Retail sales on the upswing of a V-shaped recovery

However, Ed Strapagiel's latest analysis shows it is still unclear which gains and losses will be permanent.
Retail, shopping, consumers

Canadian retail sales have continued their gradual crawl back from the impact of pandemic lockdowns, with the food and drug sector leading the way, according to the latest report from Ed Strapagiel.

The consultant’s analysis of the latest Statistics Canada data suggests that the three month average retail sales growth rate was “heading up the second leg” of a V-shaped recovery in July, and will probably cross into positive territory in the following months. In the meantime, Canadian retail sales were still down 3.4%, year-over-year, and even though the underlying 12 month retail sales’ trend line has started to climb, “so much damage has been done that it may not get back to zero growth” before the year is finished, Strapagiel notes.

The food and drug category continues to experience the greatest sales uptick of any sector, with 8.2% growth year-to-date and 8.8% growth for the three months ending in July. Convenience stores had the largest growth of any business in the sector (13.8%) for that time period, with grocery growing by a similarly impressive 12.2%. After a rough few months, health and personal care stores also seem to be rebounding, with a sales growth of 1.1%.

The fact that these stores have mostly remained open has given them prolonged strength in a difficult retail environment, possibly hitting record levels. While Strapagiel says it is difficult to see this trend continuing indefinitely, he says at least some of the growth it has already experienced could be permanent, at the expense of the restaurant industry.

Store merchandise retail sales are now “on the upstroke side” after being on the downward trend for much of the year. In July alone, the sector’s retail sales were up 7.3%, but down 0.6% year-over-year for the three months ending in July, making it uncertain how much growth it will be able to make back. 

General merchandise stores weren’t as significantly affected by the pandemic as mall-based specialty retailers, a trend that continues. General merchandise retail sales were up 11.5% for the three months ending in July, but – as numerous creditor protection filings and permanent store closures would suggest – clothing and accessories’ stores bore the brunt of the pandemic’s economic ramifications, with sales down a whopping 36.1% year-over-year for the quarter. It’s also unclear how much growth in ecommerce during the pandemic will be permanent, and what impact that will have on both on-premise sales and longer-term shopping volumes.

Furniture stores have also shown signs of a comeback; while sales growth is still down by 16.6% for the year-to-date, they were up 7.4% in July alone. A similar trend is being seen in sporting goods, book and music stores, while electronics, appliance and building supply sales growth is now outpacing the numbers it has been posting during the rest of the year.

Retail sales growth at struggling new car dealers remains negative, down 15.6% for the period, but that’s “less bad” than some of the results earlier in the year. Gasoline station sales also struggle as people stay home more, declining 24.5% in the last three months.