Canadian Tire faces higher than normal inventory levels amid ‘cluttered quarter’ – National

Canadian Tire Corp. Ltd. is facing higher-than-normal inventory levels after a late start to sales with warm weather combined with early fall and winter product shipments.

The company added $465.6 million in inventory at the end of its most recent quarter, up about 18 percent year-over-year, due to higher in-transit inventory and more seasonal merchandise. more spring and summer.

The situation has raised concerns that the retail giant may experience the same excess inventory problems and price cuts that US retailers have warned about.

But Greg Hicks, president and chief executive officer of Canadian Tire Corp., said he’s pleased with the company’s ability to manage inventory levels “especially considering what we’re seeing with retailers. large south of the border.”

“We’re happy with our inventory levels and don’t see any meaningful margin risk or growing rebate requests to release inventory,” he said Thursday in the call. call to discuss the company’s second quarter results.

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Higher cargo inventories at the end of June partly reflected a later start to spring this year, Hicks said. The company noted “good movement of these products in July when warmer weather finally arrives,” he said.

The inventory levels also reflect more than $260 million in shipments for fall and winter categories, Hicks said.

However, TJ Flood, retail president of Canadian Tire, said the stores’ dealers are “a little heavier in some spring and summer categories and…probably wish they had fewer bikes and kayaks.” than”.

However, he said the drop in sales of items like bicycles, kayaks and paddleboards was offset by sales of plumbing and auto maintenance.

Canadian Tire reported lower second-quarter profit than a year ago despite double-digit revenue growth.

The company, which has retail, financial services and real estate businesses, reported net shareholder income totaling $145.2 million or $2.43 per diluted share for the quarter, down from $223.6 million or $3.64 per diluted share a year earlier.

Revenue for the three months ended July 2 was $4.4 billion, up 12.4% from $3.9 million in the same quarter of 2021.

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Overall retail sales increased 9.9% and comparable sales, excluding gasoline, increased 5%.

Canadian Tire’s comparable retail sales growth increased by 3.9%. Flood said transactions increased while the average number of items in each transaction decreased and the price per item increased.

Similar store sales on the company’s Mark’s banner jumped 20.9% after growing 43.2% in the same period last year.

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Hicks said the store’s brands, such as Levi’s, Carhartt and Timberland, are helping to attract customers under the age of 30 – a key demographic in the retail industry.

Canadian Tire’s financial services revenue grew 15%, driven by growth in accounts receivable and growth in credit card sales, driven by increased customer activity and new account acquisitions.

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The company recorded $36.5 million in one-time expenses during the quarter after officially shutting down Helly Hansen’s Russia operations and withdrawing from the market.

Irene Nattel, an analyst with RBC Dominion Securities Inc., said Canadian Tire’s “cluttered quarter” masked the company’s “solid fundamental performance”.

The company’s underlying demand trend remains strong, she said, with retail banners delivering strong revenue growth despite supply chain difficulties.

© 2022 Canadian Press

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