CANADIAN APPAREL INSIGHTS TrendexNA.com FEBRUARY 2019 Marketing Intelligence for the Canadian Apparel Industry FEATURED ARTICLE TJX’s Canadian Apparel’s Share Increases In 2018 TJX Canada TJX Canada continued during 2018 to increase its share of TJX Canada the Canadian apparel market. Trendex estimates that TJX Total Sales (US$ Millions) UPDATES ON Canada’s apparel sales during 2018 increased 6.0% to $3,870 Aritzia $3,642 US$2.4 billion. TJX Canada’s share of the 2018 apparel Canada Goose $3,171 $2,884 $2,855 Columbia Canada market increased to 10.2% up, from 9.3% in 2017. Winners Gildan shares of the Canadian apparel market, based on Helly Hansen Trendex’s estimate, increased to 7.7%, up from 7.5% in Sport Chek 2017. Part of the increase in both TJX Canada and Winners 2018 2017 2016 2015 2014 Marks market shares were attributable to Winners adding 7 stores TJX Canada during 2018, while Marshalls added 15 stores. Walmart Canada Overall, TJX Canada’s sales increased 6.2% in 2018 to TJX Canada US$3.87 billion. The conglomerates comp sales during Apparel Sales (C$ Millions) OTHER 2018 increased by 4.0%, while its gross profit was also up $2,434 $2,297 Environics New Service $2,172 3.0%. However, the retailers adjusted profit margin, exclud- $1,885 2018 Apparel CPI ing foreign currency was down 200 basis points vs. 2017. Levi Strauss The decrease was attributable to store wage increases and a drop in merchandise margins. TJX Canada ended the Luxury Apparel 2018 2017 2016 2015 Brands Carried year with 484 stores, 30 more than a year earlier. The retail- Source: Trendex er could have had an even better year except for the fact that its total sales in Q4 2018 inexplicable decreased 4.3%. NEXT MONTH 2018 Apparel Undoubtedly, TJX Canada benefitted in 2018 for a number of factors including the demise of Sears Imports/Exports Canada, a continuing aggressive store expansion program, the lackluster performance of Off Fifth In Review and an aggressive marketing plan built around a loyalty plan incorporating all three of the compa- Gap Canada ny’s banners. TJX provided guidance for 2019 that it was forecasting a comp increase of 2%-3% on sales of approximately US$4.1 billion for its Canadian division. A portion of the growth in 2019 will be due to the addition of 30 stores. Does the slowdown in TJX Canada’s growth, coupled with Off Fifth’s disappointing performance, signal that growth in the Canadian off-price segment is slowing? That’s an issue that will be ad- dressed in the April 2019 issue of this publication. TJX Canada TJX Canada—Stores* Year ending Feb 2, 2019 2016 2017 2018 Q4 2018 Annual 2018 Winners 255 264 271 Total Sales -4.3% +6.2% Marshalls 57 73 88 Comp Sales +4.0% +4.0% HomeSense 106 117 125 Gross Profit -24.0% +4.0% Total 387 454 484 * As of January 31 Copyright 2019 Trendex North America This newsletter is proprietary to Trendex North America and may not be reproduced or disseminated outside a subscribing company without express written consent of Trendex North America. Subscribe at: http://www.trendexna.com/order-form-canadian-apparel-insights CANADIAN APPAREL INSIGHTS NOVEMBERTrendexNA.com 2018 FEBRUARY 2019 Marks: Q4 Negatively Effects Results Sport Chek: Somewhat Disappointing For All Of 2018 Results For 2018 FGL Sports has been rebranded to Sport Chek. During its Marks, Canada’s largest retailers of men’s apparel had a last quarter of 2018, the retailer reported its sales increased disapproving Q4 2018 which served to depress its perfor- 1.9% vs. 5.6% a year earlier. For the same quarter, Sport mance for all of 2018. During the last quarter of 2018, both Check reported a 2.5% increase in its comp sales vs. 5.9% a Marks total and comp store sales in its 386 stores, in- year earlier. Unseasonably warm weather along with a highly creased by 1.8%. A year earlier, the retailer’s total sales had promotional and competitive environment negatively affected increased 3.9%, while its comp sales were up 3.4%. the company’s sales. Accessories, outerwear and athletic Marks lackluster performance during Q4 2018 was attributed apparel were the top performing categories while Woods and to the quarter’s unseasonably warm weather. The company Helly Hansen were called out as the top performing brands. called out denim, casual footwear and workwear as drivers The retailer also noted that it benefitted from a significant of growth. Sales also benefitted from customer’s positive growth in e-commerce. reaction to the Equipe Pour Tout rebranding strategy of For all of 2018, Sport