Recent financial data indicates consumer spending in areas such as groceries, restaurants, and apparel remains strong. In Canada, grocery spending has proven solid, restaurant activity has remained resilient, and apparel sales are holding strong.
These patterns point to steady consumer behaviour, even as inflation and interest rates remain elevated. South of the border, the U.S. retail landscape reflects a slightly more uneven pattern, with restaurant sales showing improvement since February and apparel spending continuing on an upward trend.
This consumer resilience has been reflected in better-than-expected year-to-date earnings results for many retailers. Companies such as Empire Company Limited, the parent of Sobeys, Safeway, and FreshCo, reported improved earnings in the most recent quarter. Empire’s net income rose to $173 million, up from $149 million the previous year. This comes despite ongoing concerns in broader economic sentiment, which does not appear to be fully mirrored in shopper behaviour.
Canadian Tire also reported encouraging signs in its first-quarter update, noting increased discretionary spending among. Households with higher levels of debt appear to be re-engaging in the retail space. This trend suggests a degree of consumer confidence that has withstood recent economic pressures.
Meanwhile, Walmart remains cautiously optimistic. The retail giant expects to meet its full-year guidance for sales and operating income. However, it flagged elevated tariffs as a potential risk factor moving forward. This caution reflects the delicate balance between managing costs and sustaining consumer demand.
Despite these positive indicators, analysts are not ruling out the possibility of a slowdown. The retail outlook is mixed, and early signs of strain are beginning to surface. In the U.S., dollar stores are seeing increased foot traffic. There is also evidence that higher-income consumers are trading down. This shift often signals underlying consumer fatigue that could become more prominent if economic headwinds persist.
Within this dynamic landscape, certain Canadian retailers are positioned favourably. National Bank’s top investment picks include Loblaw, Dollarama and Groupe Dynamite. These companies are noted for their clear growth paths, limited exposure to tariffs, and strong ability to manage cost pressures. These attributes make them more likely to navigate uncertainty successfully.
While the Canadian retail sector managed to remain robust so far in 2025, signs suggest that caution is warranted. Shoppers may begin to tighten their belts in the months ahead as the delayed impacts of global and domestic pressures start to weigh more heavily on consumption patterns.
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