Canadian Tire Corp. Ltd. CTC-A-T saw profit and sales tumble in its fourth quarter, and has cut its spending targets, as consumers continue to pull back on non-essential purchases amid a challenging economic environment.
The Toronto-based retailer reported a 67.6-per-cent decline in net income in the quarter, which included the all-important holiday shopping season. Net income attributable to shareholders fell to $172.5-million, compared to $531.9-million in the same period the prior year.
Excluding some normalizing items, net income attributable to shareholders fell to $3.38 per share in the quarter ended Dec. 30, compared to $9.34 per share in the prior year. According to the company, about $2.26 of that decline was related to an accounting change in how it records the impact of a margin sharing arrangement with its Canadian Tire store owners.
The flagship Canadian Tire chain was affected by continuing weak demand for discretionary products, as consumers hit hard by inflation and rising interest rates have pulled back on spending where they can.
Canadian Tire was also hit by an unusually warm December, which dampened sales of seasonal winter products – a trend that also affected the Mark’s chain, where sales declined for winter categories such as boots and coats, and at Sport Chek, where demand fell for outerwear, skis and snowboards.
Across the company’s retail banners, comparable sales – an important metric that tracks sales trends not influenced by store openings or closings – fell by 6.8 per cent in the quarter ended Dec. 30, or 6.9 per cent excluding fuel sales at its gas stations. For the full year, comparable sales fell by 2.9 per cent, or 3.1 per cent excluding petroleum.
Fourth-quarter revenue fell by 16.8 per cent compared to the same period the prior year, to $4.4-billion. For the full year, revenue fell by 6.4 per cent to $16.7-billion.
“Our performance last year fell short of our expectations as our team continues to navigate a challenging macroeconomic environment,” chief executive officer Greg Hicks wrote in a statement on Thursday.
The company has once again cut its spending targets as it continues to cope with the challenging economic environment. On Thursday, Canadian Tire forecast its operating capital expenditures would be in the range of $475-million to $525-million, pulling back on the range it disclosed three months ago, which had pegged expenditures at $550-million to $600-million for the upcoming year.
The company had already been slowing its pace of investments, affecting the rollout of a four-year, $3.4-billion plan announced in March of 2022. That strategy aimed to increase sales, with investments including store upgrades, improvements to digital operations, additional warehouse construction, new product launches and expansion of its Triangle loyalty program. Delays in real estate projects and supply chain investments contributed to a decline in operating capital expenditures in 2023, which amounted to $615.3-million compared to $747.6-million in the prior year.
“While the pace of our investments has slowed, we remain committed to our strategy as we balance tough short-term decisions with our long-term objectives,” Mr. Hicks wrote in Thursday’s statement.
