APPAREL AND FOOTWEAR SPECIALIST RETAILERS IN CANADA - ANALYSIS

Country Report | Apr 2022

KEY DATA FINDINGS Market Sizes

Retail value sales grow by 20% in current terms in 2021 to CAD23.3 billion Sales of Apparel and Footwear Specialist Retailers
TJX Cos Inc, The is the leading player in 2021, with a retail value share of 20% Retail Value RSP excl Sales Tax - CAD million - Current - 2007-2026

Retail sales are set to grow at a current value CAGR of 7% (2021 constant value CAGR
of 5%) over the forecast period to CAD33.4 billion
23,323 Forecast
35,000

2021 DEVELOPMENTS 30,000

Omnichannel approach pays off for specialist retailers 25,000

The review period witnessed the closure of many physical apparel and footwear
20,000
specialist retailers across multiple brands as a result of higher rents and the perceived
benefits of shifting the focus away from brick-and-mortar stores to the strongly
developing e-commerce channel or in adopting the pop-up store concept. More 15,000
intense competition also led to outlet closures and shifts in strategy. These trends
were intensified by the onset of the Coronavirus (COVID-19) pandemic. In 2021, apparel 10,000
and footwear specialist retailers continued to face numerous challenges as consumers
were more cautious about spending due to economic uncertainties. To some extent, 5,000
this trend could benefit popular platforms like Kijiji and eBay and the online thrift shop
ThredUP, since many Canadian consumers were already turning to second-hand 0
purchases of apparel and footwear for both money-saving and ethical reasons. 2007 2021 2026
However, the shift towards e-commerce and an omnichannel approach is paying off as
apparel and footwear specialist retailers start to recover from the shock of the
pandemic on the demand for apparel and footwear. Sales Performance of Apparel and Footwear Specialist Retailers
% Y-O-Y Retail Value RSP excl Sales Tax Growth 2007-2026
In 2021, apparel and footwear retailers continued its recovery of sales lost during the
COVID-19 pandemic. Growth accelerated in summer, and July marked the first time
monthly sales exceeded pre-pandemic (2019) levels. Overall, sales showed a 19.7% Forecast
substantial recovery in 2021, albeit remaining below pre-pandemic levels over a full 20%
year. Many consumers continued to shop for apparel online, although many are
returning to in-store, in-person shopping.
10%

Specialist retailers focus on strategies to win back consumers

0%
Apparel and footwear specialist retailers faced several headwinds in 2020, including
declining consumer interest in once popular fast fashion and mid-market brands, the
closing down of shopping malls during COVID-19 and decreased consumer purchasing -10%
power due to higher unemployment rates and the general economic fallout of the
pandemic. Changes in strategies to respond to the exigencies of the pandemic included -20%
many existing retailers shifting to face masks amid shortages during COVID-19, as
fashion face masks became a new growth category for retailers, at least in the short to
medium term. Nevertheless, the channel suffered a slump in retail value sales in 2020. -30%

Other strategies to win back consumers included the easing of financial pressures in -40%
the wake of the COVID-19 pandemic. For example, Buy now pay later (BNPL) options 2007 2021 2026
were introduced by Canadian branded retailers like Aritzia, Gap, lululemon, American
Eagle, and others. BNPL, which has grown in popularity, was extended by more retailers
adopting such options to increase average cart size and convert more potential
customers to sales. In order to rebuild sales and win back customers, some payers
invested in their existing loyalty programmes. In addition, lululemon athletica
extended and added dynamism to loyalty programmes in major cities. When paying an
annual fee, members receive a free pair of trousers, faster shipping and exclusive
passes to in-store events While such initiatives are too expensive for most Canadian
apparel retailers, the use of experiential activities like in-store fashion shows or in-
person consultations with staff could help to win over consumers.

Return to pre-pandemic lifestyles and new activities lead to “wardrobe

refreshes”
Consumers in search of a “wardrobe refresh” helped to drive the sales recovery in
apparel and footwear specialist retailers in 2021. As lockdown restrictions eased and
lifted and more social activities became available to consumers, many increased or
diversified their purchase of apparel. This indicated the pent-up demand that had
accrued throughout the pandemic, as well as the need for new clothes for a return to
pre-pandemic lifestyles or “new” activities. The demand for casual and comfort wear
during lockdown led to a demand for sweatpants, sweatshirts, sportswear (athleisure)
and nightwear, for example. As consumers started to resume work and socialising

