Canadian retail sales in March had the worst decline ever – and this is only the beginning

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On Friday, the plight of Canadian retailers became clearer, as Statistics Canada released a report showing record industry-wide billions of dollars in sales during the early days of the coronavirus pandemic.

March sales data captures the first weeks of panic, as work at home orders swept across the country and non-core businesses were closed en masse in the middle of the month. Despite the surge in panic purchases, the shutdown of non-core businesses squeezed retail sales, which fell 10% to about $ 47 billion in March from $ 51 billion in February – the largest monthly decline ever registered, said StatsCan.

Although 40% of the retailers were closed for part of March, it was only for an average of five days. Not surprisingly, sales continued to decline until April, the first full month of economic closure in Canada. Statistics Canada advance estimate predicts April sales down 15.6% from March, although the agency has suggested that this figure may change.

“It goes without saying that one or the other of the figures – that of March or that of April – would be a record, but that consecutive declines of this magnitude lead us into completely unknown waters”, Derek Holt, chief Scotiabank, the economics of the financial markets, said in a note to customers on Friday.

Holt said Canadian retail was already in a tight spot before the pandemic “blew up the barn doors”, noting that sales volumes in the sector had not increased since the third quarter of 2018.

“COVID-19 has exacerbated a bad situation exponentially,” he said.

But it was clear from StatsCan’s data on Friday that there was an obvious gap between the winners and the losers in this detail calculation, with core businesses on the one hand and non-core businesses on the other.

The hardest hit retailers – those selling clothing, footwear and luxury items such as jewelry – lost half or more of their sales in March compared with the previous year. And the wealthiest industries – grocery, beer and alcoholic beverages – recorded year-over-year sales increases of 20-30%.

Consecutive declines of this magnitude plunge us into completely unknown waters

Derek Holt, Scotiabank

The only outlier was Convenience Stores, a vital business that had a relatively stormy month, with sales down 0.6% year over year.

But Alimentation Couche-Tard Inc., owner of the global brand Circle K, said Friday that the March decline was a mistake.

Convenience stores rushed in the last two weeks of March to adjust to an upside-down world in which it was essentially forbidden to enter a store for an item. People also filled up with less gas and therefore did less shopping in stores attached to gas stations.

“People did not leave their homes, and if they did, it was to make this large stock at the grocery store,” explained Stéphane Trudel, executive vice-president of operations at Couche-Tard for Canada. “So yes, we were the only ones open, but the majority of people were at home. So a big drop in traffic. Sales were not as impacted as traffic. “

Couche-Tard changed its assortment during the first weeks of the pandemic in Canada to larger take-out products instead of ready-to-eat products in individual portions. For example, customers preferred a large bag of potato chips over a small on-the-go lunch bag.

The retail sales declines were comparable to those of other countries, including the United States.

Trudel said that Couche-Tard has started to see gains in alcohol and tobacco, particularly because “contraband” cigarettes are now more difficult to find.

After a “slight” drop in sales in March, he said that overall sales in Canada had increased in April from year to year and were “constantly increasing”. But he said it was too early to give exact figures.

The industry’s largest decline was in retail footwear, down 54% from March 2019, according to the StatsCan report, while clothing declined 52.1%, and the luxury category of jewelry, luggage and leather decreased by 47.8%.

But auto sales, by far, contributed the most to the overall decline, down about $ 5 billion from February, or 35.6%. According to Statistics Canada, the decline is attributable to lower demand for new and used cars, as well as auto parts, “while Canadians continued to distance themselves physically and avoid non-essential trade.”

StatsCan noted that the retail sales declines were comparable to those of other countries, including the United States, which recorded a 7.1% drop in March.

On the positive side, supermarkets grew the most, up more than $ 2 billion, or 29.7% in March from the previous year and 27.1% from February. Beer, wine and liquor store sales increased 19.2% year over year, while cannabis retail sales increased 197.1%, although StatsCan noted that cannabis figures had not been seasonally adjusted as there are “no seasonal patterns established by official statistics yet. “

Online sales reached $ 2.2 billion in March, or 4.8% of total retail sales, a year-on-year peak of 40.4% which gives retailers years ahead in their digital strategies, according to Marty Weintraub, national retail manager at Deloitte Canada.

But the revival of the entire retail sector will largely depend on customers returning to the stores.

“Health and safety concerns are absolutely going to be a determining factor,” said Weintraub.

But it seems that many are not yet convinced that it is safe to shop.

Last week, Deloitte consumer tracking asked 1,000 Canadians if they felt safe going to the store. Only 38% said yes.

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