Profits at Canadian retailers are forecast to rise by nearly one-third this year, according to a report by the Conference Board of Canada.

The report released today suggests that profits in the retail trade industry will increase by 32.8% in 2004 to $9 billion after two weak years. Sectors expected to show the largest growth in 2004 include building material and garden equipment and supplies.

Retailers of furniture, home furnishings, electronics and appliances, as well as clothing and department stores are also enjoying stronger results this year.

“This year’s solid performance represents the peak of profit growth over our forecast period,” said Louis Thériault, associate director, industrial outlook. “Revenues are expected to increase by more than 5% in 2004, as a result of strong consumer spending and moderate price increases. Renewed employment growth, wage gains greater than the rate of inflation and some tax cuts are giving consumers more money to spend.”

Profit growth will moderate in the medium term, averaging 7.7% from 2005 to 2008. By 2008, the forecast calls for retail industry profit of $11.9 billion, an increase from profit levels of $5.5 billion in 2002 and $6.8 billion in 2003 for this large and diversified industry. Revenue growth averaging 4.9% annually is expected from 2004 to 2008.

Motor vehicle and parts dealers are expected to post the strongest profit growth among industry sectors at an annual average of 19% between 2003 and 2008. Although growth has been weak in 2003 and 2004, a more vibrant market is expected beginning in 2005, as rising prices catch up from years with almost no increases.

Also posting double-digit profit growth over the forecast period is clothing, department and other general merchandise stores, at an average annual pace of 13.8%.

Furniture, home furnishings, electronics and appliance stores will average profit growth 12% per year through 2008. The booming housing market has driven demand, and even though housing starts are expected to fall off, tight cost controls and improved efficiencies-including job losses estimated at 10,000 in 2004-will maintain profit growth. Building material and supplies retailers will see their profit growth decline substantially during this period as the housing market slows.

Food and beverage retailers are experiencing downward pressure on profits as they undergo significant capital expenditures to keep pace with general merchandise stores.

Overall employment in the retail industry is expected to grow by an average of 1.9% annually over the forecast period, representing an increase of 184,800 additional employees compared to 2003.