People shop at Canadian Tire location in Toronto, on Thursday, February 17, 2022. (Christopher Katsarov/The Globe and Mail)
Even as concerns about inflation intensify, Canadian Tire Corp. Ltd. CTC-T is not yet seeing customers “trade down” to lower-priced items, executives said Thursday.
“We are clearly operating in an environment where inflationary pressures are real,” chief executive officer Greg Hicks said on a conference call to discuss the company’s fourth-quarter earnings. The call came one day after Statistics Canada reported that the consumer price index rose 5.1 per cent in January, a rate of inflation not seen in three decades.
Canadian Tire is weighing decisions to pass on higher costs to consumers against pressure from competitors. “Yes, price is moving on to the customer, but as we’ve talked about before, we don’t intend to give an inch competitively,” Mr. Hicks said on the call.
He added that the company’s marketing in the coming months will continue to focus on promoting “choice and value” for shoppers. Ninety per cent of the products at its flagship Canadian Tire stores are items under $50, which represent roughly half the chain’s sales. But the stores have also seen sales growth at other price points, with items more than $200 driving roughly one-third of that growth throughout the pandemic.
Canadian Tire, which also owns the Sport Chek and Mark’s chains, saw overall revenue climb 5.4 per cent in the fourth quarter, reflecting a strong holiday shopping season, higher fuel and tire sales and increased demand for hockey equipment, as people returned to organized sports.
The Toronto-based retailer reported $5.1-billion in revenue in the 13 weeks ended Jan. 1, compared with $4.9-billion in a 14-week period the prior year.
Like many retailers, Canadian Tire spent more on shipping to prepare for the busy holiday season, amid global supply chain difficulties. The company prioritized shipments of higher-demand products and chartered its own boats to ensure delivery. It now has a dedicated ship for the entirety of 2022 and has chartered three additional sailings for the first quarter.
The company is expecting higher rates for shipping containers to continue for the rest of this year and has locked in some shipping rates for 2022 with transportation providers.
“We have very good industry visibility into shipbuilding contracting, and when we look back over [the fourth quarter] of 2020 and the first few months of 2021, new orders for the building of container vessels reached a record high,” Mr. Hicks said. “So our expectation is that these ocean carriers will push this incremental capacity into the system early next year.”
At Canadian Tire stores, comparable sales – an important metric that tracks sales growth not affected by permanent store openings or closings – grew 9.8 per cent in the fourth quarter, compared with the same period in the prior year.
Sport Chek’s comparable sales grew 15.9 per cent, as its stores saw high demand for hockey equipment, athletic shoes and clothing. And comparable sales at Mark’s grew 15 per cent, partly thanks to a return to in-store shopping and inventory management.
The stores experienced fewer restrictions on in-person shopping than in 2020. While this led to less online shopping, e-commerce sales were still up significantly over prepandemic levels, reaching almost $500-million in the quarter.
Canadian Tire has also been building its Triangle Rewards loyalty program to access more customer data, allowing it to do more targeted marketing and promotions. The program added 770,000 members in the fourth quarter and grew 23 per cent year over year. It now has more than 11 million members.
The company reported that its fourth-quarter net income increased to $535.7-million, or $8.40 per share, compared with $521.8-million or $8.04 per share, in the prior year.
For the full year ended Jan. 1, 2022, revenue increased 9.6 per cent to $16.3-billion. Net income for the year grew to $1.3-billion, or $18.56 per share, compared with $862.6-million, or $12.35 per share, in the prior year.
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