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North America Retailing Sectors : A Company and Industry Analysis (July 2008)
Mergent, July 2008, Pages: 36
This report updates the previous North American retail report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- In the US, consumers became increasingly concerned about the slowing economy, holding back on spending and cutting the performances of leading retailers
- American credit card debt grew at the fastest rate in years over the last 12 months, a fact that may signal further trouble for the banks that issue them
- Retailers fretted about the burgeoning rough year in 2008, amid fears of a recession, with reduced consumer confidence and a rise in the price of goods
- Retail stocks in the US were able to break from the downward trend in the first quarter of 2008, even though the outlook remained bleak - Top retailers in North America hinted that profits would continue to fall as consumer confidence wanes
Target (NYSE: TGT), Limited Brands (NYSE: LTD), Home Depot (NYSE: HD), Metro (TSX: MRU.A) and Rona (TSX: RON) were among the top retailers that posted a decline in quarterly results
- The effect of the US slowdown also affected Canada, curbing consumer spending and lowering the outlook for Canadian retailers
- Retailers in the US continued to seek growth through mergers and acquisitions
More than 350 transactions worth more than US$57 billion were made in 2007
Industry Profile - Key Points
- Retail sales in the US and Canada increased by 4.01% and 0.61% each during the first quarter of 2008
- Wholesalers are still playing a vital part in the economy, especially in supplying the retail industry
During the three months of 2008, wholesale inventories in the US grew to US$1.18 trillion
Meanwhile in Canada, during the first two months of the year, sales by wholesalers rose to C$86.34 billion
- Even in the face of economic troubles across North America, US and Canadian retailers continue to forge ahead with new strategies to become more profitable and efficient, while fending off ambitious competitors
- Retail employment remains high in Canada, gaining 1.18% during the first quarter of 2008
On the other hand, retail employment dwindled in the US, down by 22% during the period
- Export and import activity in Canada declined in the first three months of 2008 over the same period of 2007
In the US, the trade of retail goods and services remained active throughout the period
Market Trends and Outlook - Key Points
- More and more US retailers are filing for bankruptcy, with the numbers expected to rise and margins thinning for those left behind
- While gift cards continue to grow in popularity, consumers are finding that the gift cards of retailers going out of business are worthless
- E-commerce is one of the few bright spots for retailing
In a year in which retail industry sales are expected to experience sluggish growth, Americans are continuing to flock to the internet for clothing, computers and even cars
- Parents continue to be nervous about buying their children toys as recalls become more regular
- From Wall Street's perspective, the retail sector is not the place to be in 2008, with consumers facing numerous economic obstacles, including rising fuel prices, accelerating food inflation, an ongoing slide in real estate prices, a weakening job market and continued tightening in the credit market
- With more Canadian households having access to the internet, Canadian retailers continue to choose the convenience of shopping online.
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