There was no great joy for retailers in the holiday season as shoppers raced to the mall late in December – in the days just before and after Christmas – snapping up marked-down merchandise, but pinching business profit margins.
The ho-hum holiday performance paves the way for another year of sluggish retail sales growth as merchants grapple with spooked consumers, a weakening Canadian housing market, pressures from low-cost e-commerce rivals and, in Canada, cross-border shopping.
On both sides of the border, retailers struggled with cautious consumers who delayed shopping in the hunt for bargains. Many major players recovered toward the end of December, but at the expense of margins. In the U.S., sales at stores open a year or more rose a solid 4.8 per cent (excluding drugstores), beating expectations for a 3.4-per-cent gain, according to Boston-based researcher Retail Metrics Inc. and based on a sample of retailers’ sales results which doesn’t include giant Wal-Mart Stores Inc.
“The pattern was pretty similar in Canada,” said Michael Culhane, chief financial officer at Hudson’s Bay Co. “Shoppers definitely held off and came later … It certainly will be tougher, with more stuff late in the season. Obviously markdowns progress throughout the month.”
Retailers seemed to have emerged from the crucial holiday period with sales relatively intact, although with some notable disappointments, including Reitmans (Canada) Ltd., this country’s largest specialty women’s clothier and, in the United States, discounter Target Corp., which is gearing up for its much-hyped launch here in March. Already some U.S. retailers have lowered their fourth-quarter profit outlooks.
Most retailers count heavily on the holiday season. At HBC, which runs the Bay (whose banner name is being changed to Hudson’s Bay) and Home Outfitters stores in Canada and Lord & Taylor in the United States, holiday sales make up about 30 per cent of annual revenue and more than 40 per cent of its profit.
At the Bay, for instance, same-store sales for the nine weeks ended Dec. 29 rose 6.7 per cent, which was lower than the 9-per-cent jump it reported for November alone and 10.7 per cent in December of 2011.
Based on a limited number of Canadian retailers that have released December sales results, holiday business was weak in that month, Keith Howlett, retail analyst at Desjardins Securities, said on Thursday.
Montreal-based Reitmans, which has suffered from weak mall traffic, rising foreign competition and internal distribution snags, posted a same-store sales drop of 3.4 per cent in December compared with a 1.2-per-cent decline in November. Sales at struggling lingerie specialist La Senza fell 9 per cent in December although margins improved, its parent company said.
On a brighter note, some discounters reported gains: Winners, HomeSense and Marshalls, all owned by U.S.-based TJX Cos., said same-store sales in Canada increased 4 per cent while Costco Wholesale Corp. cited its Canadian operations as one of the best performers in its international segment, with same-store sales up 6 per cent.
At the other end of the spectrum, upmarket men’s fashion chain Harry Rosen enjoyed a 14-per-cent jump in sales in December amid a “mediocre year, at best,” said chief executive officer Larry Rosen. “The U.S. is finally coming out of its slump and there was a little more optimism” among his well-heeled clientele, he said.
For others, mild weather hurt sales of items such as ski and snowboard gear early in December. “There was some lagging, particularly in the final seven days to Christmas,” said David Russell, co-owner of high-end chain Sporting Life. “Certainly the last week, which is the biggest week of the month, was up, and we’re grateful to see that.”
In 2013, retail sales will climb 2.7 per cent, close to the estimated 2.5-per-cent growth in 2012, a forecast by Fusion Retail Analytics says. At the same time, retailers will face a daunting new competitor – Target – which will open more than 100 stores in this country.
“American retailers continue to slowly eat away at Canadian retail sales,” Fusion said in its Canadian Retail Outlook report. “With the Canadian dollar expected to stay around parity with the U.S. dollar, the trickle of Canadians travelling across the border will continue to increase in 2013, stealing an additional 0.4-per-cent sales growth from Canadian retailers.”