Canadian Tire quarterly profit misses on lower fuel margins
TORONTO Shares of Canadian Tire Corp. dipped Thursday after it reported lower-than-expected quarterly profit, hurt mainly by lower margins in its petroleum retail business as investors appeared to ignore the acquisition for $174.4 million of New York-based Party City’s 65 stores across Canada.
“Party City is a leading, one-stop shopping destination for party supplies and an expert in seasonal and micro-seasonal celebrations, with 65 Canadian retail stores in seven provinces,” the Toronto-based Department store and online retailer said.
Allan Macdonald, the company head of retail, said the Party City deal will help the retailer reach more younger Canadians and families.
“Strengthening our marketplace is at the heart of our growth strategy and we are excited to welcome Party City into the Canadian Tire family of companies. We believe the Party City-canadian Tire partnership will drive more trips, improve our offers in micro seasons, strengthen our connection with millennials and Canadian families and expand the appeal of Triangle Rewards,” Macdonald said in a statement.
The company said it expects to double Party City’s Canadian retail sales to $280 million by 2021 and that the deal would immediately add to its earnings.
Canadian Tire has been spending to broaden its retail offerings by including private labels in addition to rolling out options like home delivery and aggressively pushing e-strategies as it looks to compete with global ecommerce giants like Amazon.com and Walmart Inc. to win back market share.
The Party City deal is the latest in a string of acquisitions by Canadian Tire. They include Sportchek, Mark’s and Helly Hansen. The company also brought in bicycle brands Raleigh, Diamondback, Redline, and IZIP to its holdings in the quarter.
Canadian Tire shares fell 4.8 per cent to $136.30 in Toronto trading as net fuel margins per litre fell in a competitive market, which has also been hit by the implementation of a carbon tax in some regions.
Net income rose to $203.8 million, or $2.87 per share, in the second quarter ended June 30 from $174.4 million, or $2.38 per share, a year earlier.
Excluding items, it earned $2.97 per share, missing the average analyst estimate of $3.01, according to Refinitiv IBES.
The company’s revenue of $3.69 billion also missed analysts’ estimate of $3.71 billion.