You know it’s getting bad when even employee discounts can’t get customers through the door.
New numbers published by BMO Capital Markets Friday show just how steeply cross-border shopping has tumbled out of favour with Canadians now that the loonie is nearing peso-like levels.
Day trips into the United States this year are down 26 per cent, rivalling some of the sharpest drops on record. The loonie’s historic slide over the past year or so “has completely reversed the tide of cross-border shoppers,” Sal Guatieri, economist at Bank of Montreal, says.
The numbers back up what retail execs have been noticing this year along the U.S.-Canada border, home to scores of outlet malls that Canadians spent freely at just a couple of years ago but have virtually abandoned as the CAD has plunged in value against the U.S. dollar (see chart below).
“With the exchange rates being where they are, we’ve seen a significant decline” in foreign shoppers, Jerry Storch, chief executive at Hudson’s Bay Co. said last week. Hudson’s Bay owns U.S. high-end fashion retailer Saks and sister chain Off 5TH with several locations at malls just over the border.
‘Even our own people with discounts don’t shop in the U.S. anymore’
“The biggest decline by the way comes from Canadians,” Storch said. “Even our own people with discounts don’t shop in the U.S. anymore.”
“Some of the major outlet malls are near the Canadian border, or have a significant [number of ] Canadian tourists,” the retail exec said during a conference call. “All you have to do is visit [outlet locations], and you can see” the decline in traffic.
MORE: Canadian shoppers have deserted U.S. outlet stores, HBC says
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“Big shifts in cross-border travel tend to occur when the loonie falls below the mid-80 cent US range,” BMO’s Guatieri said.
The loonie slipped below 72 cents for the first time in 12 years this week as the dollar reacts to plunging oil prices as well as a U.S. interest rate hike from the Federal Reserve.
The upshot north of the border is that stores here stand to gain, Guatieri said, noting the eight per cent jump in American day trippers into Canada this year. The main lift however is coming from all those shoppers staying home these days rather than spending collectively billions of dollars just across the border.
“Canadian retailers may be quietly cheering the loonie’s downfall,” the BMO economist said. “They should see better days ahead.”