TORONTO
Canadian Tire Corp. Ltd. is cutting prices on thousands of items and expanding its gift offerings as it warns of a constrained holiday season and a prolonged period of intense competition for value-conscious shoppers.
The retailer, which also owns SportChek and Mark’s, reported a rise in third-quarter profit and raised its dividend on Thursday.
Chief executive Greg Hicks said the consumer psyche is “still on high alert” due to persistent inflation, high gas prices and geopolitical tensions.
“The clouds of geopolitics and macroeconomics haven’t cleared,” Hicks said on a conference call with analysts.
He said a drop in consumer sentiment from August to September was one of the biggest declines the company has tracked, and industry reports suggest holiday spending will be “constrained.”
In response, Canadian Tire has cut prices on more than 5,000 goods, including gift bags and wrapping under $2 and 99-cent ornaments, to compete with value retailers like Walmart and Dollarama.
“I wouldn’t confuse a cautious consumer with an absent consumer,” Hicks said, noting shoppers will spend when the value is right.
The goal is to capture a holiday gifting market Hicks estimates is worth more than $5 billion and build on it for other occasions like birthdays.
“That means not just leaning into having the right products to gift but also (looking at) how we get consumers to have us more front of mind,” he said.
The company expects this focus on value to last for the next year to 18 months.
“We’re going to be continuing in a very dynamic and very value-oriented price cycle for the next, probably, year to 18 months,” said executive vice-president and chief operating officer TJ Flood.
The retailer’s third-quarter results showed the strategy is working, with high-debt, low-income customers driving the highest spending increases.
Net income attributable to shareholders was $219.6 million or $4.27 per diluted share, up from $169.1 million or $3.13 per share a year earlier.
Revenue totalled $4.32 billion, up from $4.11 billion.
Comparable sales, which track sales at stores open for more than a year, rose 3.2 per cent across the company’s banners.
Canadian Tire and SportChek each saw comparable sales increase 3.2 per cent, while Mark’s reported a 3.3 per cent gain.
Higher gas prices, driven by the war in the Middle East, pushed retail sales up 4.4 per cent, though sales excluding petroleum rose 1.7 per cent.
The company’s share price rose by almost seven per cent in Thursday morning trading.
Canadian Tire also increased its quarterly dividend to $1.825 per share, up from $1.80.
However, executives cautioned the current quarter is off to a slow start due to unseasonably warm weather hurting sales of winter seasonal products.
“We’re off to a slower start in October. Clearly, winter has not showed up,” chief financial officer Darren Myers said.
“There’s a lot of the quarter left to play but we do need the weather to turn.”
The company’s financial services segment, which offers credit cards tied to its Triangle loyalty program, reported record revenue for the quarter.
E-commerce sales grew by 15.3 per cent.
The retailer’s push comes as economic pressures mount for consumers. e2gold.ca reported this week that Ottawa has extended a tariff relief program for firms importing U.S. goods, a measure aimed at easing cost pressures.
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail, BNN Bloomberg and The Spec. Quotes are checked word for word against that reporting.