May Retail Sales Growth Masks Continued Weakness in Discretionary Categories

May recorded 4.0% YOY growth across All Stores and 2.0% YOY across All Stores Less Automotive, Food and Pharmacies. At first glance, these figures appear encouraging; however, much like April, the underlying trends tell a more complex story. Consumer spending growth continues to be driven more by higher prices than by increased purchasing activity. With fuel prices, transportation costs and broader inflationary pressures continuing to weigh on household budgets, Canadians are increasingly prioritizing essential purchases while scaling back on discretionary spending; a trend that has persisted well into the spring and early-summer season.

Dominating May’s retail sales was the continued surge in Gasoline Stations, which recorded 30.0% YOY growth. Notably, this increase reflects higher fuel prices rather than increased driving activity. As the Consumer Price Index reported that gasoline prices rose 33.2% YOY in May, gasoline’s significant retail growth overstates its contribution to household spending as consumers have responded by purchasing less fuel. The consequences of this dynamic are evident across the broader retail landscape: dollars that might otherwise go toward a new appliance or a home renovation are instead being absorbed at the pump.

Against a backdrop of broad discretionary weakness, Clothing and Accessories Stores were a notable exception, rising 4.2% YOY, with Clothing Stores specifically up 5.3% YOY. Two Canadian retailers illustrate this strength particularly well. Aritzia reported a 43% increase in total revenue in Q1 2026, with comparable store sales rising 35%. These results were driven by well-received spring and summer collections, disciplined inventory management, and continued investment in marketing. Additionally, Groupe Dynamite posted equally impressive results, with total revenue growing 37.0% in Q1 2026. Together, these retailers demonstrate that when product resonates and value is clear, Canadians remain willing to spend despite a constrained environment. As summer approaches, it will be worth watching whether this momentum continues and whether the upcoming FIFA World Cup generates additional demand for apparel, particularly jerseys and fan merchandise, in key urban markets such as Toronto and Vancouver.

The most significant retail declines in May were in categories where purchase decisions are easiest to delay. Furniture, Home Furnishings, Electronics and Appliance Stores declined -6.8% YOY, with Electronics and Appliance Stores posting the sharpest decline at -10.7% YOY. Building Material and Garden Equipment and Supplies Dealers were also down -4.2% YOY. This weakness is notable given that late spring and early summer typically represent the busiest period for home improvement spending.

The decline in electronics warrants particular attention. Consumer demand for traditional appliances and home electronics continues to be constrained by household budget pressures, while ongoing investment in AI infrastructure and commercial computing is reshaping portions of the broader electronics supply chain. Although the direct impact on consumer product availability varies by category, elevated costs and cautious consumer spending continue to weigh on demand. Meanwhile, ecommerce sales grew just 1.7% YOY in May. Rather than shifting online in search of lower prices, consumers appear to be consolidating purchases and shopping less frequently but more intentionally. Retailers raising free shipping thresholds may be inadvertently reinforcing this behaviour by reducing impulse purchases and encouraging consumers to wait until they can justify a larger basket.

As we move deeper into the summer season, JCWG is thinking about:

• How much longer can discretionary retail categories withstand elevated fuel and energy costs? With household budgets still under pressure, will categories such as electronics, home furnishings and home improvement continue to lag, or is there potential for spending to rebound later this year?
• Will the FIFA World Cup provide a meaningful boost to retail sales? Could demand for streaming devices, fan merchandise, and viewing parties generate a measurable lift in retail sales, and is that impact likely to be concentrated in host markets such as Toronto and Vancouver?
• With higher free shipping thresholds, fewer shopping trips, and increased purchase planning, what promotional, pricing and fulfilment strategies will be most effective in driving conversion while protecting margins?

Retail Sales by Product Category, Same Month Comparison

Retail Sales by Store Category, Year to Date Comparison

Ecommerce Sales

Regional Sales, Year to Date Comparison