August 26, 2014
Ed Strapagiel is a consultant specializing in applied marketing, business development and strategic planning. [Ed Strapagiel’s Website]
Statistics Canada‘s latest numbers show a relatively strong gain of 4.8% in total retail sales in June 2014 over the same month a year ago, on a not seasonally adjusted basis. This is the best result since October of last year.
Better still, the year-over-year gain for Q2 2014 overall was 5.2%, a two year high, and a marked improvement over the 3.8% increase in Q1. The 3 month year-over-year growth trend (orange line in the chart above) continues to track a little above the 12 month trend (green line), indicating some upside going forward. The positive momentum bodes well for the rest of 2014.
While Automotive & Related retail sales are still recording the highest gains, the other major retail sectors are gaining and coming into better balance. Broader improvement is another good sign.
Food & Drug Stores
Food & Drug stores’ sales were up 4.0% year-over-year in Q2, a four year high, and almost double the growth of Q1. The 3 month trend is now significantly above the 12 month trend. This sector however has a tendency to vary up and down, so this level of growth may not be sustainable.
Health & personal care stores are mostly responsible for the strong showing, with retail sales up 7.4% in Q2. Two smaller subgroups, specialty food stores and convenience stores, also had strong sales in Q2, up 9.3% and 6.9% respectively.
On the other hand, supermarkets & other grocery stores continue to lag the retail average. Year-over-year sales were up 1.6% in Q2, but declined 1.9% in June alone.
Retail sales for the Store Merchandise sector were up 6.2% in June versus a year ago, the highest such increase in two years. The 3 month trend (orange line in the above chart) is now on the upswing and ahead of the 12 month trend (green line), which represents a recovery from a soft first quarter.
Much of the strength in Store Merchandise is from the other general merchandise stores group, which are mostly large combo retailers. In Q2 2014, their sales were up 9.1% year-over-year, and this came on the heels of a strong 8.4% gain in Q1.
At the same time, a few other store types in this sector showed improving retail sales:
– Clothing stores were up 5.2% year-over-year in Q2 versus down 0.4% in Q1;
– Shoe stores gained 4.9% in Q2 versus a decline of 1.9% in Q1;
– (Conventional) department stores were up 5.7% in Q2 versus a modest 1.8% gain in Q1.
Nevertheless, some store types had a more difficult Q2:
– Electronics & appliance stores continue to be the basket case of Canadian retail, with sales down a further 0.6%;
– Miscellaneous store retailers were also down 1.4% in Q2, worse than the 0.5% drop in Q1;
– Jewellery, luggage & leather goods stores ekked out a 0.3% Q2 gain, well down from the 6.9% Q1 increase.
Automotive & Related
The Automotive & Related sector continues to lead Canadian retail with a 6.8% sales increase in Q2 versus a year ago. This is actually slightly softer than the previous pace but still a high growth level.
Automobile dealers account for a little over half of this sector and had a 5.6% year-over-year sales increase in Q2 2014. Even though this is above the retail average, it was the lowest result for auto dealers over the last five quarters.
Gasoline station sales were up 10.4% in Q2, the top result of all store types, and somewhat stronger than their 9.3% Q1 gain.
The other motor vehicle dealers group (e.g., motorcycles, recreational vehicles, etc.) however is a weak spot in this sector. Their retail sales declined 2.1% in Q2, following a drop of 0.2% in Q1.