TORONTO ? Canadian Tire Corp. didn’t sell as many winter tires, snowboards or tuques as it would in the fourth quarter of 2015, thanks to an uncharacteristically warm winter.
But the retailer’s capability to squeeze out a rise in profits, margins and some divisional same-store sales nonetheless impressed analysts Thursday, who complimented executives on a conference call for implementing solid merchandising and price management strategies during a tough period for retailers such.
Investors liked they saw, too: Shares rose $9.08 or 7.8 percent to $125.63 in Toronto trading.
The Toronto-based retailer of auto parts and housewares and who owns the Sport Chek and Mark’s retail chains said revenue at that time ended Jan. 2 slid $273.Six million to $3.38 billion, down from $3.65 billion last year, as sales slid in apparel and sports and gas prices fell.
But net earnings at that time climbed to $241.5 million, or $3.01 per share, up from $206.6-million ($2.44) in last year’s fourth quarter, and the retailer reported a 97 basis point improvement in its retail gross margin rate, excluding petroleum, during the period.
“We believe investors is going to be relieved that Canadian Tire could improve its margins regardless of the pressures around the Canadian consumer, the weakness in Alberta, and the decline within the Canadian dollar,” said retail analyst Peter Sklar of BMO Capital Markets in a note to clients.
Sales at Canadian Tire’s stores fell 2.6 per cent overall because of the sunshine, but same-store-sales, an important measure that strips out the impact of sq footage changes, rose two percent compared with exactly the same period in 2014.
About 25 per cent of sales within the fourth quarter typically originates from winter-weather merchandise, chief financial officer Dean McCann told analysts, with the clothing division Mark’s with respect to the season probably the most, accompanied by its FGL Sports division after which by Canadian Tire’s retail division.
Chief executive Michael Medline said Canadian Tire performed well during the period in its non-seasonal categories, due partly to broadening its range of private label merchandise over the course of this past year.
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He also said executives “learned from past experience” and made a deliberate decision to not discount winter goods as heavily or as soon as they had previously despite lower-than-normal sales volumes.
The company also tapped into data to assist control costs and keep its margins intact despite foreign exchange pressure.
“(Foreign currency) is just one element of the cost of goods that we trade,” McCann told analysts, saying smart data helped management negotiate more effectively with merchandise suppliers, or “having more analytics related to how those discussions occur.”
He used kettles for example based on how goods could be sold more profitably. “If we have five kettles on the shelf and that we accustomed to buy them from four different suppliers, and that we perform the analytics to determine which of those five kettles make us as much as possible, (then executives might decide) we don’t need to sell five kettles from four different suppliers – maybe we have to sell four different kettles from two different suppliers,” he explained. “It’s amazing so what can happen from that.”
Keith Howlett of Desjardins Securities said Canadian Tire’s outlook is solid despite the fact that he expects retail sales trends is going to be challenging until the fourth quarter of the year.
“It is positive, in our view, that management is proactively managing the business to a lot more than make amends for the current economic headwinds and to deliver ongoing per-share earnings growth,” Howlett said inside a note to clients Thursday.
hshaw@nationalpost.com
Twitter.com/HollieKShaw
