- Category: Economic
- Published Monday, February 8, 2016
- CTV News
MONTREAL - Industry watchers say Canada's retail clothing sector is expected to slow in the coming few years even though the battle for luxury shoppers is revving up.
After two years of growth approaching four per cent, sales are forecast to slow and bottom out to a mere one per cent increase in 2018, says Trendex North America, a marketing research firm specializing in the clothing industry.
This year's sales are expected to grow by 2.4 per cent this year versus 3.8 per cent last year, slipping to 1.7 per cent growth in 2017 before inching back up to 2.1 per cent growth in 2020, Trendex said in a 2016 retail apparel market forecast.
But that could prove optimistic because the organization's outlook for economic growth is much stronger than the Bank of Canada's revised forecast of 1.4 per cent.
"I don't think this is going to be a banner year," retail consultant Wendy Evans said in an interview.
The low Canadian dollar is going to put pressure on retailers' margins and force them to offset higher costs by hiking prices, perhaps by three to five per cent.
But the luxury segment, Evans said, should help ease the sluggishness in the low- to mid-priced sector as Saks Fifth Avenue makes its Canadian entry this month with the opening of two Toronto stores, and U.S. retailer Nordstrom expands its presence with three new locations in Toronto this year and next.
The openings will give wealthier Canadians a reason to shop at home instead of travelling to global fashion centres like New York, while also attracting Americans looking to take advantage of the low loonie, she said.
Jim Danahy, CEO of retail advisory firm Customer Lab in Toronto, said the Quebec City-based Simons will increasingly be part of the competitive mix as the 175-year-old retailer continues to expand across Canada.
"They do a heck of a good job at assortment and service and are going to compete adequately against Nordstrom, Saks and Holts," he said.
Increased competition will erode Holt Renfrew's dominance in the luxury segment at least initially as customers visit the new retail options, said Jean Rickli, a retail consultant for the J.C. Williams Group.
"If Nordstrom is true to their word on customer experience, it's going to be tough going for Holt Renfrew," he said in an interview.
But he added that the Canadian chain has made some headway by making plans to expand its Vancouver store later this year, and opening two hr2 outlet stores on the outskirts of Montreal and Toronto that appeal to millennial shoppers.
Luxury menswear retailer Harry Rosen has also prepared for beefed-up competition by enlarging four of its stores and adding three locations last year.
While retail sales will be under pressure, analysts expect e-commerce will continue to flourish. Although a small part of their businesses, HBC, Le Chateau, Lululemon and Reitmans saw online sales increase between 16 and 72 per cent in the third quarter.
Industry observers say they expect Sears Canada will continue "drifting," and predict as many as four Canadian-based apparel retailers will either go out of business or be acquired this year.
Danier Leather is apparently the first. It entered insolvency protection last week as it seeks a buyer after years of financial problems.