*photo: cadillac fairview (cf toronto eaton centre)*

By Ed Strapagiel

Canadian retail sales growth just keeps stumbling along slowly, according to the latest data from Statistics Canada. Total retail sales gained just 1.5% year-over-year on a not seasonally adjusted basis in Q3 2019, a smidgen above the 1.4% Q2 gain but a drop from the 1.8% increase in Q1 of the year. After 9 months of 2019, or 3/4 of the year, year-to-date Canadian retail sales are up only 1.6% compared to a year ago. That doesn't even cover price inflation and population growth.

Despite a slight recent uptick, the 3 month sales growth trend (orange line in the chart above) remains at a historical low level. The underlying 12 month trend (green line) continues to dwindle and could end the year at an increase of about 1.5%, which would make 2019 the slowest growth year since the Great Recession of 2009. I'm dreaming of a mediocre Christmas.

The Automotive & Related sector is the main culprit behind soft Canadian retail sales, but it's not as if the Food & Drug and Store Merchandise sectors are doing well either. Excluding Automotive, Store Retail is up a modest 2.3% year-to-date so far in 2019, a 6 year low.

Retail sales growth in the Food & Drug sector actually performed well in the early part of 2019, but this has now collapsed to near record lows. In Q3 2019, sales increased by only 1.2% year-over-year, as compared to 3.5% in Q1 and 2.0% in Q2.

The above chart shows that the 3 month trend (orange line) is now in the middle of a weak period. This in turn is driving down the underlying 12 month trend (green line), and it doesn't look like there's much relief on the horizon. At current rates, the Food & Drug sector is likely to record a retail sales gain of only about 2% in 2019, one of the lowest annual gains in recent memory.

Supermarkets and other grocery stores' retail sales were practically flat in Q3 2019 year-over-year, with a decline of 0.01%. Convenience stores were especially weak, down 7.1% in the period. Specialty food stores offset this however, with a 7.1% Q3 retail sales gain.

Health and personal care stores' retail sales were up 3.7% in Q3 2019, their best quarter of the year so far. Their year-to-date sales have now improved to a 2.5% increase.

Store Merchandise had a relatively good Q3 2019, with retail sales up 2.8% year-over-year. This is up from 2.0% and 2.5% in Q1 and Q2 of the year respectively. Such gains are not at all record setting, but they're still better than what the other major retail sectors produced. Also, positive trends in Store Merchandise are important for the holiday shopping season.

The 3 month trend (orange line in the chart) has been somewhat erratic recently but still has improved since the start of the year. The underlying 12 month trend (green line) has been steady in recent months and could improve somewhat by the end of the year.

There are some weak spots in Store Merchandise. Retail sales at electronics and appliance stores were down a huge 10.3% year-over-year in Q3 2019, and sporting goods, hobby, book and music stores' sales were off 1.8%. Clothing stores only managed a 0.8% gain for the quarter.

Miscellaneous store retailers had the highest sales gain of 13.0% in Q3, mostly thanks to the addition of cannabis stores (this effect will start to dampen in the next few months). Building material and garden equipment & supplies merchants were up 5.4% in Q3, which is a significant recovery from the stingy 0.9% gain for the first half of the year. Also of note is that general merchandise stores, which account for about 1/3 of Store Merchandise retail sales, gained a respectable 3.9% in the quarter and are up 4.1% on a year-to-date basis.

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the "By The Numbers" table below are estimates based on previous trends.

After soaring like an eagle in 2017, the Automotive & Related sector has become a dead duck in 2019. Retail sales were up just 0.4% in Q3, and a similar 0.4% year-to-date in 2019 so far.

Gas stations are the main problem. Their retail sales declined 5.2% in Q3, and are off 4.8% on a year-to-date basis. This is due to relatively low gasoline prices, and consumers don't seem to be applying their savings at the pump to other types of shopping.

Automobile dealers' sales were up 3.1%% in Q3, but this was not enough to offset the poor performance at gasoline stations.

By The Numbers

Special Note: Statistics Canada revised historical data with the February 2019 release. Unadjusted monthly data were revised back to January 2018, while seasonally adjusted data were revised back to January 2015. Those keeping score should update their files. The analysis in this report is always based on unadjusted data.

Canadian E-Commerce Sales

StatsCan started providing ecommerce retail sales data in January 2016. While the amount of data is limited, some trends appear to be emerging. Here are some results.

Overall, e-commerce represented about 3.4% of total Canadian retail sales for the 12 months ending September 2019, including both pure play operators as well as the online operations of brick & mortar stores. Canadian consumers however also buy online from foreign websites which is not captured in these numbers.

Canadian e-commerce sales were up 31.4% year-over-year for the 3 months ending September 2019. This was much higher than for location based retail which gained just 1.5%.

Note that location based retail is the same as that in the preceding "By The Numbers" table. It's what's normally reported as Canadian retail sales. Except that it isn't. Location based retail excludes another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending September 2019, electronic shopping and mail-order houses had an estimated $13.2 billion in e-commerce sales.

But that's not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending August 2019, this group had an estimated $7.8 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $21.1 billion in e-commerce sales by Canadian operators over the year. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include e-commerce purchases made by foreigners at Canadian operations.

For electronic shopping and mail-order houses, an estimated 85.6% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that just 1.3% of their total sales are attributable to e-commerce.

In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generated an estimated 62.8% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 37.2%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.

Monthly Update Notification

This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification from LinkedIn of when an update becomes available (and you've read this far), please connect with Ed Strapagiel on LinkedIn.