Add Best Buy Canada and its sister chain, Future Shop, to the growing list of retailers struggling in Canada.
The U.S.-based retailer posted better-than-expected earnings for the first quarter, turning an $81-million loss this time last year into a $461 million profit this year, despite falling revenues. But the company’s Canadian division proved a drag on the numbers.
Best Buy doesn’t break out numbers specifically for Canada, but its international division covering Canada, China and Mexico saw revenue plunge 10.5 per cent, to $1.25 billion U.S. Same-store sales (excluding newly-opened or closed stores) fell 5.8 per cent, the company reported.
“Canada, at this point in consumer electronics, is a very, very soft market,” Best Buy CEO Hubert Joly said in a conference call Thursday, as quoted at the Financial Post.
“We’ve seen significant industry declines. We’re holding our own very well in comparison to the market.”
Best Buy has been struggling in recent years, both in Canada and elsewhere, as consumers turn to online retailers like Amazon and to specialized retailers like Apple and Samsung stores.
The company abruptly shut down 15 Best Buy and Future Shop locations last year, laying off 900 people. It announced another 950 layoffs this January.
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Best Buy is not alone in the growing crisis among traditional retailers. The Post notes revenue from electronics retail sales has fallen for the past half year, sliding 2.6 per cent in the quarter ending May 3.
Overall retail sales in Canada have seen tepid growth. The latest numbers showed a decline of 0.1 per cent in retail in March, surprising economists who had expected to see growth.
In this harsh environment, Sears Canada has been busily closing stores and the U.S.-based parent company has been musing about selling off the Canadian operation. (Question: Who would buy it, and why?)
Target entered Canada last year with expectations it would turn a profit by the end of 2013, but has so far lost $1.5 billion since opening its first stores last spring.
Homegrown retailers are also struggling, with fashion chain Jacob announcing recently it will close all its stores.
And as if that wasn’t enough pressure on the industry, a new problem is emerging: Gas prices.
In a report released this week, National Bank of Canada noted that the percentage of retail spending going to gas is near an all-time high, above 13 per cent of all retail spending in Canada.
By comparison, in the U.S. gas amounts to about 10.5 per cent of retail spending -- a record high gap between the U.S. and Canada. Canadians now pay about 30 per cent more for gas than Americans.
National Bank says this is eating into spending in the rest of the economy, helping to explain sluggish retail sales.
The report also noted that Canada’s job growth has hit a weak patch, with essentially no net new jobs created in the six months to April. That, too, impacts retailers’ ability to grow sales.