Canadian Tire sees sales rise, but profit drop in second quarter

Higher expenses including foreign exchange resulted in lower earnings A shopper enters a Canadian Tire store in Toronto. Photo by Peter J. Thompson/National Post Canadian Tire Corp. Ltd. saw sales grow across its retail banners in the second quarter, but higher expenses and the cost of pulling its Helly Hansen brand out of Russia weighed…
Canadian Tire sees sales rise, but profit drop in second quarter

Higher expenses including foreign exchange resulted in lower earnings

A shopper enters a Canadian Tire store in Toronto. Photo by Peter J. Thompson/National Post

Canadian Tire Corp. Ltd. saw sales grow across its retail banners in the second quarter, but higher expenses and the cost of pulling its Helly Hansen brand out of Russia weighed on earnings for the period.

The company on Thursday reported net income attributable to shareholders of $145.2 million or $2.43 per diluted share, down from $223.6 million or $3.64 per diluted share in the same period in 2021.

“We achieved our top line with a retail gross margin rate that was flat against last year despite inflation and freight costs,” chief executive Greg Hicks said during an earnings call, adding that he was pleased with their inventory management, “especially considering what we’re seeing with large retailers south of the border.”

Several major retailers in the United States have reported issues with bloated inventories that are expected to drag on earnings.

Canadian Tire said their retail inventory and margin management helped them achieve five per cent growth in comparable sales “despite some unseasonable weather.”

The growth came across the company’s retail banners, including Canadian Tire Retail, SportChek, Mark’s and Helly Hansen.

Customers stand in line for curb-side pickup at a Canadian Tire Corp. store in Toronto. Photo by Cole Burston/Bloomberg files

Chief financial officer Gregory Craig said year-over-year growth in Ontario was strong, particularly in the latter part of the quarter. Last year, many stores were closed for in-store shopping and other restrictions until mid-June last year.

Automotive was the strongest division of Canadian Tire Retail in the quarter, with revenue up 15 per cent or $90 million against last year, Craig said.

“With cars back on the road and a shortage of new cars, categories associated with maintaining your vehicle drove disproportionate growth,” he said.

The higher revenue was offset by higher expenses including in foreign exchange, which resulted in earnings below the prior year.

Income before taxes was also down in part due to costs related to the company’s exit from Russia, which resulted in a $36.5 million one-time expense in the quarter.

Canadian Tire temporarily paused its Helly Hansen operations in Russia in March following Russia’s invasion of Ukraine and is now formally leaving the market.

“These one-time expenses offset our strong revenue growth,” Hicks said, noting that normalized diluted EPS would have decline less precipitously, to $3.11 from $3.72 in the prior year.

Helly Hansen performed well in the second quarter as revenue rose 38.9 per cent compared to the same period in 2021. All regions delivered double-digit sales growth for the banner, with results being particularly strong in North America, which represents almost a quarter of Helly Hansen revenue, Craig said.

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At SportChek, Craig said the resumption of team sports drove the banner’s growth, including in licensed clothing as spectator sports, such as the NHL playoffs, returned to Canada. Craig said increased attendance and the return of Blue Jays and Raptors games in Toronto also contributed to higher customer demand.

“Getting national brands on shelves in the quarter was challenging given supply chain issues,” Craig said, but noted that the company still got its fair share relative to others in the market and was in stock in key SportChek categories.

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Mark’s meanwhile reported a 20.9 per cent jump in comparable sales growth over the same period last year, with jeans, industrial footwear and workwear being the strongest performing categories.

Hicks said Canadian Tire has ensured minimal supply chain disruptions and the company doesn’t see any meaningful margin, risk or incremental markdown requirements to clear inventory.

“Inventory seems to be the hot topic for the industry right now and I want to be clear that we feel good about our inventory levels,” he said, adding that the company is seeing “solid customer demand” in the third quarter.

• Email: [email protected] | Twitter: denisepglnwn

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