Retail sales growth weak according to KubasPrimedia
After a less-than-stellar Q1 and Q2, the Canadian retail environment appears set to rebound slightly in the latter part of 2011 according to the latest Retail Sales Outlook report from Toronto consultancy KubasPrimedia.
However, KubasPrimedia executive vice-president Ed Strapagiel predicts that a full recovery could still be up to a year away, as Canadian consumers remain somewhat spooked by the lingering U.S. recession and the European debt crisis.
“Looking down the road, there’s nothing that would indicate that things are going to take off in a positive direction until the U.S. economy gets on the mend again, and that has been a pretty slow process,” said Strapagiel.
That places an even greater onus on the marketing function he said, since retailers can’t count on customary market growth to increase sales. At the same time, he noted, the Canadian retail landscape is about to become more cluttered with an influx of U.S. retailers such as Target.
“[Retailers] had better be darn sharp and work on shoring up their weaknesses and building on their strengths, because they’re going to need that a short time from now,” he said.
While Canadian retail sales were up 3.3% in the first half of 2011 (all figures are based on Statistics Canada data), the KubasPrimedia report said that underlying problems were masked by a 9.5% increase in the automotive sector. Store retail, for example, was the weakest it has been in at least five years, with a negligible 0.1% increase in sales.
The second quarter produced what KubasPrimedia described as “mixed signals,” with two typically stable categories – supermarkets and drug stores – seeing what Strapagiel described as “entirely unexpected” sales declines of 0.8% and 1.4% respectively. Other sectors such as furniture stores (-1.2%), and building material/garden equipment and supplies (-5.2%) also saw declines.
However, these were at least partially offset by increases in sectors that are usually harmed by a weak market: general merchandise (a 4.3% gain in the second quarter) and clothing stores (4.7%).
KubasPrimedia said it is “a little optimistic” for the balance of 2011, noting that the economy is in “relatively good shape” despite some recent setbacks. It predicted a return to normal growth for the food and drug categories, and said that an “okay” housing market could help sales in home goods categories. In addition, stabilizing gasoline prices could help free up some additional consumer dollars, it said.
Projecting into 2012, KubasPrimedia said that initial indications are for a 5.2% increase in total retail sales to $480.3 billion, with both the food and drug and store merchandise sectors strengthening along with the economy. Automotive will continue to boost the numbers, it said, but should be less of a factor.