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norms, there was a demand for more formal or semi-formal work attire, although Competitive Landscape
casual and comfort clothing remained in vogue.
Company Shares of Apparel and Footwear Specialist Retailers
PROSPECTS AND OPPORTUNITIES % Share (NBO) - Retail Value RSP excl Sales Tax - 2021

An omnichannel approach adds dynamism to operations, while TJX Cos Inc, The 20.2%
interaction with merchandise remains a key drawing card for physical Canadian Tire Corp Ltd 4.9%
stores Gap Inc, The 4.4%
Apparel and footwear specialist retailers is expected to see limited store expansion or H&M Hennes & Mauritz AB 2.8%
growth in outlet numbers over the forecast period. High rents and lower than optimum Reitmans (Canada) Ltd 2.2%
performance, exacerbated by COVID-19, forced many apparel and footwear specialist
retailers to reduce their physical footprints and focus more on omnichannel strategies. lululemon athletica inc 1.8%
Since the pandemic also served to accelerate the shift to online shopping, closing down Aritzia LP 1.5%
unprofitable stores and gravitating towards e-commerce is expected to become a long-
term trend. Harry Rosen Inc 1.4%
Zara Canada Inc 1.1%
Retail value (constant 2021 prices) sales in apparel and specialist retailers are projected
to grow strongly in the short term, before stabilising. However, by the end of the Children's Place Retail ... 1.1%
forecast period, retail value (constant 2021 prices) sales are set to be slightly below the American Eagle Outfitter... 1.0%
2019 level. While a large number of sales shifted to e-commerce due to the pandemic,
consumers continue to enjoy shopping for clothing and footwear in-person. They Bath & Body Works Inc 0.9%
particularly like to browse in person, try on and physically interact with merchandise, DSW Canada Inc 0.8%
which is a process that has yet to be seamlessly replicated through e-commerce or
Guess Inc 0.7%
digital technologies.
URBN Canada Retail Inc 0.5%
Athleisure and loungewear offer growth opportunities for agile players La Senza Corp 0.5%

Prior to COVID-19, some specialist retailers, such as lululemon, benefited from Abercrombie & Fitch Co 0.4%
expansion and the athleisure and health and wellness trends. Over the forecast period, Boutique La Vie en Rose ... 0.3%
retailers specialising in casualwear and/or athleisure are expected to benefit from
another trend resulting from the pandemic, with some companies set to retain remote Maurices Canada Stores L... 0.2%
working policies, in the short or longer term or for part of the week. As in the Others 53.3%
pandemic, this work practice would benefit comfortable and casual loungewear and
sports-inspired apparel and footwear. Meanwhile, a focus on health and wellness and
the growing participation in exercise and sports are also supporting the demand for
athletic clothing and footwear. While athleisure is very much on the rise, this trend is
also morphing into loungewear, as the COVID-19 experience sees consumers looking to Brand Shares of Apparel and Footwear Specialist Retailers
feel good again through their apparel and footwear. Therefore, specialist retailers able % Share (LBN) - Retail Value RSP excl Sales Tax - 2021
to meet this new fashion demand should see growth opportunities.
Winners 18.3%
Home consumer base to continue to encourage outlet expansion of Mark's Work Wearhouse 4.9%
luxury brand specialist retailers Old Navy 2.7%
Luxury apparel brands have continued to expand in Canada despite the economic H&M 2.6%
impact of the COVID-19 pandemic. While some luxury brands experienced sales Marshalls 1.9%
declines throughout the pandemic, others have seen sales rise towards or above 2019
levels. The Canadian footprint of several brands, including Gucci, Thom Browne and Lululemon Athletica 1.8%
Golden Goose, expanded in 2021, supported by the development and growth of e- Aritzia 1.5%
commerce. This helped to absorb some of the losses caused by the slump in
international tourism. While some luxury stores have tended to rely on brand- Harry Rosen 1.4%
conscious Asian shoppers, some attracted local purchasers of luxury brands who could Reitmans 1.3%
or would not travel abroad and/or who made savings due to limited social and leisure
Gap 1.2%
opportunities at home. This is likely to continue to support luxury brand specialist
retailers as international tourist flows recover. Moreover, growth throughout the Zara 1.1%
pandemic indicates that luxury outlet expansion is likely to continue in the forecast The Children's Place 1.1%
period.
American Eagle Outfitter... 1.0%
Victoria's Secret 0.9%
Guess 0.7%
Penningtons 0.7%
Shoe Company 0.6%
Banana Republic 0.5%
La Senza 0.5%
Others 55.3%

5-Year Trend
Increasing share Decreasing share No change

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