Slumping currency holds silver lining for Canadian retailers
By Alastair Sharp and Amrutha Gayathri
(Reuters) - The Canadian dollar's plunge to a 12-year low is seen boosting sales for the country's retailers in 2016 as fewer shoppers cross the border south, but profit growth will vary depending on their ability to control import costs and push through price increases.
The currency has lost roughly a third of its value against the U.S. dollar since the start of 2014 as weaker prices for oil, a key Canadian export, triggered a mild recession last year. It fell to less than 71 U.S. cents this week.
In their 2016 outlook for Canada, the commercial real estate services firm CBRE says an influx of tourists and foreign retailers such as Nordstrom Inc (JWN.N: Quote) setting up shop should help spur retail sales growth despite limp economic growth.
"Overall, the low loonie is a positive for Canadian retailers," said Arlin Markowitz, who analyses urban retail investment properties for CBRE. "It's not only keeping Canadians' purchasing power at home, but it's also attracting tourists."
The Conference Board of Canada has forecast 4.2 percent growth in retail sales in 2016, up from a likely gain of 1.3 percent in 2015. But it said with costs likely to jump at a similar clip, margins will likely hold steady.
Canada notched a 9.3 percent increase in inbound overnight trips by U.S. residents in the first 10 months of 2015, according to Statistics Canada, while there was a 21.2 percent decline in the number of Canadians returning from same-day trips across the border.
"I suspect cross-border shopping (to the U.S.) will all but die now," said Doug Porter, chief economist at BMO Capital Markets "That's a positive for Canadian retailers."