lines indicate that the good news in the Store Merchandise sector is likely to continue into 2015, as the 3 month trend (orange line in the chart) remains ahead of the underlying 12 month trend (green line). Liquidation sales at Target Canada should also keep the numbers up, although other retailers may suffer somewhat. 

Automotive & Related

The Automotive & Related sector is a Jekyll and Hyde story. Automobile dealers' sales were up a stunning 16.4% in December 2014 versus the same month a year ago. On the other hand, gasoline station retail sales declined an almost equally stunning and offsetting 12.4%. 

At up 6.5% in 2014, Automotive & Related still had the highest annual sales growth rate for the year overall versus the other major retail sectors. But this appears to be changing with Store Merchandise now emerging as the new leader. 

By The Numbers