More CIBCEconomic Outlook: Need Some Breaks To Go Our Way
Avery Shenfeld, Chief Economist
Canadian retail sales fared a bit better than we had expected in 2025, but we’ll need some breaks to go our way to stay on that growth path in 2026. Last year saw nominal retail sales advance by 4%, representing a 2.3% gain in volume terms, each about a percentage faster than our forecast at this time last year. That came despite the drag from slowing population
growth and a weak job market. With both of those factors likely to weigh again on the 2026 pace, we’re likely to see retail growth come up a bit lighter this year.
Last year, retailers benefited from two key developments: first, Canada won an exemption from U.S. tariffs for those goods that qualified for the Canada-US-Mexico trade deal and which were not subject to sector-specific tariffs. That protected the country from even larger job losses that would have materially dampened household spending. Second, lower inflation, including softening rent hikes and a deceleration in mortgage interest costs from
Bank of Canada rate cuts, meant that those who kept their jobs saw wage gains that generally exceeded inflation.
For 2026, we’ll need a bit of luck to go our way on both of those fronts. Our forecast assumes that trade talks go well enough to preserve free trade access for those sectors that have it now, and that we avoid new sectoral tariffs. But it also rests on the assumption that the current, war-driven spike in energy prices has reversed by this summer, with the conflict ending sometime in April.
While gasoline prices are elevated, greater spending at the pump will eat into retail volumes elsewhere. Diesel prices will also impact trucking costs for retailers, which could impinge on margins if household demand s not strong enough to pass that all on in prices.
Even so, Canadian inflation, currently sitting below 2% year on year, could peak at roughly 3% this spring, and then decelerate back to the 2% range later in the year. Since gasoline is included in retail sales, higher outlays at the pump could support a nominal retail gain of 3½% this year. But in volume terms, there are reasons to expect a deceleration from last year’s pace, with our forecast looking for real retail sales growing at roughly 1½%
That’s about as much as can be expected given other forces that are still acting to constrain the pace of spending. While we expect the unemployment rate to stabilize if the trade talks bear fruit, it is not likely to see material improvement until 2027. As well, the stability in the unemployment rate this year will not reflect very robust job creation. Tighter immigration
policies will reduce the growth in the size of the workforce, and will also mean that it will take meaningful gains in per capita consumption to achieve even modest volume gains for retailers.
Fiscal plans offer hope for better growth in 2027, but for the current year, they are not likely to generate a lot of additional spending. We could see some gains for retailers this spring among those that target lower-income households, who will be seeing an enhanced GST credit show up in their bank accounts. But other federal budget measures are largely aimed
at promoting capital spending, which will take a while to get off the ground, and the national capital region could feel a drag from federal staffing cuts. Monetary policy seems to be stuck at what is only a barely stimulative setting, and the window for cutting rates further may have been shut, at least for the next quarter or two, by the rise in oil prices.
Canadians are continuing to reduce winter travel to the U.S., but the degree to which that has left added spending power at home has been offset by greater travel to other sun destinations. Retailers at summer tourist destinations in Canada could see more upside from shifts in travel plans. Housing resales and new home purchases remain sluggish, particularly
in Southern Ontario, which will continue to cut into related retailing in furniture, but perhaps shift some spending into items related to renovating existing dwellings.
There are still some downside risks in this outlook that would arise if the escalation in energy costs is longer lasting, or if trade talks fail to reduce uncertainties over access to the U.S. market. But our base case forecast is for another year of moderate growth, with improved prospects for Canadian retailers in 2027.
Jamieson Wellness Inc. (JWEL-TSX) — Outperformer
Price (3/23/26) C$34.01 12-18 mo. Price Target C$43.00
Company Profile
Jamieson Wellness is a manufacturer, distributor and marketer of
natural health products, primarily in Canada, the U.S., China and
~40 other countries. The company was founded in 1922 and is
headquartered in Toronto.
Investment Thesis
Jamieson is a leader in the attractive VMS industry, with a
dominant market position in Canada and a growing international
presence. JWEL’s international strategy remains in an
investment phase and carries some risks, but has been
delivering strong growth and still has meaningful earnings upside,
in our view. We believe JWEL can continue to deliver double-digit
EPS growth and we see modest upside to valuation if the
company continues to execute against its targets.
Price Target (Base Case): C$43.00
We apply an 18x P/E multiple to our 2027E EPS, excluding NCI.
While this multiple is below JWEL's all-time historical average of
~24x, it is broadly in line with where the stock has traded over the
last three years. We believe strong execution supports modest
expansion from current levels of ~16x.
Upside Scenario: C$53.00
We assume EPS outperforms by 10%, reflecting better-than-
expected performance in China and the U.S., and increase our
target multiple by two turns.
Downside Scenario: C$27.00
We assume earnings that are 25% below our base case forecast,
which would represent two years of no EPS growth vs. 2025. In
this scenario, we use a target multiple of 15x, which has been
JWEL's historical trough.