Business

Canadian retail spending picks up, in defiance of rate hikes

Published

1 year ago

June 21, 2023

Canadians have ramped up their retail spending in recent months, despite higher interest rates that are meant to slow their consumption and bring down the rate of inflation.

Retail sales rose by 1.1 per cent in April, after a 1.4-per-cent slide in March, Statistics Canada said in a report on Wednesday. The April result easily surpassed its previous estimate of a 0.2-per-cent gain. In volume terms, retail sales rose 0.3 per cent.

Further gains appear to be on the way: In its preliminary estimate on Wednesday, Statscan said retail sales rose an additional 0.5 per cent in May, although that number is subject to revision.

The resilience of the Canadian consumer has been a major theme of the economy this year. Despite a rapid series of rate hikes from the Bank of Canada that began more than a year ago, many households appear to be shrugging off the impact of those higher borrowing costs.

In the first quarter, the Canadian economy expanded at a rapid clip – fuelled in large part by a surge in household spending. This and other strong economic data convinced the Bank of Canada to resume raising interest rates after a brief pause. Earlier this month, the central bank increased its policy rate by 25 basis points to 4.75 per cent, the highest level since 2001. (A basis point is 1/100th of a percentage point.)

After Wednesday’s report, several analysts said the BoC would likely raise its benchmark interest rate by another 25 basis points at its next decision on July 12.

The recent increases in retail spending are “not what the Bank of Canada will be looking for as it hopes to slow domestic demand,” Randall Barlett, senior director of Canadian economics at Desjardins Securities, said in a note to clients.

Statscan’s report showed a broad-based increase in retail spending. Sales rose 3.3 per cent at general merchandise retailers in April from March. Receipts were up 3.1 per cent at clothing retailers and by 1.5 per cent at food and beverage retailers.

There was, however, a decline at stores catering to the housing market. For instance, sales fell 1.3 per cent at electronics and appliance retailers in April. While real-estate activity has perked up in the spring, the recent rise in borrowing rates could put further pressure on the sector.

In a recent speech, Bank of Canada deputy governor Paul Beaudry said the central bank was “surprised” by the strength of consumer spending in the early months of 2023.

“We had expected growth in demand for services to start to ease off, but Canadians continue to catch up on travel, entertainment and restaurant spending. More unexpected was the strength of the rebound in goods spending,” Mr. Beaudry said on June 8.

In a summary of deliberations for its June rate decision, which was published on Wednesday, the Bank of Canada’s policy-setting governing council pointed to several possible explanations for robust spending. These included the delayed effects of higher interest rates, pent-up demand for services, the easing of supply-chain issues, strong population growth and continued strength in the labour market, among other reasons.

“While it was impossible to declare any one explanation as predominant, members were of the view that with the resurgence in household spending growth, the pickup in consumer confidence, and the slowing in disinflationary momentum, monetary policy did not look to be sufficiently restrictive,” the summary of governing council deliberations read.

In recent months, federal and provincial governments have provided financial assistance to many households, ostensibly to help them with higher living costs. (Economists have criticized some of these measures for supporting consumption and undermining efforts to rein in inflation.)

The Bank of Canada is raising interest rates to reduce demand and wrestle inflation back to its 2-per-cent target. In April, the consumer price index rose at an annual rate of 4.4 per cent. While that’s down from a peak of 8.1 per cent last June, the rate ticked up from 4.3 per cent in March.

Members of the bank’s governing council expressed concern that inflation could get stuck “materially” above the 2-per-cent target, according to the summary of deliberations.

The central bankers “agreed that the economy remained clearly in excess demand and that the rebalancing of supply and demand was likely to take longer than previously expected,” it read.

In April, the Bank of Canada projected that inflation would ebb to around 3 per cent in the summer, before returning to its 2-per-cent target in late 2024. The bank will update its economic forecasts at the rate decision in July.

Source link

Business

Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

Published

12 hours ago

September 13, 2024

Anne Joseph

TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

Source link

Business

Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

Published

2 days ago

September 12, 2024

Anne Joseph

VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

Source link

Business

Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

Published

2 days ago

September 12, 2024

Anne Joseph

MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

Source link