Canadian Tire Corp Ltd (CDNAF) achieved a normalized EPS of $4.07 in Q4, contributing to an annual EPS of $12.62, marking a significant improvement over 2023.
The Triangle Rewards program showed strong performance, with loyalty sales growing 4% in Q4 and increased cross-banner engagement.
The company successfully leveraged its digital platform to mitigate the impact of the Canada Post strike, maintaining website stability and growing key categories like automotive.
Mark's stores showed considerable returns, with new store investments contributing to 50% of Mark's overall retail sales growth.
Supply chain modernization efforts resulted in $20 million in savings in 2024, contributing to lower operating expenses.
Negative Points
Consumer confidence remains low despite an uptick, and the looming threat of tariffs could erase recent gains.
The Canada Post strike negatively impacted flyer distribution, resulting in over 100 basis points of comps loss in the quarter.
Discretionary categories saw a decline, and seasonal categories like Christmas lights underperformed expectations.
The company faces potential margin risks due to tariffs and currency fluctuations, with a need to reassess assortment architecture.
Financial services saw a 12% decline in normalized IBT due to tightening gross margins and increased write-offs.
Q & A Highlights
Q: With Canadian Tire Financial Services (CTFS) now fully owned, what are the plans for expanding coalition partnerships and building out the business? A: Greg Hicks, President and CEO, explained that owning 100% of CTFS allows Canadian Tire to have full control over its strategic direction, particularly in building resiliency and recurring revenue through the Triangle Rewards program. The focus will be on expanding partnerships that provide everyday needs value to Canadians, similar to the existing partnership with Petro-Canada.
Q: How did the weather and other factors impact Canadian Tire Retail (CTR) sales in Q4, and what is the outlook for Q1? A: Greg Hicks noted that unusually warm weather in October and November affected sales, but December saw improvement. The Canada Post strike also impacted flyer distribution. Despite these challenges, positive demand trends were observed, and these have continued into the first six weeks of the year, with strong replenishment from dealers.
Q: What are the expectations for SG&A expenses in 2025, and where do you see opportunities for further leverage? A: Gregory Craig, CFO, highlighted that controlling SG&A expenses was a key achievement in 2024. The focus will remain on controlling costs while investing in real estate and IT for long-term productivity gains. Variable costs may increase with growth, but the team is committed to managing expenses effectively.
Q: How is Canadian Tire planning for potential tariff impacts, and what measures are in place to mitigate these effects? A: Greg Hicks stated that the primary concern is the indirect impact of tariffs on Canadian GDP and employment. Direct impacts include managing margin pressures from tariffs on 15% of goods sourced from the US. The company is exploring Canadian partnerships and alternative sourcing to mitigate these effects.
Q: How is the company leveraging consumer data from the Triangle Rewards program to make inventory and assortment decisions? A: TJ Flood, EVP and President of Canadian Tire Retail, explained that the rich consumer data from the Triangle Rewards program informs buying decisions and helps manage inventory. The company is agile in adjusting inventory buys based on demand trends, with lead times varying by category.
Q: Has there been a noticeable change in consumer sentiment or spending since the announcement of tariffs? A: Greg Hicks mentioned that while strong demand continues, it's difficult to draw a direct line to sentiment changes due to tariffs. The weather has been a significant factor in recent sales trends, and more time is needed to assess the impact of tariffs on consumer behavior.
Q: What are the larger categories imported from the US, and how quickly can Canadian Tire pivot to other suppliers? A: Greg Hicks noted that 15% of goods are sourced from the US, with alternative suppliers available for most products. The company is well-positioned to manage sourcing challenges, with Canadian suppliers ready for essential categories and plans to shift some sourcing overseas if necessary.
Q: How did promotional activity impact sales in Q4, and what categories saw the most benefit? A: TJ Flood highlighted that promotional intensity increased in Q4, with positive results in categories like household batteries and hunting. The marketing team effectively communicated Canadian Tire's value proposition, and the company plans to continue focusing on value in 2025.
