Some retail categories are showing new signs of life

Ed Strapagiel's latest analysis shows auto and general merchandise beginning to stir, while apparel continues to get hammered.

shopping mall

Over the past three months, year-over-year total sales are increasing, but retail analyst Ed Strapagiel warns that successive waves of COVID could scuttle that momentum, which is not evenly distributed across categories. 

According to the latest figures from Stats Canada, retail sales increased 3.2% year-over-year for the three months ending in August 2020 on a not seasonally adjusted basis.

The food and drug sector, one of the few consistent economic bright spots, is continuing its strong showing in 2020. Retail sales were up 6.6% versus a year ago in the most recent three months, with sales at supermarkets and other grocery stores gaining 9.3% year-over-year.

As the graph below shows, store merchandise has reversed its downward slump: for the three months ending August, retail sales were actually up 5.8% year-over-year. Strapagiel, however, warns that we should not have a Pollyanna reaction to these figures. Year-to-date, retail is still down 3.5% after eight months, and the underlying 12 month trend (the chart’s green line) still has a ways to go to return to pre-pandemic levels, and isn’t enough to protect against the uncertainty of coming pandemic waves. 

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Strapagiel points out that the results are very preliminary and could reflect latent demand being exercised thanks to the reopening of malls and stores, and that it could cool off in the months ahead.

Also, apparel and accessories continue to be “a major COVID casualty,” according to Strapagiel. That sector’s retail sales were down 19.9% for the 3 months ending August, and down 34.4% year-to-date after eight months of 2020. Fashion retailers in particular, he says, “are dropping like flies,” with Le Chateau being the most recent addition to the dozen Canadian fashion retailers that have filed for bankruptcy or creditor protection since March.

Automotive is a particularly hard-hit category, but it’s showing signs of stirring: new car dealer retail sales were down only 0.6% year-over-year, the segment’s best result since the pandemic’s onset and a far cry from its recent 36.1% freefall in Q2. 

Not surprisingly, ecommerce remains piping hot, with sales up 69.3% year-over-year, which actually reflects a partial cooling off, according to Strapagiel. However, e-commerce still only represents about 5.1% of Canadian retail sales.

By geography, Alberta and Prince Edward Island are taking the brunt of the year-over-year downturns, while Manitoba, Quebec and the greater Vancouver area are leading the charge into the positive.