Canadian Tire Earnings: Top Line Remains Under Pressure, but Profit Improvement Is Encouraging

We plan to slightly raise our CAD 156 fair value estimate on no-moat Canadian Tire following its solid third-quarter earnings release. The top line remained pressured as comparable sales declined 1.5%, though results slightly outperformed our expectation for a 2.5% drop. Consistent with previous quarters, management noted that higher prices and waning consumer sentiment continue to pressure spending capacity. The weakening economic backdrop proved pervasive across the firm’s product assortment as Canadian Tire’s namesake banner saw sales of essential items post a modest decline while discretionary categories fell 3.5%. We share management’s sentiment that economic conditions are unlikely to ameliorate in the near term, and we continue to forecast a low-single-digit percentage decline in comparable retail sales in fiscal 2024.