TORONTO (Reuters) - Canadian holiday retail sales are expected to be the strongest in three years, helped by lower unemployment, falling gasoline prices and weaker currency, but aggressive discounting could temper profits for retailers, industry analysts say.
A report released on Thursday by consulting firm Colliers International forecast December sales will grow 4.6 percent to C$46.8 billion ($41.42 billion). Excluding autos and gas, the report sees sales exceeding C$33 billion, an increase of 3.3 percent from a year earlier.
“Following a significant December dip in 2012 and a disappointing showing in 2013, December 2014 should yield more encouraging results for retailers,” Colliers’ James Smerdon and David Bell said in the report.
November has also become a big month for holiday shopping over the last three years as more and more Canadian retailers adopt American-styled “Black Friday” sales, which follows the Thanksgiving holiday in the United States. But Smerdon and Bell noted the benefit of higher sales volumes will likely be offset by deeper discounts.
Retail data from Statistics Canada showed that on a quarterly basis, store merchandise sales hit a 4-year high, which also bodes well.
“It’s got a lot of momentum behind it,” said Ed Strapagiel, an independent retail consultant. Strapagiel is forecasting retail sales will rise 3.5 percent in the fourth quarter.
Statistics Canada said employers unexpectedly hired 43,100 new workers in October, on top of the 74,100 positions created a month earlier, while the unemployment rate fell to 6.5 percent.
“The gasoline prices will actually drag down the percentage increase in overall retail (sales), but most of all, it will shift that money from your gas tank to your Christmas tree,” said Strapagiel, noting that cheaper gas could mean nearly C$100 in extra money for drivers during the holiday shopping season.
Strapagiel said a weaker Canadian dollar could reduce some of the holiday cross-border shopping, both in person and online, and boost domestic sales. Colliers’ Smerdon noted that the volume of cross-border shopping done by Canadians has risen each year, however, regardless of currency fluctuations.
(1 US dollar = 1.1300 Canadian dollar)
Reporting by Solarina Ho; Editing by Jeffrey Hodgson and Grant McCool