Canadian Tire Corp Ltd (CDNAF) Q2 2024 Earnings Call Highlights: Navigating Challenges with ...

GuruFocus News
4 min read

In This Article:

  • EPS: $3.56, up from $3.08 last year.

  • Retail Sales: $5 billion, down 4.1% and 4.6% on a comparable basis, excluding petroleum.

  • Comparable Sales at CTR: Down 5.6% in Q2.

  • Retail Gross Margin Rate: 36%, up 36 basis points compared to last year, excluding petroleum.

  • SG&A: Down 6% on a normalized basis.

  • Corporate Inventory: Down 15% or $477 million.

  • Financial Services IBT: $89 million, flat to last year on a normalized basis.

  • Triangle Rewards Membership: eCTM redemption up more than 8% over last year.

  • New Store Openings: 18 refreshed or expanded CTR stores, 4 new Pro Hockey Life stores.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Canadian Tire Corp Ltd (CDNAF) reported a strong improvement in profitability with EPS of $3.56, up from $3.8 last year.

  • The company's Triangle Rewards program showed resilience, with loyalty sales outperforming non-loyalty sales and a significant increase in new membership uptake.

  • Retail gross margin rate, excluding petroleum, was up 36 basis points compared to last year, driven by lower freight costs and contributions from Helly Hansen.

  • The company successfully managed down corporate inventory by 15%, contributing to improved operational efficiency.

  • Canadian Tire Corp Ltd (CDNAF) saw growth in essential categories, with own brand essentials outperforming national brands by 600 basis points.

Negative Points

  • Retail sales were down 4.1% in the quarter, with a more significant decline in high-ticket discretionary categories like Backyard Living.

  • Comparable sales at Canadian Tire Retail (CTR) were down 5.6% in Q2, impacted by softer consumer demand and unseasonably cold and wet weather.

  • The company faced increased promotional intensity, particularly in Sport Chek and Mark's, due to aggressive discounting by competitors.

  • Financial services saw a slight increase in the write-off rate to 6.7%, reflecting challenges in credit risk management.

  • The strategic review of Canadian Tire Financial Services is ongoing, creating uncertainty around future capital allocation and strategic direction.

Q & A Highlights

Q: How do you categorize the current consumer spending trends, and what is the outlook for 2025? A: Greg Hicks, President and CEO, noted that consumers are cautious, focusing on essentials and value. The trends seen in recent quarters persist, with spending less dependent on income and more on household indebtedness. The company plans to continue leveraging its membership, assets, and operating leverage strategies into 2025, expecting no significant economic growth in the near term.

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