Company Reports

We will discontinue analyst coverage of Canadian Tire on or about April 20.

In the fourth quarter, Canadian Tire posted retail revenue growth excluding petroleum of 10.7%, driven by a comparable sales uplift of 4.2%. Retail gross margin excluding petroleum expanded 118 basis points from the prior year to 35.4%, ahead of the company's target of 35%.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

Canadian Tire posted third-quarter retail revenue growth of 5.9% year over year, excluding petroleum and underpinned by a 1.8% uptick in comparable sales. Retail gross margin excluding petroleum expanded 57 basis points to 35.8%, ahead of its North Star target of about 35%.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

Canadian Tire posted second-quarter revenue growth of 5.3% year over year, underpinned by a 5.6% uptick in comparable sales. However, normalized EBITDA margin tightened 144 basis points to 13.2% amid increased investment. Overhead expenses rose nearly 13% to CAD 881 million.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

Canadian Tire posted first-quarter revenue growth of 4%, underpinned by a 4.7% uptick in comparable sales. Adjusted EBITDA also improved 11% to CAD 422 million (12.2% margin) due to favorable cost leverage in the retail segment.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

On Feb. 19, no-moat Canadian Tire announced plans to sell its Helly Hansen business to Kontoor Brands for about CAD 1.3 billion. Management indicated that selling the sports and workwear brand should help streamline its portfolio and improve focus on its domestic retail operations. Proceeds from the sale are expected to be used to reinvest in the existing business, pay down debt, and repurchase shares. We consider management’s capital-allocation priorities to be reasonable and plan to maintain our Standard Capital Allocation Rating.

We plan to raise our CAD 160 fair value estimate on no-moat Canadian Tire by a low- to- mid-single-digit percentage following its solid fiscal 2024 fourth-quarter earnings release, primarily due to the time value of money. The firm’s results did not significantly differ from our expectations, and we do not plan to materially alter our long-term forecast, which calls for low-single-digit top-line growth and a midcycle operating margin around 9%. Shares declined about 5% following the earnings release, but the stock continues to trade in a range that we’d consider to be fairly valued.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

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.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

We do not plan to materially change our CAD 153 fair value estimate on no-moat Canadian Tire after the firm posted mixed second-quarter results. Top-line marks came in weaker than we expected but stringent cost management and lower supply chain costs helped buoy margins. We anticipate making a slight downward adjustment to our revenue forecast amid lackluster consumer demand but a modest upward adjustment to our full-year operating margin forecast, which stands around 7.5%. After rallying by a mid-single-digit percentage, shares currently trade in a range that we’d consider fairly valued.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

We do not plan to significantly alter our CAD 150 fair value estimate in light of no-moat Canadian Tire’s fiscal 2024 first-quarter earnings report as weaker-than-expected revenue was compensated for by resilient retail margins. Comparable retail sales declined 1.6% (below our forecast for flat comp growth) amid a weak spending environment, with softer sales proving pervasive across each of Canadian Tire’s retail banners. As we expected, management cited weakness across its discretionary product categories but noted a slight uptick in essentials, led by automotive. Consistent with recent quarters, the firm also continued to grapple with inventory destocking from its dealer partners as revenue declined 6% compared with a 2% drop in retail sales at affiliated banners. Management struck a cautious tone when discussing dealer restocking and expects the pace of ordering to remain prudent and reactionary to underlying consumer demand in the coming quarters, which we agree with. We do not anticipate a quick amelioration in the Canadian economy and expect Canadian Tire’s top line to remain constrained in the near term, though we suspect the firm has already faced the brunt of its destocking headwinds and thus expect the firm’s revenue to align with retail sales more closely.

In light of stringent competition and a weakening demand backdrop, we’ve lowered our fair value estimate on no-moat Canadian Tire to CAD 150, from CAD 175 previously, though we still view shares as slightly undervalued. The firm’s portfolio of over 1,400 stores benefited from a robust spending environment in fiscal 2020-22 as comparable sales growth burgeoned and margins expanded amid favorable operating leverage and resilient demand across discretionary product categories. However, demand showed signs of normalizing in fiscal 2023—retail revenue excluding petroleum declined nearly 8%—as lackluster retail spending was seemingly exacerbated by inventory destocking from its third-party dealers. With little evidence to suggest a rebound is imminent, we expect the firm’s near-term growth and margin trajectory to be constrained.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.