Canadians are shopping until they drop and spending like there is no tomorrow.

On a buying spree since 1996, there is no immediate end in sight for keen consumers, and even the most Grinch-like forecasts for this 2005 holiday season show that Santa and his elves can expect to be busy over the next few weeks.

Even after Boxing Day sales results are factored in, most forecasts for 2006 - especially in the retail strongholds in Western Canada - indicate that cash registers will keep merrily ringing up sales increases well into the New Year.

Retail profits are set to reach a new high of $9.5 billion in 2005 across Canada, surpassing last year's record of $9.1 billion, says a new report from the Conference Board of Canada.

Jack Dagley, Business Edge
Canadian Institute of Retailing and Services director Paul Messinger sees a strong Alberta economy driving retail sales.

"Profits have been strong despite weak price appreciation, in part because the rise in the value of the Canadian dollar has helped keep cost growth in check for some stores, including those that sell clothing and general merchandise," writes Louis Theriault in the Conference Board's industrial outlook on Canada's retail trade industry, which was released last week.

As a result, the retail sector's profit margin this year is expected to match the 2.5 per cent it reached in 2004.

Meanwhile, nationwide retail sales are up 6.6 per cent for the first nine months of 2005, with third-quarter statistics rising by 7.3 per cent over 2004, according to a Canadian retail trade outlook report from Toronto-based research and consulting firm Kubas Consultants.

Some of the strongest sectors were home electronics and appliances, up by 9.7 per cent in the third quarter, and home centres and hardware, higher by nine per cent in the same period. Department store sales were also on the rise, but only by 1.7 per cent in the same time frame.

Kubas Consultants vice-president and retail analyst Ed Strapagiel says most of the good retail news centres around Alberta, Saskatchewan and Manitoba, which are leading in retail sales growth.

"It's simply economic development," says Strapagiel, explaining why the West is doing so well. "There's a lot of economic development in the West and not that much in Atlantic Canada. (And) because of the rise of the Canadian dollar, the Ontario manufacturing sector is not as competitive as it was a few years ago."

Alberta will lead in retail sales growth in 2005, coming in at 12.7 per cent for the year, followed by Saskatchewan (up 8.8 per cent), Manitoba (7.2 per cent), B.C. (5.9 per cent) and Ontario (five per cent), according to Kubas projections.

Those numbers dovetail with a recent Statistics Canada report showing that retail has remained strong since the mid-1990s.

The study, Retail Trade Since The Turn Of The Millennium, covering 1996-2004, shows that retail in Canada has grown at a relatively robust pace, even though the economy encountered a series of dampening events. It also says that Alberta led the retail drive between 2000-2004, while Saskatchewan, Manitoba and B.C. all rang up healthy increases. Ontario, though, came in at a pace "well below" the national average, says the report.

Retail sales in Alberta over the period increased at an average annual rate of 8.1 per cent, the highest in the country and well above the national average of 4.8 per cent, says Statistics Canada, following a strong average annual increase of 7.4 per cent between 1996 and 2000.

During the four-year period, sales also increased at an annual average of 5.8 per cent in Manitoba.

"There is no question the West is carrying the growth," says Diane Brisebois, president and CEO of the Toronto-based Retail Council of Canada (RCC).

"The Prairies are doing very well. In most cases it's due to the investments in the resource sector and our individual retailers are telling us - those located in Manitoba, Saskatchewan and Alberta - that they're seeing ongoing consumer confidence, their business is stronger than its ever been and they're more optimistic than retailers in other section of the country."

And Albertans even have more places to put their new purchases, with a booming new housing market and a resale market that is red-hot in most parts of the province.

Consumer confidence in the oil-rich province is strong, driven by a robust oilsands sector with billion dollar oil-related megaproject announcements almost becoming commonplace.

"Retail will be strong in Alberta because the Alberta economy is strong," says Paul Messinger, director of the Canadian Institute of Retailing and Services (CIRAS), based at the University of Alberta.

"The Alberta economy is strong because many of Alberta's leading industries are strong - a key industry being the oil industry and the oilsands. The investment in northern Alberta and the oilsands is really at unprecedented levels and will continue for the foreseeable future."

