Canadian Tire profit jumps 8% on spending for winter tires, sporting goods
Canadians may have been reluctant to open their wallets at some stores in the 2014 holiday season, but they were willing to spend at Canadian Tire.
The Canadian retailer reported profits rose to $206.6 million, or $2.44 per diluted share, in the three months ended Jan. 31, up eight per cent from $191 million or $2.32 per diluted share at the same time last year.
Same-store sales at Canadian Tire were up 2.8 per cent, mainly on strong demand for winter tires, sales at FGL Sports, owner of Sport Chek, were up 4.9 per cent and sales at Mark's Work Wearhouse were up 1.2 per cent. Same-store sales are an important measure for retailers that compares sales in the current quarter with sales the year before.
- Canadians' holiday spending down 2% in 2014
- Canadian Tire money updated to include digital loyalty rewards
The increase in spending at Canadian Tire retail operations came despite an overall decrease in seasonal spending by Canadians as recorded by Statistics Canada. It had been predicted that lower gas prices would lead to more consumer spending before Christmas.
The company's stock jumped 8.8 per cent today to a record high of $133.44 a share.
Canadian Tire began a change in its marketing practices to attract more families and has boosted its digital offerings in an effort to woo a younger demographic.
RBC retail analyst Irene Nattel said Canadian Tire's retail results were better than expected, helped by changes it made.
"The simultaneous repositioning and remerchandising of key retail categories across all banners, and focus on productivity, is enabling Canadian Tire to deliver sector-leading performance," she wrote in a note to investors.
Canadian Tire CEO Michael Medline told analysts on Thursday that unpredictable seasonal weather isn't quite make-or-break for Canadian Tire anymore.
That means if snowblowers aren't rolling out of stores during a mild winter, or if a rainy summer fails to light a fire under barbecue sales, the impact won't leave a massive dent in the financial results.
"Across all of our core retail banners, we have taken positive steps to weatherproof the businesses as much as we can," he said on a conference call.
"We saw these efforts pay off as we had strong performance in non-seasonal categories."
Canadian Tire has added a new home decor line and wider selection of kids' toys that will sell regardless of rain, snow or sunshine.
Revenue for the full year increased 5.7 per cent over 2013 to $12.5 billion, reflecting a strong contribution from all its retail operations.