*MONTREAL EATON CENTRE PHOTO: IVANHOÉ CAMBRIDGE*

The following is an analysis by Toronto-based retail consultant Ed Strapagiel, who publishes a monthly report with his perspective on the state of the Canadian retail industry. Mr. Strapagiel's analysis pertains to retail sales numbers for the beginning of 2019.

By Ed Strapagiel

The 3 month trend (orange line in the chart above) is still scrapping bottom, but at least it might be getting past its low water mark. Total retail sales increased only 0.8% year-over-year for the 3 months ending February 2019, but most of the bad news was in December 2018. The underlying 12 month trend (green line) is still soft however, and it'll need some time to recover even under favourable circumstances.

A complicating factor is that gasoline prices are due to be on the rise this spring. This will make the overall retail statistics look better, but it won't really help most merchants.

Note that Statistics Canada has 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. This analysis is always based on unadjusted data.

Food & Drug

For the 3 months ending February 2019, Food & Drug retail sales were up 3.4% year-over-year, the highest such gain of the major retail sectors. The 3 month trend (orange line in the chart above) is at about the historical average, and has pulled up the underlying 12 month trend (green line) somewhat.

Sales gains at grocery stores appear to be leading the way. Their retail sales were up 3.7% year-over-year for the 3 months ending February 2019. This is in part due to inflation as retailers pass along supplier price increases.

Sales at health & personal care stores appear to be keeping pace. For the 3 months ending February 2019, their retail sales gained 3.4% year-over-year. Retail data for health & personal care stores were significantly revised with the recent Statistics Canada update, with 2018 annual sales now $1 billion higher or about 2% more than previously reported. That's a major correction considering that retail sales growth rates are typically in the low single digit range.

Convenience stores and specialty food stores still had higher than average retail sales gains, but by less of a margin than in previous months.

Store Merchandise

Retail sales growth in the Store Merchandise sector is continuing to weaken. Sales were up only 1.1% year-over-year for the 3 months ending February 2019. The underlying 12 month trend (green line in the chart) has been declining steadily for the last year. The 3 month trend (orange line) is at a low ebb, implying that things are likely to get worse before they get better.

Several retailer segments – the usual suspects at this point – are experiencing sales declines. This includes electronics & appliance stores (retail sales down 11.3% year-over-year for the 3 months ending February 2019), sporting goods, hobby, book & music stores (down 4.5%), jewellery, luggage & leather goods stores (down 4.4%), and home furnishings stores (down 1.0%).

On the other hand, there are relatively few winners in Store Merchandise. Miscellaneous store retailers' sales were up 7.4% for the 3 months ending February 2019, but about half of this is due the addition of the new cannabis stores group. General merchandise stores also had an above average gain for the period, with retail sales up 4.1%.

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.

Automotive & Related

The Automotive & Related sector went on a tear from late 2015 to late 2017, but has been crashing ever since. The volatility is due to large swings in new car dealer and gasoline station retail sales, both of which are currently in a slump. The current plunge is mostly due to a combination of lower gasoline prices and low sales growth at new car dealers.

For the 3 months ending February 2019, new car dealers' retail sales were up just 1.8% year-over-year. Although this was a modest improvement, it was the strongest such gain over the last year.

Gasoline station retail sales were down 9.4% in the same period, which led to a retail sales decline of 1.7% in the overall Automotive & Related sector for the 3 months ending February 2019. The current outlook is that gasoline prices will find their way up in the next few months, which should lead to some recovery in Automotive & Related.

By The Numbers

Special Note: Statistics Canada has made updates to 2017 numbers, and has also moved retail storefronts of telecom companies out of electronics & appliance stores and into a non-retail category, Telecommunications (NAICS 513). Retail trade statistics have been revised back to January 2012.

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 3.5% of total Canadian retail sales for the 3 months ending February 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 13.2% year-over-year for the 3 months ending February 2019.This is a relatively modest gain, but still significantly higher than for location based retail.

Note that location based retail is the same as that in the preceding large "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 February 2019, electronic shopping and mail-order houses had an estimated $11.0 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 February 2019, this group had an estimated $7.5 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $18.5 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 businesses.

For electronic shopping and mail-order houses, an estimated 85.3% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that just 1.2% 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 59.5% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 40.5%.

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