Canadian Retail Sales Continue Weakening Trend

By Ed Strapagiel

The most recent Statistics Canada numbers show an uptick in Canadian retail sales in May 2018. Is this a turnaround? That's not too likely. First of all, it's not at all unusual to hit a particularly hot or cold retail sales month at any time, and one month does not a trend make. Secondly, and more importantly, the recent uptick was nowhere near enough to compensate for weak sales growth in the immediately preceding months. 

After 5 months, 2018 year-to date total Canadian retail sales are up 3.6%. That's not great, and it's significantly less than the 6.2% growth recorded after the first 5 months last year. 

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The 3 month growth trend (orange line in the chart above) shows the recent uptick, but it's still running well below the underlying 12 month trend (green line). At this rate, 2018 could end up being the slowest year in recent history.

Food & Drug

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Retail sales in the Food & Drug sector were up only 0.8% year-to-date through to May 2018, one of the lowest results ever for the first 5 months of a year. The 3 month growth trend (orange line) has declined unrelentingly since the middle of last year, and the underlying 12 month trend (green line) is following suit. 

The largest component of this sector is supermarkets & other grocery stores, but their retail sales were down 0.8% year-to-date. In contrast, retail sales at the small specialty food stores group were up 11.1%. 

At one time, health & personal care stores were the sales growth leaders in this sector. Those days appear to be over now. Their retail sales recorded a flat 0.0% change year-to-date after 5 months of 2018. 

Store Merchandise

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After 5 months of 2018, year-to-date retail sales in the Store Merchandise sector were up 4.7%. This is "not bad", but still not as good as the 6.5% annual gain recorded last year. 

The trend lines however are discouraging. The 3 month growth trend (orange line in the chart above) has been steadily weakening since about the middle of last year. The underlying 12 month trend (green line) peaked in Q1 2018 and is now starting a downward slide. 

On a year-to-date basis, only electronics & appliance stores are doing exceptionally well, with retail sales up 11.7% after 5 months of 2018. At the other end of the spectrum, shoe stores sales declined by 3.5%. Retail sales at general merchandise stores, which account for about 1/3 of the Store Merchandise sector, were up a relatively modest 2.8% year-to-date. 

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

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Much of the accelerating growth rate of Canadian retail sales in 2016 and 2017 was due to The Automotive & Related sector. Since late last year however, the 3 month growth trend has significantly weakened. The underlying 12 month trend is now heading downward, about as fast as it came up in 2017. 

Sales at new car dealers appear to have suffered a major reversal of fortune. After 5 months of 2018, their year-to-date retail sales are up just 1.6%, after annual increases of 10.0% and 9.4% in the previous 2 years. Things are unlikely to turn around soon, given rising interest rates and possible tariff issues. 

Year-to-date retail sales were up 10.8% at gasoline stations after 5 months of 2018. This is all due to higher gas prices at the pump, rather than any real economic gain. Nevertheless, it helped to keep up overall retail sales numbers. 

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By The Numbers

Special Note: Statistics Canada has made updates to 2017 numbers, and has also moved retail storefronts of telecom companies out of electronics & appliance stores and into a non-retail category, Telecommunications (NAICS 513). Retail trade statistics have been revised back to January 2012. 

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For definitions of store types, see Statistics Canada NAICS

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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 some results. 

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Overall, e-commerce represented about 2.7% of total Canadian retail sales for the 12 months ending May 2018, including both pure play operators as well as the online operations of brick & mortar stores. Canadian consumers however also buy online from foreign websites which is not captured in these numbers. 

Canadian e-commerce sales were up 12.6% year-over-year for the 3 months ending May 2018, but this is much less than the 33.4% gain recorded in the same period a year ago. E-commerce retail sales gains are still in double digits, and are still much higher than for location based retail, but growth may be slowing down. 

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 includes electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending May 2018, electronic shopping and mail-order houses had an estimated $9.41 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 May 2018, this group had an estimated $7.08 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $16.50 billion in e-commerce sales by Canadian operators over the year. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include e-commerce purchases made by foreigners at Canadian businesses. 

For electronic shopping and mail-order houses, an estimated 83.1% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that just 1.2% 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) generated an estimated 57.1% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 42.9%. 

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada

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

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