Canadian Tire profit falls 30 percent even as sales rise

People shop at the Liberty Village Canadian Tire store in Toronto.Christopher Katsarov/The Globe and the Mail

Canadian Tire Corp. Ltd. CTC-AT profit fell more than 30 percent in the second quarter even amid higher sales, as the company incurred costs related to a operational efficiency program and get your Helly Hansen business out of Russia.

The Toronto-based retailer reported net income attributable to shareholders of $145.2 million, or $2.45 per share, in the 13 weeks ended July 2, compared with $259.1 million, or $3.68 per share. action, in the same period of the previous year.

The exit from the Russian market had a $33.4 million impact on Canadian Tire’s results. Excluding the impact of such costs incurred in the second quarter, the company said normalized net income attributable to shareholders was $185.8 million, or $3.11 per share.

Canadian Tire first announced a temporary pause in Helly Hansen’s Russian operations in March after that country’s invasion of Ukraine. The company has now sold all of its store leases, remaining inventory and other assets to its long-time business partner in Russia, but the sale did not include rights to the Helly Hansen brand or other trademarks; once the remaining inventory is sold, their stores will be closed and products will no longer be shipped to the country. As of March, Helly Hansen had 41 stores in that market and employed more than 300 people.

Canadian Tire said demand for its products remains healthy, even in an inflationary environment. Shoppers have returned to brick-and-mortar stores in greater numbers as COVID-19 restrictions have eased and e-commerce sales remain higher than pre-pandemic levels, according to the company.

Some major retailers south of the border, including Walmart and Target, recently warned they will be forced to slash product prices to clear store shelves after buying too much inventory to deal with supply chain grunts. . But CEO Greg Hicks said this is not the case for Canadian Tire, even though the company has been ordering products earlier to ensure availability.

“I’m very pleased with our team’s ability to manage our inventory, especially considering what we’re seeing with large retailers south of the border,” Mr. Hicks told analysts on a conference call Thursday to discuss the results. .

The automotive category has grown as people venture out more and a shortage of new cars led to higher maintenance spending. Demand for casual and industrial wear has continued to drive sales at its Mark’s stores, and a return to team sports has helped sales at the Sport Chek chain.

The late start of warm weather this year and unusual spring storms caused unexpected changes in buying patterns. Sales of products such as trampolines, bikes and pool floats fell, although some of these categories have rebounded in July as the weather changes.

Revenue grew 12.4% compared to a year ago, to $4.4 billion in the quarter.

Executives also noted that the company is seeing growth in products priced above $250, an unusual trend considering that with high inflation, shoppers often “switch” to lower-priced items to maintain their savings. budgets under control. In some cases, the retailer sees buyers switch.

“While we are not immune to macroeconomic circumstances, our business is resilient…we are seeing strong customer demand,” said Mr. Hicks.

Excluding oil, retail sales grew 4.6 percent in total. Like-for-like sales, an important metric that tracks sales growth unrelated to new store openings, rose 3.9% at Canadian Tire stores and 4.1% at Sport Chek. Mark’s comparable sales grew 20.9 percent compared to the prior year.

The “disorderly” quarter belied “solid underlying performance”, RBC analyst Irene Nattel wrote in a research note on Thursday. She said customer demand remains strong and comparable sales growth was better than expected.

Strong retail sales were partially offset by higher expenses, including foreign exchange costs.

Canadian Tire’s financial services segment has been seeing more credit card customers and saw credit card sales growth of 25.4 percent in the quarter. The company reported an increase in its provision for expected credit losses compared to a decrease in the provision last year, resulting in a $57.6 million change in pre-tax income.

“Risk levels remain below historical levels,” the company said in a statement.

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