Retail outlook not so bad

By Drew Halfnight

Even as analysts continue to predict a “sobering” holiday season for Canadian retailers, two sets of numbers surfaced this week that paint a different picture.

The Retail Council of Canada released its national monthly sales for August, showing strong year-over-year growth almost across the board.

Retail sales were up 4.6 per cent for the first eight months of 2008, or 7.5 per cent excluding food, cars and gas – a promising trend heading into the year-end retail bonanza.

Then the shocker. Canadian auto sales hit a six-year high for October this past month, according to the latest data from Toronto auto consultant Dennis DesRosiers, and are tracking at 1.4 per cent year-over-year growth in 2008.

Both sets of numbers contradict gloomy reports on consumer confidence from the business press, and indicate that Canadians are experiencing recent economic meltdowns differently from their neighbours to the south.

Judging from the figures, it appears many Canadian consumers and retailers conducted business as usual through the late, untouched by the subprime lending crisis that paralyzed retail south of the border.


And while bear markets mauled portfolios the world over in September, Canadians were apparently unloading cash on luxury cars.

“Some might see these as shocking,” said DesRosiers in an e-mail sent Monday with October auto sales attached. “I am absolutely completely surprised by the Canadian performance.”

Several import nameplates showed gains in the double digits, with Audi, BMW, Mercedes, Subaru, Suzuki, Volkswagen and Jaguar all up more than 20 per cent over October 2007.

“Look at the strength of luxury players in Canada for the month,” noted DesRosiers. “These brands are also having respectable YTD performances.”

Import nameplates are now up 9.4 per cent year-to-date over 2007.

The positive figures come in stark contrast to U.S. auto sales, which plummeted to new lows in October. General Motors logged its worst month of domestic sales since 1975; Ford was down 30 per cent; and Toyota, Honda and Nissan each dropped 23 per cent or more.

“This is clearly a severe, severe recession for the U.S. automotive industry and something we really can’t sustain,” said Mike DiGiovanni, GM’s executive director of global market and industry analysis.

“Clearly we’re in a very dire situation.”


In Canada, the retail outlook is far from “dire,” with many analysts scaling back on doomful prognostications of recession and a bad holiday season.

“Despite a challenging economy, slumping consumer confidence and negative headlines,” led a release from Ernst & Young this week, “Canadian retailers will still see a steady flow of customers this holiday season.”

In the release, analysts at Ernst & Young recommended “heavy promotions” as a way for retailers to compete with bad news in the business pages.

General merchandise sales in August represented a 6.7 per cent gain over the same month last year, and are tracking at about the same rate for 2008.

Several individual markets, including hardware, garden, pharmacy, sporting, music and book, supermarket and gas were all up over 3 per cent year-to-date compared with the same period in 2007.

Also, total home furnishing and electronics sales were up 6.1 year-to-date over last year, an encouraging sign heading into the tech-heavy holiday spending season.

As for regional performance, all provinces were reporting positive year-to-date figures,