This company’s shares have dropped a bit lately as investors fear the Omicron variant could lead to more lockdowns. However, the company’s experience should help it cope with future disruptions.
Moreover, many of its customers quickly embraced its online ordering and curbside pickup options. The company’s improving efficiency should also help it compete with other retailers.
The stock trades at just 10.3 times the company’s earnings.
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CANADIAN TIRE CORP. (Toronto symbols CTC and CTC.A; www.canadiantire.ca) operates 504 Canadian Tire stores. They sell automotive parts and services, and household and sporting goods; franchisees run most of the locations. Most Canadians live within 15 minutes of one of those stores. The company’s other operations also enrich its outlook. They include 163 stores operating under the PartSource (auto parts) and Party City (party supplies) banners.
Canadian Tire has several other major retail chains: Mark’s sells casual and work clothing through 382 stores; and the Sport Chek Group sells sporting goods and athletic wear through 377 outlets, including Sport Chek and Sports Experts.
The company’s revenue in the quarter ended October 2, 2021, fell 1.8%, to $3.91 billion from $3.99 billion a year earlier.
Thanks to the easing of COVID-19 lockdowns and increased customer traffic, the company’s overall same-store sales improved 3.3%. That reflects gains of 1.4% at the Canadian Tire chain, 11.2% at Sport Chek, and 7.9% at Mark’s. However, e-commerce sales declined 2.2% as stores re-opened. Even so, online sales in the past 12 months totalled $1.2 billion, about double the previous level.
Like other retailers, the company is facing higher shipping and labour costs. As a result, its earnings in the quarter declined 14.8%, to $4.20 a share (or a total of $257.6 million) from $4.93 a share (or $301.9 million).
Canadian Tire continues to invest in new stores and distribution centres. For all of 2021, it expected to spend between $650 million and $700 million. That’s up from $452.4 million in 2020, as COVID-19 forced it to delay some of those projects.
The company can comfortably afford those outlays. It ended the latest quarter with cash of $2.13 billion. Its long-term debt of $3.55 billion is a moderate 32% of its market cap.
Value Stocks: Company is rewarding both customers and investors
Canadian Tire also continues to sign up new users for its “Triangle” rewards plan. The company added 680,000 new Triangle members in the third quarter of 2021, and the plan now has 10.7 million members. That includes 2.1 million Triangle-branded Mastercard credit card holders, who also earn points on purchases at non-Canadian Tire stores.
By studying the purchasing habits of its Triangle members, Canadian Tire creates exclusive offers for them. In the latest quarter, loyalty sales accounted for 57% of its retail sales.
The company has now completed a multi-year plan to improve efficiency by closing unprofitable stores and consolidating administrative functions for its chains. These have cut at least $200 million from its annual costs.
Canadian Tire also aims to cut a further $100 million from its annual costs, partly by installing robotic machinery at its distribution centres. It expects to complete this new plan by the end of 2022.
The company also recently acquired a 25% stake in Ashcroft Terminal Limited, which operates an inland port facility 300 kilometres east of Vancouver. The deal gives Canadian Tire more control and flexibility over its supply chains. The company paid $40.0 million for this stake.
Canadian Tire is now using some of those savings to reward investors. Starting with the March 2022 payment, it will raise your quarterly dividend by 10.6%. Shareholders will then receive $1.30 a share instead of $1.175. The new annual rate of $5.20 yields 3.0%.
The company has also re-started its share repurchase plan. It aims to buy back $400 million of its shares by the end of 2022.
The re-opening of the economy likely lifted Canadian Tire’s earnings for all of 2021 by 31.0% to $17.03 a share. The class A shares trade at a low 10.3 times that estimate.
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I just don’t understand why I am getting these subscription services even though I did not renew said subscriptions. The two services I subscribe to should have expired in January. In fact you as much as told me this in our last correspondence. I don’t mind you sending this information to me but I don’t want to be charged at a later date for something I didn’t pay for.
Either provide me with a good explanation why I am receiving these services free or kindly stop sending them to me.
Regards
Ron Sherby