Back-to-school bargains fail price test

Shoppers still waiting for our strong dollar to pay a dividend at cash registers

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Dana Flavelle

'Tween retailer Siblings says it has slashed prices on everything from purple leggings to lace-bottom Ts in hopes of luring cautious Canadian shoppers into its stores during the crucial back-to-school season.

Canada's biggest stationery supplier Staples Business Depot is also trumpeting price cuts on basics such as pencils and paper notebooks.

But consumers hoping to find real deals on a wide range of products during the second-biggest shopping season of the year may be disappointed.

Many Canadian retailers are still charging significantly higher prices than their U.S. counterparts despite last year's sharp rise in the relative value of the loonie, said Doug Porter, deputy chief economist with BMO Capital Markets.

"Prices are still well above those in the U.S.," said Porter, who has conducted two separate studies on the topic over the past year. The gap had narrowed, he noted in June, from 24 per cent to 18 per cent but it remained "extraordinarily large" given near parity in the currencies at the time.

Canada's retailers say they're doing their best to pass on any cost savings they can negotiate with suppliers.

"Our prices are quite a bit lower this year than last year due to our increased purchasing power," Staples president Steve Matyas said, citing a stronger dollar and his chain's larger number of stores as contributing factors.

An 80-page Hilroy notebook is now 26 cents versus $1.03 last year at this time. A package of 60 Crayola coloured pencils is just under $5 compared with $12.96 last fall.

The Retail Council of Canada also says the dollar has helped many retailers cut their prices in recent months.

But Porter believes further price cuts will come only if consumers demand them by shopping across the border. And he cautions with the loonie now trading below 95 cents (U.S.), down from a monthly peak of $1.07 last November, that may not be as attractive an option.

Most Canadian retailers see soaring gasoline prices as a bigger problem for them than the loonie this year. Although gas prices have recently fallen back from their July peak, they're still taking a bigger bite out of consumers' wallets than at this time last year. The average price in Ontario 12 months ago was 95.6 cents a litre versus $1.26 this past week.

Combined with softening employment and growing concerns about the impact of the United States' economic woes on Canada, "consumer confidence has weakened fairly markedly" in recent months, Porter said.

"I think people are much more cautious today than they were even three, four months ago," said Matyas at Staples.

"I don't see doom and gloom but consumers are being careful," said Siblings president Edith Benezrah, a 25-year veteran of retail sales.

"We're dealing with a much more cautious consumer," agreed Derek Nighbor, national vice-president of the Retail Council of Canada.

The council was expecting retail sales growth to remain at or just below the rate cited by Statistics Canada in May (4 per cent nationally, 3.2 per cent in Ontario).

However retail sales were flat in June, totalling $14.5 billion seasonally adjusted, the same as in May.

Higher fuel prices also affect retail prices, Nighbor said, by boosting the cost of transporting goods to market. So, it's a bit of a double whammy for them.

View the rest of our back-to-school section here.