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June retail sales flat as Raptors effect offsets auto and gas slump: StatCan

Canadian retail sales edged expectations in June with merchandise and sporting goods sales climbing as the Toronto Raptors made their NBA championship winning run, according to the latest numbers from Statistics Canada.

Clothing and clothing accessories stores saw a 4.2% uptick in sales, while sporting goods, hobby, book and music stores recorded a 3.7% increase, the federal agency said.

“These gains also followed inclement weather in May and coincided with the Toronto Raptors playing in and winning the NBA championship in June,” Statistics Canada said in a release last week.

Most of the other subsectors saw stronger sales, but these were offset by lower sales at motor vehicle and parts dealers and gasoline stations.

Overall, sales in the retail trade sector were essentially unchanged in June from May at $51.3 billion, the agency said.

Economists on average had expected a decline of 0.1%, according to the financial markets data firm Refinitiv.

“A flat Canadian retail sales reading isn’t usually anything to cheer about. But when it comes against consensus expectations for a decline, not to mention alongside a solid gain in volumes, we’ll certainly take it,” CIBC economist Royce Mendes said in a note to clients.

Sales were down in four of 11 subsectors tracked by Statistics Canada.

Motor vehicle and parts dealers fell 2.5% in June as sales at new car dealers were down 3.2%. Gasoline station sales fell 3.4% as the price of gasoline moved lower.

Excluding sales in these two subsectors, monthly retail sales gained 1.7%. Retail sales in volume terms increased 0.4%.

Sales at building material and garden equipment and supplies dealers rose by six%, while general merchandise stores’ sales rose by three% in June.

Cannabis stores also saw a 6.2% jump in sales in June, on a low base to $91 million unadjusted.

The uptick in sales in clothing and sporting goods during the month were likely fuelled by the Toronto Raptors’ historic win, economists said.

It was the first NBA championship in the Toronto franchise’s history and marked the first for a Canadian team in one of the big four North American professional sports since the Toronto Blue Jays won the 1993 World Series.

After the win in mid-June, fans lined up outside stores to buy special edition NBA championship merchandise and millions filled the streets in downtown Toronto for a parade to celebrate the team.

“The good gains in clothing and sporting goods might be partially driven by the Raptors effect, as their championship run was in high gear in the month,” said BMO Capital Markets’ Canadian rates and macro strategist Benjamin Reitzes in a note to clients.

In addition to the Raptors-fuelled sales bump in clothing and sporting goods, the monthly survey of food services and drinking places showed a one% increase in June.

“Canadian restaurants and bars were big winners during the NBA playoffs,” CIBC’s Mendes said.

 


Statistics Canada reports retail sales fell 0.1% in May to $51.5B

Canadian retail sales fell for the first time in four months as shoppers spent less at grocery and liquor stores in May.

Statistics Canada said retail sales fell 0.1% in May to $51.5 billion.

Economists had expected an increase of 0.3%, according to Thomson Reuters Eikon.

CIBC senior economist Royce Mendes said the weakness was relatively narrowly based, with only four of 11 sectors lower on the month.

“Food and beverage stores curiously represented the largest decline, odd for a series that should usually be quite consistent,” Mendes wrote in a report.

“As a result, some of that softness could turn out to be transitory, but from a longer-term perspective, real sales have still shown little growth since the start of 2017.”

Sales at food and beverage stores decreased 2.0% in May after increasing for three consecutive months as sales at supermarkets and other grocery stores fell 2.0% and sales at beer, wine and liquor stores dropped 2.7%.

Clothing and clothing accessories stores saw sales fall 2.7%, while general merchandise stores dropped 1.1%.

Meanwhile, sales at motor vehicle and parts dealers edged up 0.5% and sales at cannabis stores rose 14.8%.

Excluding sales at motor vehicle and parts dealers and gasoline stations, retail sales fell 1.0%.

In volume terms, retail sales fell 0.5% for the month.

Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said there were a couple of factors that likely weighed on the retail sales.

“First, gasoline prices were up sharply in the month, pushing gas station sales up 3.5%. That spending tends to get diverted from other sectors,” he said.

“And, the weather in May was simply awful, generally a negative for retail activity. The sectors hit hardest, clothing, sporting goods, alcohol, general merchandisers are consistent with bad weather.”

However, Reitzes noted that Canadians remain heavily indebted and that will likely restrain spending growth for years to come.

The weaker-than-expected retail sales report came as the Canadian economy has been showing signs of strength as it has bounced back from a weak end to 2018 and start to 2019.

The Bank of Canada kept its key interest rate on hold last week when it also released its updated monetary policy report.

In its forecast, the central bank raised outlook for second-quarter growth to an annual pace of 2.3% compared with its April projection of 1.3%. It predicted growth an annual pace of 1.5% for the third quarter.

The Bank of Canada stands in contrast to the U.S. Federal Reserve, which is expected to cut its key interest rate later this summer.


