A Canadian Tire logo is displayed on a store in Ottawa on Friday, Aug. 11, 2023. THE CANADIAN PRESS/Sean Kilpatrick
TORONTO – Canadian Tire Corp. Ltd. saw its profit drop about 68 per cent in the key holiday shopping quarter as a tougher economic environment and an unseasonably warm winter put a damper on consumer spending.
The Toronto-based retailer, which also owns SportChek, Mark’s, Party City and Pro Hockey Life, reported Thursday that its profit attributable to shareholders was $172.5 million, or $3.09 per diluted share, in its fourth quarter.
The result for the 13-week period ended Dec. 30 compared with a profit of $531.9 million, or $9.09 per diluted share, in the same quarter a year earlier.
Chief executive Greg Hicks admitted the quarter “fell short” of the company’s expectations.
“This past year was challenging, more so than we expected at the outset given rising interest rates, stubborn inflation impacting discretionary spend and unfavorable weather,” he told analysts on a Thursday conference call.
Canadian Tire tends to be acutely affected by swings in consumer sentiment and the weather because much of its product base can be linked to seasonal sports or holidays. Many consumers view such items as discretionary and curtail spending on them when inflation and interest rates are high.
“Christmas is a great example,” said TJ Flood, president of Canadian Tire Retail on the same call as Hicks. “It doesn’t get more discretionary than Christmas.”
Shoppers who leaned into such thinking pushed Canadian Tire’s revenue down to $4.44 billion in the quarter from $5.34 billion in the same quarter a year prior.
“While we had expected results to be challenged by softening consumer spending, the impact was more severe than expected,” Chris Li, a Desjardins analyst, said in a note to investors Thursday.
Canadian Tire’s stock price fell almost four per cent $135.91 in late-morning trading as the market responded to drops in several of the company’s key metrics.
Its consolidated comparable sales were down 6.8 per cent, which it attributed to softening consumer demand, compounded by weaker sales due to many parts of the country breaking records for warm temperatures in December.
While SportChek experienced declines in outerwear, skiing, snowboarding and winter accessories, Canadian Tire saw categories like windshield wipers, winter tires and batteries hold up well.
“We live and operate in Canada where weather can be unpredictable, that said, we know we need to be well stocked in weather-related categories to support our customers’ seasonal needs,” Hicks said.
In addition to weather, Canadian Tire was also grappling with rival retailers ramping up promotional activity to squeeze any sales out of customers that they could.
Black Friday sales started earlier than usual, pushing up competition, which is persisting into 2024.
But moving forward, Hicks was confident in the company’s ability to navigate headwinds.
He pointed out that the business invested $1.4 billion since March 2022 in a plan to grow the company with new and remodeled stores, new and expanded distribution centers with automation and technology infrastructure upgrades.
“Heading into 2024, we are placing heightened attention on our financial flexibility and controlling what we can control while mitigating what we can’t,” Hicks said.
This report by The Canadian Press was first published Feb. 15, 2024.
Companies in this story: (TSX:CTC.A)
