Holiday season left Canada's retailers feeling shortchanged, early numbers show

TORONTO – Early signs from retailers suggest that Canadian holiday sales were nothing to celebrate in 2013 as more shoppers hunted for discounts and retailers slashed prices to move inventory.

Both Sears and Target said lower sales in Canada pressured results in the fourth quarter, a sobering outlook that could be echoed in financial reports from other retailers in the coming weeks.

The holiday shopping season, which includes Black Friday and Christmas, was “very difficult,” said Daniel Baer, a retail analyst at Ernst & Young.

Bad weather in Central Canada kept many people from malls during the peak shopping period. A massive ice storm hit southern Ontario in the days leading up to Christmas, while the eastern provinces suffered their own unseasonably bad weather and power outages.

“Between what we’ve been hearing from (Sears and Target) and other private companies, it has certainly been a tough two months — December in particular,” Baer said.

However, it wasn’t just the bad weather, he suggested.

The increasing popularity of Black Friday sales actually worked against Canadian retailers, Baer said.

While more companies promoted deep discounts to coincide with the U.S. Thanksgiving holiday, it meant shoppers became conditioned to expect sales throughout the rest of the holiday shopping season.

For those reasons, sales likely dipped in early December, which caused retailers to react with another round of price cuts to drive more traffic, Baer said.

Statistic Canada won’t release official retail sales figures for December until the end of February.

In the meantime, quarterly financial reports offer a taste of what to expect.

Women’s apparel retailer Reitmans (Canada) Ltd. (TSX:RET.A) said holiday sales fell 5.3 per cent for the five weeks ended Jan. 4, compared to the same time last year.

On Friday, Target Corp. said poor sales at its Canadian stores will have a bigger impact on fourth-quarter results than it originally expected. The discount retailer said it had to slash prices to clear out unsold merchandise and that hurt gross margins.

It now anticipates a deeper loss of about 45 cents US per share for the quarter, more than the loss of 22 cents to 32 cents US it had previously projected.

Target operates 124 locations across the country, but the discount chic chain has said that its hyped foray into Canada has had rocky start as it faced high expansion costs and worse than expected sales. Some common complaints have ranged from near-empty shelves to prices notably higher than at its U.S. locations.

Department store retailer Sears Canada Inc. (TSX:SCC) was also affected by poor same-store sales, its U.S. parent company said.

Sears Holdings Corp. warned Thursday that it faces a hefty loss for the fourth quarter and full-year, and blamed it partly on a drop of 4.4 per cent in sales at its Canadian stores between Nov. 3 and Jan. 6.

Sears Canada has been winding down operations at several stores across the country and selling off merchandise at discounted price.

Despite the sales decrease, Sears Canada says that it did see a 1.5 per cent jump in same-store sales in its apparel and accessories business. The struggling retailer also cautioned that there may be other factors that could affect its earnings.

Both Sears Canada and Target Corp. are scheduled to report fourth-quarter earnings on Feb. 26.

Moneris Solutions delivered its own holiday roundup on Friday which showed that while overall spending increased by 1.95 per cent in the fourth quarter, the increase was lower than in the previous three quarters of the year.

The impact of the ice storm caused in-store spending to fall 2.62 per cent in Ontario from Dec. 20 to 24, it said.