Retail foodservice is the fastest-growing foodservice segment in Canada

Canadians under 40 are taking the biggest bite out of the country’s restaurant business, while showing an appetite for environmentally sustainable operations and menu options. Plant-based protein, sustainable seafood and locally sourced food are in demand, while plastic straws continue to disappear, according to the 2019 Foodservice Facts report just released by Restaurants Canada.

This information is also valuable to the convenience sector, which is increasingly diversifying its offerings to include foodservice for busy customers on the go. The report found that retail foodservice (prepared meals in department stores, convenience stores and grocery stores) remains the fastest-growing foodservice segment in Canada, with projected annual sales increasing by 6.2% to $2.9 billion in 2019.

The report credits Millennials (27-42 years old) and generation Z (19-26 years old) for helping to grow overall foodservice sales by 5.1% in 2018, driving sales to nearly $90 billion. This marks five consecutive years of growth exceeding 5%, which, according to Restaurants Canada, makes Canada’s foodservice industry the fastest-growing sector in the country during the past decade.

The report reveals:

  • 79% of Gen-Z consumers and 71% of Millennials order food or beverages from a restaurant at least once a week or more.
  • Consumers under 30 years old spend 44% of their food dollar on food and alcohol from restaurants, compared to 35% for those between the ages of 30 and 39, and just 27% for those 65 and older.

Chris Elliott_Headshot“The days when targeting a baby boomer was a can’t miss strategy is over. Those under 40 are now driving the industry,” Chris Elliott, senior economist at Restaurants Canada, said in a statement. “Whether they are looking for environmentally sustainable alternatives, tech friendly options or more diverse menu offerings, it’s vital for restaurant operators to adapt to their changing customer base in order to appeal to new guests and maintain brand loyalty.”

 A taste for sustainability

Millennials are leading the increasing focus on sustainability in the foodservice industry. According to the report: “Their preference to do business with companies that prioritize environmental stewardship and social responsibility extends to their dining habits — and restaurants are responding to this demand.

Eight out of 10 foodservice business operators across Canada now say environmental sustainability is important to their success and 72% say they have made changes to their business operations to become more sustainable.

Nine out of 10 say they plan to continue or improve on their current level of environmentally sustainable operations over the next three years.

Currently:

  • 98% recycle.
  • 93% use energy or water-saving equipment.
  • 77% track, compost, or donate leftover food.

Shanna Munro_Headshot“Finding ways to operate more sustainably is simply part of doing business in restaurants today,” said Shanna Munro, president and CEO of Restaurants Canada. “Though changes often take some upfront investment, many are seeing the benefits not only for the planet, but for their bottom line.”

According to the 2019 Foodservice Facts report from Restaurants Canada, 70% of restaurant operators say they have made changes to their menu/selection of items. Growing appetites for plant-based dining have been a significant reason for this.

With Canadian consumers indicating shifts in protein consumption (vegan and vegetarian meat alternatives showing the highest growth), plant-based options appear here to stay as more diners make the switch to “do their part” for the environment.

Demand for convenience

With the rise in food delivery skyrocketing in 2018, consumers have no shortage of options when ordering in; everything from their favourite local restaurant to major franchise chains and even fine dining is on the table when it comes to delivery today.

The impact of the demand for delivery is mostly being felt in densely populated cities where foodservice is more economically viable. Foodservice orders made online, through websites and mobile apps, totaled more than $4.3 billion in 2018 (a 44% increase from 2017) and can be broken down into the following key categories:

  • Quick-service restaurant delivery sales increased by 49%.
  • Full-service restaurant delivery sales increased by 54%.

“As Generation Z and Millennials look for convenience, eating out or ordering in is appealing as a time-friendly alternative to cooking,” said Elliott. “We expect to see these generations looking to order food at lower price points, and while health is important, many want to indulge a little too.”

Beyond delivery tech, Millennials and Generation Z customers prefer establishments that offer free Wi-Fi. They also like to use social media platforms, such as Instagram and Snapchat, to interact with establishments, leave reviews, follow activity and tag photos. In order to attract this key customer base, restaurants (and c-stores) should adapt their digital marketing and advertising strategies to keep customers hungry for more.

Foodservice challenges

Despite industry growth, foodservice operators are struggling in some areas:

  • Labour costs, as well as recruiting and retaining employees, are the top two challenges currently facing foodservice operators.
  • Higher minimum wages, food costs and increasing labour shortages have resulted in higher operating costs, contributing to a 4.2% increase in menu prices at restaurants across the country.
  • A slowdown in average annual foodservice sales growth is expected, given rising household debt and slower job creation.
  • Commercial foodservice sales in Canada are predicted to decelerate to an average of 4% growth per year between 2020 and 2023.

Overall, Canada’s foodservice industry is forecast to surpass $100 billion in annual sales in 2021, presenting exciting opportunities.