In July retail sales in Canada continued to grow but at a much slower pace than in previous months. Statistics Canada reported that retail sales were up +0.6% in July versus growth of 23.7% in June and 18.7% in May.

Yearly Retail Sales Growth in Canada

Fastest Growing Retail Categories: July 2020 vs. July 2019

Sporting goods, hobby, musical instruments & books – (+11.4%)
General merchandise – (+11.2%)
Food & beverage – (+8.4%)
Electronics & appliances – (+6.2%)
Furniture & home furnishings – (+6.0%)
Building material & garden equipment – (+4.7%)
Health & personal care – (+3.3%)
Motor vehicle and parts dealers – (+1.3%)
Clothing & accessories – (-12.9%)
Gasoline stations – (-14.5%)

Month to Month Retail Sales Growth in Canada

Fastest Growing Retail Categories: July 2020 vs. June 2020

Clothing & accessories – (+11.2%)
Gasoline stations – (+6.1%)
Furniture & home furnishings – (+5.0%)
Motor vehicle & parts dealers – (+3.3%)
Electronics & appliances – (+0.6%)
Health & personal care – (-0.0%)
General merchandise – (-0.4%)
Food & beverage – (-2.1%)
Sporting goods, hobby, musical instruments & books – (-8.8%)
Building material & garden equipment – (-11.6%)

Clothing and accessories sales grew the fastest in July versus June, but the growth mostly reflects a shift in spending from non-discretionary to discretionary items. A more interesting view is to look at how retail spending is fairing versus last year. Clothing and accessory sales in Canada are actually down by 12.9% in July versus last year. The pandemic is causing consumers to spend less on workwear and on clothing for events like weddings.

But hidden in the data is a trend that has been underway for many years. As Morgan Stanley reported: the apparel market has “hit a ceiling” and is “going into structural decline.” This can be seen in the back to school budgets for parents of teenagers now versus twenty years ago. Twenty years ago nothing would be allocated for the purchase of an iPhone or an iPad (or both) because these devices did not exist. Now those items are the new essentials. If those are the new essentials then there is less room for spending on discretionary items like clothing. And if money is being spent on clothing increasingly it is spent on lower priced retailers like Walmart and Amazon. This trend is also taking place in the United States where in 1920 Americans spent 38% of their income on food and 17% on clothing. Today Americans only spend 10% of their income on food and they spend even less on clothing now, just a paltry 2.4%.

The struggle facing clothing and accessory retailers is also seen in the number of retailers that have applied for CCAA protection, which covers insolvent corporations. Since May of this year nine of 12 major retailers that have filed for CCAA protection according to the Insolvency Insider are clothing and accessories retailers. They include companies like Groupe Dynamite, Aldo, Moores, Reitmans and Comark (Bootlegger, Cleo and Ricki’s).

As many consumers look for things to keep themselves entertained during the pandemic sporting goods, hobby, books & music stores have been the beneficiary. These stores have grown the fastest versus last year, up 11.4% in July versus last year. General merchandise retailers like Costco and Walmart are also performing well as shoppers consolidate their shopping trips and select retailers that offer one-stop shopping so they can reduce their exposure to the virus by getting the goods they need all in one place.

Electronics and appliance stores like Best Buy are also surprise winners as consumers have shifted to learning and working from home. "Products that help people work, learn, connect and cook at home, like computing, appliances and tablets, were the largest drivers of our sales growth for the quarter," said Corie Barry, Best Buy’s CEO. "Trends across most categories and services improved materially throughout Q2 as we opened our stores more broadly for shopping, especially categories like large appliances and home theatre that benefit from more experiential shopping," added Barry.

Overall the trend in retail sales in Canada is positive with a V shaped recovery. "It's almost comforting to see an economic report that is somewhat back to `normal'" said Doug Porter, Chief Economist at the Bank of Montreal. "While the headline gain was a bit shy of expectations, the much bigger and more important picture is that retail and wholesale activity just carved out perfect V-shaped rebounds."

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The Top 10 Fastest Growing Retail Categories in Canada