Grocery stores get a sales bounce, but market share still slips

Canadian retail sales weakened in November but grocery stores managed to sidestep the trend, says a retail expert.

Seasonally unadjusted figures from Statistics Canada show supermarkets grew a healthy 4.1 per cent in November compared to the same month in 2011. Total retail sales grew just two per cent.

A report on the findings by Toronto retail consultant Ed Strapagiel, however, says that grocery sales were up only 1.1 per cent through the first 11 months of 2012.

“The November results appear to be a statistical ‘blip’ rather than a sustainable trend,” he said. "In general, conventional grocers are losing ground to combination stores, the most prominent of which has been Walmart Supercentre. But Target may take over this role going forward."

Walmart Canada announced yesterday it is opening 37 Supercentres this year. Target, meanwhile, arrives in Canada in March.

Strapagiel predicts supermarkets and grocery stores will have about 80.7 per cent share of total Canadian food and beverage sales in 2012. That estimate is based on projections through the first three quarters of last year.

Only six years ago, in 2007, grocery stores' share was 85.6 per cent. "Supermarkets and grocery stores’ share in fact has been dropping steadily for the last 10 years,” said Strapagiel.

He noted that the food and drug group also had a good month in November, with sales up 4.6 per cent versus last year.

“In general however, retail sales gains have been weak in 2012, increasing only 1.8 per cent year-to-date after 11 months,” said Strapagiel. “Going forward, food price inflation and margin pressure continue to be challenges.”

In general merchandise, conventional department stores, sales declined 1.2 per cent in November versus last year, and were up only 1.0 per cent year-to-date. “The other general merchandise stores sector (which includes combination stores like Walmart Supercentre, Costco, and Canadian Tire) was up 7.5 per cent year-to-date–which seems to be a pretty clear indication of where consumer dollars are moving,” said Strapagiel.

The real growth in food has come from general merchandise stores where they have been increasing share of total food and beverage, from 10.1 per cent in 2007 to 14.3 per cent (projected) in 2012, said Strapagiel. “This is a 40 per cent increase in share, which is huge.”

He predicted that retail sales growth will likely be about three per cent for 2012. Statistics Canada has not yet released data on December.

“That will be the second lowest gain of the last 10 years, the exception being the recession year of 2009. The only thing that's really growing in Canadian retail is competition, with Target due to open its doors in less than 60 days,” said Strapagiel.

On a seasonally adjusted basis, grocery and supermarket sales for November were up