c/o Global News: Reitmans Ltd., one of the country’s most established clothing retailers, says a decline in traffic to shopping centres is a primary reason why its network of stores is seeing a drop in sales.
Other forces are pressuring sales at the retailer – as well as at many of its rivals —too, though, as consumers confront mounting debt levels and more of them accelerate a shift toward online shopping.
“Mall and [shopping centre] stores were impacted by e-commerce alternatives, a highly competitive environment and consumers with near record high debt levels,” Reitmans said in the company’s earnings release, published late Wednesday.
Closely watched
Reitmans operates about 825 stores under various banners in malls and shopping centres across Canada. Developments at the retailer are being closely watched as the retail sector undergoes broad upheaval that’s claimed many big names in recent months, not least Target Canada.
Rival clothiers Mexx and Jacob have closed, while the owners of Bombay and Co. and Bowrings have shut down too. Last week, the owner of Bootleggers and cleo clothing shops entered creditor protection, casting doubt over the fate of its network of locations.
Reitmans hasn’t gone unscathed. With sales coming under pressure, the retailer announced in November it would shutter or convert to other stores its Smart Set chain of 107 locations. The women’s clothing shops had been losing ground to lower-cost rivals, such as H&M and Zara, experts say.
Reitmans said Wednesday sales slipped by about one per cent at mall locations, though online sales continued to ramp up quickly. Sales were impacted by the closing of 55 stores, the retailer said.
Online rise
Retailers are also reacting to the continued rise of online shopping, a force that now appears to be taking a meaningful toll on bricks-and-mortar purchasing habits.
Retail sales generated through online e-commerce sites in Canada are expected to nearly double by 2018, to $44 billion, according to eMarketer. That sum is equivalent to about a month’s worth of retail spending by all Canadians now.
The shift to e-commerce shopping was underscored yet again last week with the sudden closure of struggling electronics retailer Future Shop.
Persistent weakness
High household debt levels also appear to be at play, experts say. A sluggish holiday shopping season has broadened out through the first months of the year into a noticeable downturn in retail spending, economists say – despite falling gasoline prices providing a lift in household discretionary incomes.
Consumers may be paying down debt, or stashing the cash away, some suggest.
“What’s surprised us is the persistence of the weakness. We thought with lower gasoline prices, resulting in more discretionary income, we thought … [spending] would start moving up,” Paul Ferley, the assistant chief economist at Royal Bank of Canada said. “We haven’t seen it.”
Two months in a row of big declines in retail spending has “raised some concerns,” Ferley said.
A colder January – which became even more so in February and into March – may be partly to blame for the slowdown, the economist said.
But Ferley and other experts will be watching monthly retail sales data set to be released by Statistics Canada on April 17 to see if the slowdown persists.
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