Canadian Tire | Revenues down, but profits up

(Toronto) Canadian Tire Corporation is the latest retailer to warn of a slowdown in consumer demand as the rising cost of living continues to dampen spending.

“The increased cost of living combined with higher interest rates has created a period of hesitation among Canadian consumers,” President and CEO Greg Hicks told analysts during a conference call. THURSDAY.

“This has had a clear impact on our operations,” he added.

The retailer, which also owns Sport Experts, Atmosphere and l’Équipeur, announced Thursday that its first-quarter profits rose from last year while revenue fell about 5%.

The retailer says its net income attributable to shareholders totaled $76.8 million, or $1.38 per diluted share, for the quarter ended March 30.

The result is up from profit of 7.8 million, or 13 cents per diluted share, for the first three months of 2023, when the group was hit by costs linked to a distribution center fire .

Revenue for the quarter was 3.52 billion, down from 3.71 billion at the same time last year.

Slowing demand in recent quarters has prompted retailers to reduce inventories, particularly for non-essential items.

“We have seen merchants continue to manage the health of their inventories by reducing their inventory,” said TJ Flood, executive vice-president and president of Canadian Tire Retail Group.

This is why the company saw a gap between its sales and revenue in the first quarter, he said, following similar trends from the fourth quarter of 2023.

“We expect retailers to buy spring-summer categories more in response to the consumption patterns they see than based on how they have done so over the past two years, i.e. buying early and building inventory,” Mr. Flood told analysts on the conference call.

A more volatile quarter

Comparable sales fell 1.6% across all brands, driven by fewer shoppers amid an economic slowdown.

Canadian Tire retail same-store sales decreased 0.6%, compared to a 4.8% decline in the same period last year. The Toronto-based retailer said its essential category retail stores were up 2%, led by automotive services.

Sales of seasonal gardening products increased 3% after declining for five consecutive quarters, said Gregory Craig, Canadian Tire’s chief financial officer. Sales of backyard entertainment and outdoor cooking also recovered early in the year.

Mr. Flood said the retailer plans to focus on the essentials and create value for customers through promotions aimed at driving sales.

“We know the customer is hungry for value right now,” he said. We’re very focused on everything that we provide from that perspective, whether it’s inventory or marketing our own brands. »

Inconsistent demand put pressure on sales of discretionary items, making the quarter more volatile than last year, Mr. Hicks told analysts.

Canadian markets are expecting rate cuts from the Bank of Canada as early as June, which will also mark the end of the second quarter. Other companies, including Shopify and Spin Master, have recently pointed to similar economic pressures in their quarterly results from higher interest rates and weakening sales.

The central bank is closely monitoring economic data, including consumer spending, ahead of its June 5 announcement.

Mr. Hicks believes that possible interest rate reductions “could promote stability, easing uncertainties in our business operations.”


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