Apparently, a whole lot of Canadians got socks and sweaters for Christmas.
Clothing stores were one of the top performing retail segments in the fourth quarter of 2010, with sales up 8.8% over the same period in 2009 according to the new “Retail Sales Outlook Canada” report from Toronto-based KubasPrimedia.
But while early holiday promotion produced a lift in overall retail sales in November, the KubasPrimedia report said there was considerable softness during the Christmas season, resulting in a modest 4.8% increase that was the lowest quarterly gain of the year.
“In November [retailers] pulled December demand forward, and when December came along they had to run deals and discounts to get the numbers up again,” said Ed Strapagiel, executive vice-president for KubasPrimedia. “Sometimes you can’t win.”
After what it described as an “okay” 2010, the KubasPrimedia report says there is nothing to indicate a significant retail recovery this year. The report calls for Canadian retail sales to increase 5.1% to $458.6 billion, in line with 2010.
Strapagiel said that Canada’s retail environment remains inextricably linked with the U.S. market, which is still struggling to emerge from recession. “We can only go so far without our biggest customer south of the border,” he said.
The report also noted that gasoline station sales distort the overall retail picture, with projected growth of 10.2% to $53 billion this year. It is the only segment expected to see double-digit growth, closely followed by specialty food stores (a projected 9.4% increase) and new car dealers (+8.3%).
“A lot of the gains are really coming out of the automotive [sector] and the big one there is gas stations,” said Strapagiel.
As always, individual segments within the overall retail landscape continue to outperform the market, with the Automotive & Related Group—a broad segment comprised of new and used car dealers, automotive parts, accessories and tire stores and gas stations—projected to grow 8.1% this year.
KubasPrimedia projects the Store Merchandise Group, which encompasses everything from department stores to clothing stores and furniture stores, to grow by 2.8% in 2011, with total sales reaching $164.5 billion.
Strapagiel did express surprise at the lacklustre performance of electronics and appliance stores, with 2011 sales projected to increase a modest 2.5% to $14.1 billion. “With all the new technology products out there you might have thought they’d have done better, but they’ve been slashing prices,” he said.
The report also warned that when the retail sector does fully recover, the celebration could be short-lived as Canadian companies prepare for a mass influx of U.S. retailers such as Marshall’s, Kohl’s and Target—which earlier this year purchased more than 220 Zellers stores across the country though the first Target store won’t open in Canada until 2013.
Strapagiel said Canadian companies have traditionally enjoyed near “oligopolies” in retail sectors such as pharma, but U.S. retailers typically encounter more competition in the world’s biggest consumer market, making them “vicious, hungrier and meaner.”
Target, for instance, is one of the few U.S. retailers that has posed a legitimate threat to Walmart said Strapagiel. “That puts them in a class by themselves,” he said. “They’re going to be a formidable competitor, and unlike Lowe’s, for example, they’re not going to come in with a couple of stores here and there—they’re going to come in with 120 – 150 locations.”