Chek’s total sales increased 1.1%, Marks in Quebec. while its comparable sales increased 2.0%. The retailer op- During all of 2018, Marks sales increased 3.0% vs. 4.7% a erated 409 stores at the end of 2018, two less than a year year earlier. The company’s comp sales rose 2.8%, which earlier. Sport Chek’s 1.1% increase in sales was attributed to was less than the 4.2% during 2017. Sales per sq. ft. in- strong sales growth in key categories, including outdoor, ath- creased 2.6% to C$1,247. The retailer attributed its growth letic clothing/accessories, footwear, licensed apparel and during all of 2018 to its rebranding strategy with specifically winter categories. The retailer also noted that targeted pro- increased sales of casual wear, including denim, casual motions and higher e-commerce sales contributed to its footwear and outerwear. sales growth. However, increased promotional activity, along with a mix-shift to lower margin products through its e- Although Marks’ fourth quarter results served to diminish commerce channel negatively affected Sport Chek’s gross what up to then, was an above average year for the retailer margin. they should not be seen as an indicator that the retailer did anything wrong during the quarter. Rather, Marks should Separately, Sport Check announced that one of its Sport take pride in its efforts during 2018 to remerchandise its Experts franchisees would be opening during November stores and tell its story through an effective advertising cam- 2019, a first of its kind flagship stores in the Quarter DIX 30 paign. In the end, something out of Marks’ control, the un- complex in suburban Montreal. Undoubtedly even though SPORT CHEK seasonably warm weather during December, Marks’ most Total Revenue important month, “rained (as opposed to snowed) on its pa- Sports Experts operates 105 (C$ Millions) stores in Quebec, and is clearly rade.” $1,993 $1,978 the dominant sporting goods retailer in the Province it is MARKS opening this flagships store in Total Revenue (C$ Millions) hopes of countering the increas- $1,247 2018 2017 $1,215 ing presence of both Decathlon $1,212 Total Sales +1.1% N.A. $1,154 and Sportium in the Province. $1,093 Comp Sales +1.8% N.A The Tire: A Canadian Retail 2018 2017 2016 2015 2014 Total Sales +3.0% +4.7% +6..0% -2.3% +4.5% Apparel Powerhouse Comp Sales +2.8% +4.2% +6.1% -0.5% +3.1% Trendex estimates that during 2018 the combined Stores 386 386 382 380 383 apparel sales at Marks, Sport Chek and Canadian Sales Per Store N.A. $3,148 $3,022 $2,876 $2,876 (C$000) Tire totaled C$1.7 billion. If so, the Canadian Tire Corporation accounted for an estimated 5.4% of Canadian apparel sales during 2018. 2 CANADIAN APPAREL INSIGHTS NOVEMBERTrendexNA.com 2018 FEBRUARY 2019 Canadian Apparel Retail Prices Finally Increase In 2018 After decreasing in 2017 by 1.4%, the Consumer Price Index (CPI) for apparel in- creased in 2018 by 1.2%. During 2018 the CPI for footwear increased by +0.3%, while that for all items including gasoline increased by 1.3%. Over the period 2014 CANADIAN CONSUMER PRICE INDEX to 2018 the CPI for apparel increased by 1.0%, while the CPI for footwear and all 2014 2015 2016 2017 2018 items increased respectively by 0.3% and 7.0%. Total 83.1 84.5 84.1 82.9 83.9 The 1.2% increase in the 2018 CPI for apparel was attributable to increases in the Apparel CPI for all three segments of the apparel market as the CPI for women’s, men’s Womens 78.9 79.9 79.9 78.6 79.4 and juvenile increased respectively by 1.0%, 1.2% and 1.3%. Over the period 2014 Mens 92.0 93.7 93.4 92.1 93.2 to 2018 the CPI for all three segments of the retail apparel market increased by Infants 76.3 78.5 76.7 75.7 76.7 1.0%, with the CPI for men’s (+1.3%) apparel increasing the most, followed by Total 93.6 94.3 93.5 93.8 93.9 those for women (+0.6%), and children’s (+0.3%) apparel. Footwear There are a number of reasons why retail prices for apparel in Canada should not All Items have increased during 2018 including: (including 125.2 126.6 128.4 130.4 133.4 The seemingly never ending increase in apparel promotional activity gasoline) Sears Canada’s liquidation during the first quarter of 2018 Source: Statistics Canada (326-0021) The increasing market share of fast fashion retailers The large increase in imports from lower cost countries including Cambodia (+11.4%) and Vietnam (+15.7%) Levi Strauss Pulls Back The Curtain Regardless of these reasons, apparel prices did in fact in- Levi Strauss, one of the world’s largest apparel companies, crease during 2018.