Building materials and garden equipment sales were up 6 per cent, with stores such as Canadian Tire Corp. seeing a 3-per-cent sales gain.MARK BLINCH/REUTERS
The challenges facing the Canadian consumer – and retailers – are unlikely to dissipate, despite glimmers of hope in the most recent reading on retail sales.
Data released last week showed bright spots in June as warm weather and a championship run by the Toronto Raptors boosted sales that month. But headwinds from slower economic growth and rising consumer debt are likely to persist, experts say.
“These are challenges that are unlikely to disappear soon," said Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce.
South of the border, a number of retailers – including Walmart Inc., Target Corp., Nordstrom Inc. and Kohl’s Corp. – reported surprisingly strong earnings results last week for the most recent quarter, in spite of continuing trade disputes and fears about a looming recession.
Canadian retail sales were essentially flat in June, as strength across most sectors was offset by declines at gasoline stations and automotive dealers, Statistics Canada reported Friday. Excluding those two sub-sectors, monthly retail sales were up 1.7 per cent.
Sales of building materials and garden equipment were up 6 per cent, while general merchandise stores – such as Canadian Tire Corp., Walmart Canada and Dollarama Inc. – saw a 3-per-cent sales gain.
The late start to spring in parts of the country prompted some shoppers to delay buying seasonal items that they normally would have purchased in May until June, boosting that month’s sales figures.
“All of a sudden there was this switch to, ‘Okay it’s summer, we need air conditioners, we need fans, we need stuff to do our gardening,’ " said Maureen Atkinson, a senior partner at retail advisory firm J.C. Williams Group.
The Raptors’ playoff run also boosted June sales figures, as fans scooped up memorabilia and apparel. The Toronto-based team won its first National Basketball Association title in June.
“Not only did bars and restaurants do quite well that month, but we also had people buying caps and jerseys and that seems to have been part of the story in the retail numbers," Mr. Shenfeld said.
But the trend is unlikely to continue over the long term, he added.
“If you step back from the one-month upturn, retail sales, particularly after stripping out inflation, have really not been growing much over the last year and a half," Mr. Shenfeld said, adding that many consumers are simply tapped out and higher interest rates have discouraged them from spending.
“People already bought the car and redid the kitchen and don’t need to repeat it this far into the business cycle," he said.
One positive is that job creation in Canada is still reasonable, he said, “so spending isn’t going to evaporate."
Given the headwinds, Canadian retailers are expected to rein in operating costs, increase their marketing efforts to get more shoppers into their stores, and be cautious about ordering inventory.
“They’re going to try very hard to be as efficient as possible and cut costs, but if the consumer isn’t coming along for the ride, retailers are pretty limited in what they can do," said Toronto retail consultant Ed Strapagiel.
“I think that some of the thrift operations – the dollar stores and Walmarts of this world – might stand to do a little bit better than the mainstream.”
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