People in Alberta also feel more confident, says Messinger. "The shopping malls are going to continue be very crowded, very lively and optimistic."

The RCC's Brisebois adds that it doesn't hurt that Alberta lacks a provincial sales tax. "It's a perk many consumers in the rest of Canada envy."

But even a sales tax is not hurting business in the neighbouring Prairie provinces. Saskatchewan and Manitoba are riding waves of pent-up demand and growth in their own resource sectors.

There's anticipation that Saskatchewan's mining sector, particularly diamond exploration, is on the verge of more commercially viable discoveries, says Dwight Heinrichs, an instructor at the University of Regina's faculty of business administration who specializes in marketing.

"Certainly oil, too, has had a spinoff effect, not to the same level as in Alberta but it has had an effect" on Saskatchewan's strong retail numbers, he adds.

As a result, big-box retail developments are the order of the day in Regina and Saskatoon, he notes. "In Regina, we've just had Best Buy added to the mix, and others like that too."

Big-box stores are also on the rise across the border in Manitoba.

Winnipeg's major shopping district around the Polo Park mall is undergoing massive change as adjacent land is slated for redevelopment.

Rob Warren, executive director of the Asper Centre for Entrepreneurship at the University of Manitoba, says that Cadillac Fairview is trying to woo retailers not yet in Winnipeg, while others are also making plans to move into the Polo Park area.

Manitoba's recipe for retail success, says Warren, is based on a housing boom stemming from pent-up demand - in part due to a younger demographic that still lives at home, even into their early 30s, and a lot of older housing.

"It's also probably the last place in the world where condos became popular," he says. "Ten years ago nobody in their right mind would recommend living in a condominium. Today, we seem to be throwing them up all over the place."

Warren also points to a solid manufacturing base, government employment and immigration. "Put all that together and you get a very ripe market for consumer spending."

On the West Coast, B.C. retailers have a number of reasons to be optimistic, says Mark Startup, president and CEO of Retail BC.

"We have a retail economy that has been growing month after month after month for three plus years," says Startup. "We have historic low interest rates at a time when British Columbia is beginning its buildout for the 2010 Olympic Games and we have a very good demand for goods and services resulting from the home building and renovation sectors."

Provincial government tax policies in B.C. have also been kind to businesses and investors for the past four years, he adds.

Meanwhile, the average expected holiday spending on gifts and non-gift related expenses for the 2005 Christmas season is $1,357 per person, according to a new study conducted for RCC by Canadian market research firm Pollara - a marked increase from the $991 cited in the spending intention survey last year.

This year, 94 per cent of Canadians plan to give gifts to others, spending an average of $687. These consumers also plan to spend an average of $670 on non-gift related expenses, such as travel, decoration, beauty services, food and drink, and entertainment this coming holiday season, adds Brisebois.

"Although Canadians are dealing with various economic factors such as rising energy costs, it appears that this has not dampened their enthusiasm about giving gifts and celebrating the holidays with family and friends, and it also reflects the consumer trends we are seeing across the border."

"Our outlook for Christmas (retail) is good, but not great," adds analyst Strapagiel. "It depends a fair bit on what part of the country you're in."

Canadians between 45 and 54 years of age will spend the most on gifts at $798, whereas Canadians aged 35-45 will spend the least on gifts at $690 this holiday season, says Brisebois, who estimates that Ontario residents will spend an average of $781, British Columbians will spend $765 and residents of the Prairies will spend $753.

Santa, meanwhile, is apparently leaving some presents for the retailers themselves as he heads out with this year's deliveries. Store owners in most provinces say they expect their economic outlook to remain positive into and throughout 2006.

In B.C., 94 per cent of respondents to a Retail BC survey indicated that they expected retail sales to at least remain the same or even increase throughout 2006, says Retail BC's Startup.

In Alberta, CIRAS's Messinger, says: "I see continued very optimistic growth for 2006, driven by our economy that we are blessed with. Interest rates will damper the growth slightly, but the basic trend will be growth."

In the Prairie region, Heinrichs also anticipates ongoing growth and economic prosperity for retailers continuing. "The Conference Board and all the banks agree Manitoba is going to have decent growth next year."

(Laura Severs can be reached at laura@businessedge.ca)