Christmas season was jolly for Canadian Tire retail sales
Holiday products help boost growth
The outstanding sales growth at Canadian Tire contrasts with the generally tepid results reported to date by U.S. retailers.
Canadian Tire capped off a strong year of retail performance with robust sales in its core retail stores, helped by improved merchandising and sales of its house-branded goods.
“I don’t think Canadian Tire retail’s same-store sales growth was a record, but it came very close,” chief executive Stephen Wetmore told analysts and investors on the retailer’s fourth-quarter conference call Thursday. He said sales of holiday-related seasonal merchandise were strong, and noted 80 per cent of its Christmas-related merchandise sales are under brands it owns.
The automotive and housewares retailer’s sales and margins were further improved by the company’s investments in data analytics to help optimize pricing, promotions and merchandise, Wetmore said, particularly in light of a negative foreign exchange impact.
Earnings rose 10 per cent to $246.8 million in the period ended Dec. 31, or $3.46 per share, compared with $225.2 million, ($3.01), in the same period last year. That beat analysts’ mean estimates of $3.39, according to Thomson Reuters. The retailer’s shares climbed 6.88 per cent to $154.51 in Toronto on Thursday.
The news comes after a decidedly mixed holiday season for retailers, particularly for U.S. merchants. Canadian Tire has been investing heavily in data analytics and e-commerce in an effort to better serve customers who use the Internet to browse, research and shop for goods. The retailer’s sales, general and administrative expenses rose in the period to $910.8 million from $823.8 million a year ago.
“Skill-set investment, primarily, was driving (expenses) in the fourth quarter,” Wetmore told analysts, explaining the company invested in “outside help” to teach its employees about areas of operational efficiency. The retailer also spent money on digital initiatives.
“Digital marketing efforts around (the in-house loyalty program) is more expensive than traditional advertising and we have to keep an eye on that,” Wetmore said.
Web traffic continues to grow at CanadianTire.ca, with 300 million visits in 2016, but the CEO did not outline new initiatives for the digital division in 2017. “Our ecommerce strategy is unfolding as planned,” Wetmore said, adding executives are using consumer analytics to help guide strategy.
Same-store sales, a key measure of retail performance tallying volume at locations open for more than a year, rose 8.1 per cent at Canadian Tire’s retail stores compared with the same quarter of 2015. At FGL Sports, same-store sales rose 5.1 per cent, and same-store sales rose 10.8 per cent at the company’s Mark’s apparel division.
For the full year, Canadian Tire’s revenue rose to $12.7 billion in 2016 from $12.3 billion in 2015.
Overall revenue at Canadian Tire climbed 7.7 per cent to $3.64 billion, up from $3.38 billion last year.
Analyst Keith Howlett at Desjardins Securities noted that strong sales at Canadian Tire and FGL Sports were driven largely by non-weather-related sales, while about half of Mark’s growth stemmed from weather-related products.
“The outstanding sales growth at Canadian Tire contrasts with the generally tepid results reported to date by U.S. retailers,” Howlett wrote in a note to clients Thursday.
Allan MacDonald, president of Canadian Tire, said the retailer has been working to improve the productivity of the stores through analyzing demographics and communities to help merchandise the stores in a more relevant way. Customer data gleaned from Canadian Tire’s loyalty program is also providing help in merchandising, he said. In recent years the company has made an effort to improve and promote its assortment of inhouse products. Its private brands include Noma lighting products, Woods camping and outdoor goods, MotoMaster automotive goods, and Canvas home goods.