As the all-important holiday gifting season kicks off, Canadian retailers continue to grapple with an unpredictable economy that’s made shoppers more conscious about price tags. 

Black Friday deals have driven several years of record-breaking shopping sprees. But in an uncertain economy, retailers have more on their minds this year than simply racking up sales. Here’s what we learned about Canada’s retail sector from the recent slate of earnings reports:

High holiday hopes: Many retailers get a sales boost in the period from Black Friday, the day after American Thanksgiving, through Boxing Day.

“November and December are huge,” said TJ Flood, president of Canadian Tire retail. Indigo’s sales “are highly dependent on the holiday sales season,” said CFO Craig Loudon as he reminded analysts why they shouldn’t read too much into the book seller’s annual performance based on the last quarter alone.

But few retailers provided much insight into their expectations for the period. While Loblaw president Galen Weston said products are “already flying off the shelves” since the grocer released its 36-page pamphlet of President’s Choice holiday products, the toy maker Spin Master noted it believes consumers are delaying their holiday spending.

Reports are mixed as to how much people in Canada are planning to buy at what is typically a wallet-emptying time. A Deloitte Canada survey suggested the average household will spend 11 per cent less this year, doling out $1,347 for festivities. However, PwC suggests a 13 per cent bump and JLL a 16 per cent rise. In a hopeful sign, retail sales in Canada jumped 0.6 per cent in September, according to Statistics Canada, and an early estimate suggests a 0.8 per cent rise last month.

For some retailers, the weather will be one determining factor. Both Canada Goose and Canadian Tire are hoping for a cold Canadian winter. “The first cold snap prompts business,” said Canada Goose CFO Jonathan Sinclair.

Reaching for the thesaurus: It is clear that retailers are anxious about how the current economic environment—one of increasing interest rates and continued inflation concern—is shaping consumer behaviour. Executives have called it everything from “volatile” to “challenging” to “uncertain,” but their bottom line is the same: consumers are under pressure, leading them to change their spending habits.

The anxious consumer’s hierarchy of needs: “Customers are stretched and spending less overall,” said Canadian Tire CEO Greg Hicks. The company saw a drop in more expensive, discretionary categories, while essentials—including automotive—gained about four per cent. More customers are buying just a single item at a time or only products on sale. Using its loyalty-rewards data, Canadian Tire surmises households with more debt, especially in Ontario and B.C., are spending less on wants.

People are waiting to buy big-ticket items, like mattresses, said Sleep Country CEO Stewart Schaefer. Customers are visiting the company’s stores and checking out mattresses, but buying a pillow, sheets or another less expensive item instead, he said. “Everyone is seeing the exact same thing,” he said of retailers in today’s economy.

Artizia started experiencing a slowdown in the first week of June and Indigo also saw customers buy less last quarter, but watched sales gain momentum during promotions.

Loblaw, Canada’s largest grocer, reported that its customers may be less likely to pay for grocery delivery right now as they deal with more expensive costs across the board.

All about discount: At grocery stores, where food prices have risen significantly, customers have flocked to the major grocers’ discount banners. “There’s no sign of it slowing down in any meaningful way. Our perspective is that this will continue for the foreseeable future,” said Loblaw’s Weston.

As a result, grocers have been investing in building out their lower-priced chains. Loblaw opened its 150th Maxi store—its Quebec discount retailer—in November, and a further 22 other discount locations this year. Metro’s new store openings this year have so far mostly been discount chain locations, and it’s planning to add eight more next year.

Meanwhile, discount retailers like Dollarama continued to reap the benefits of more cost-conscious consumers. 

Desperate times: Sky-high inflation has prompted more theft at Canadian retailers, especially at grocery stores.

“This surge in organized retail crime remains a significant problem for the retail industry,” said Loblaw CFO Richard Dufresne. “These are sophisticated organizations that are increasingly using violent tactics and complex networks to steal and sell stolen goods for profit.”

To help thwart this, Loblaw is investing in stores and its workforce, as well as working with law enforcement, he said. It saw “significant” improvement in what the industry calls shrink—product loss due to factors including theft—quarter over quarter and expects that trend to continue.

Supply chain and demand: The supply-chain issues that arose during the COVID-19 pandemic left many retailers with surplus inventory. That problem now seems to be abating, though retailers continue to be vigilant about the level of stuff they’re ordering to stores and warehouses.

Loblaw has slowed down buying, said Dufresne, as the company remains “laser-focused” on inventory levels. Spin Master has seen retailers “pause or reduce” orders, especially since mid-October, as they worry about being left with too much stock after the holidays.

Many retailers have shifted to moving parts of their supply-chain journey in house. Artizia is on track to open a new Toronto-area distribution centre, which will ship to both eastern Canada and the U.S., in August. Metro has opened a new automated distribution centre in Terrebonne, Que., which will be fully operational by the end of its 2024 financial year. Canadian Tire has reduced the number of third-party facilities it uses from 15 at the start of the year to an anticipated zero by the end of it, while opening up a new facility in the Greater Toronto Area.

Inflation nation: Grocers said food inflation is waning, but lamented suppliers pushing price hikes onto them, which they in turn pass onto consumers.

“Without the support of suppliers, it will be difficult for the industry to sustain the current momentum of falling food inflation,” said Loblaw’s Dufresne. Several large, global suppliers have requested higher-than-expected price hikes for next year, he said, adding that supplier asks have slowed down, but “could be slowing way more.” (Loblaw also reiterated its stance that the upcoming grocery code of conduct could boost inflation.) Empire, too, has received these requests, said CEO Eric La Flèche, noting the company is negotiating them “as much as possible.”

Downsizing and cost-cutting: Amid the ongoing uncertainty, a handful of companies downgraded their financial guidance. “We are taking a more conservative approach in regards to our expectations,” said Canada Goose CEO Dani Reiss as the company decreased its guidance for revenue and other measures for the year. Artizia said it expects “flat to slightly down” net revenue next quarter. Spin Master provided a mixed update, lowering its expectations for gross product sales of toys and revenue, but increasing its outlook for another metric.

Many announced plans to reduce costs. Canadian Tire is laying off three per cent of staff and eliminating most unfilled positions, which should account for another three per cent reduction. Canada Goose cut its “non-store and non-manufacturing” staff levels by about 10 per cent in the past quarter. Artizia honed in on 150 ways to trim costs, saving it an estimated $60 million a year. Indigo has launched a transformation plan, which typically means cost-cutting.

Dollarama, on the other hand, was an outlier, revising its outlook upward after expressing caution around how its sales this year would hold up against last year’s strong performance. “That value-seeking behaviour has held strong,” said then-CFO J.P. Towner.

What wasn’t said: None of the retailers discussed Wegovy, Ozempic or other weight-loss drugs that some have projected to eat away at the profits of food retailers.

And though it is the buzzword of the year, few mentioned artificial intelligence. Canadian Tire nodded to its progress in “AI-enabled shopping experiences,” but didn’t provide any substantial updates to its AI push.