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Canadian Retailers Facing Rough 2012: Moody's

TORONTO — The outlook for the Canadian retail sector is stable although income growth will be sluggish in 2012, as elevated consumer leverage and intensifying competitive pressures will weigh on the sector's results, according to a new report from Moody's Investors Service.

"We expect the Canadian store-based retail sector will generate modest revenue growth of between 2%- 3% in 2012," Darren Kirk, Moody's vice president and senior credit officer for Moody's, said in a statement. "Elevated Canadian household indebtedness means consumers may constrain spending as market volatility and economic uncertainty persists."

Moody's points out that Canadian disposable income growth has generally remained strong since 2006, but has been more than offset by a 40% rise in household debt.

Supermarket chains Loblaw Cos., Metro Inc. and Sobeys will also feel pressure as Wal-Mart increases its presence in advance of Target's anticipated arrival in early 2013, Moody's added.

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