Shoppers enter a Canadian Tire store in Ottawa, on Aug. 11, 2023.Sean Kilpatrick/The Canadian Press
The prospect of a trade war between Canada and the U.S. has “substantially erased” early signs of improving consumer confidence, the chief executive of one of the country’s largest retailers said on Thursday.
“At a time when the economy seemed to be moving in the right direction and we were gearing up for a return to growth, we’re now faced with the threat of tariffs,” Greg Hicks, president and chief executive officer of Canadian Tire Corp. Ltd. CTC-T, said during a conference call to discuss the company’s fourth-quarter results.
While U.S. President Donald Trump has partially paused the 25-per-cent tariffs on all Canadian and Mexican goods that he had promised, this week he announced a 25-per-cent levy on steel and aluminum imports, including from Canada, set to begin on March 12.
The pause in other tariffs has not stopped Canadian companies from reviewing their supply chains to mitigate the higher costs that could result, including from retaliatory measures that the Canadian government has promised.
Canadian Tire sources roughly 15 per cent of its goods from U.S. suppliers, Mr. Hicks said, and the company is now looking into alternatives to shield customers from higher prices.
“Any product that we source in the U.S., we have alternative sources for,” he said.
Canadian Tire is not alone in reviewing its U.S. supply chain. The president of Tim Hortons said in an interview with The Globe that the company is looking to switch to Canadian suppliers for the minority of goods, such as some packaging, that it buys from the U.S.
Already, a larger percentage of Canadian Tire’s products come from Canada than from south of the border, Mr. Hicks said. Many of those products fall under the category of essential goods. “If you think about anything that goes into a bag or a bottle, it’s likely that is a Canadian supplier.”
Mr. Hicks estimated that it should be possible to find Canadian sources for roughly 25 to 30 per cent of the products the company currently buys from the United States. Other categories, such as auto parts, would likely move to overseas suppliers.
“We’re going to do our absolute level best to insulate our customers as much as we can from higher costs.”
Those customers had been giving indications of “economic green shoots,” as sentiment improved and retail sales grew in the fourth quarter, Mr. Hicks said. But shoppers are still putting the brakes on purchases they do not have to make, dampening demand in stores.
The Toronto-based retailer reported on Thursday that the fourth quarter was the only period in fiscal 2024 when comparable sales rose. The return to growth was driven by a bump in shopping during the December holiday period, as well as wintry weather that drove more purchases of seasonal gear – such as snow shovels and ice-melting products – compared with the prior year’s milder start to the season.
Comparable sales – an important metric that tracks sales growth not tied to new store openings – rose by 1.1 per cent in the fourth quarter ended Dec. 28, 2024, compared with the same period the prior year.
The holiday period was made more complicated by a shift in timing of the Black Friday sales bonanza, which fell later in the season this year, and by more intense promotions as retailers competed for price-sensitive shoppers. Retailers were also affected by the Canada Post strike, which delayed deliveries of holiday flyers and forced Canadian Tire to “completely replan” the last five weeks of the year, Mr. Hicks said.
While retail sales grew, sales of non-essential products fell by 2 per cent at flagship Canadian Tire stores. Growth came from automotive services and other essential categories.
At SportChek, comparable sales rose by 0.4 per cent, helped by demand for hockey equipment, hydration products and casual footwear.
Marks reported demand across categories, including for its industrial apparel, driving comparable sales growth of 1.8 per cent.
Members of Canadian Tire’s loyalty program, looking for savings, also redeemed 7 per cent more Canadian Tire Money in the quarter than in the same period the prior year.
The company’s financial services business reported lower normalized income before income taxes, which fell to $76.9-million in the quarter compared with $87.2-million in the same period the prior year.
Canadian Tire’s total revenue grew by 1.5 per cent in the quarter, to $4.5-billion. That fell below analysts’ expectations of $4.58-billion, according to the consensus estimate from S&P Capital IQ.
Net income attributable to shareholders jumped to $411.5-million in the fourth quarter, compared with $172.5-million in the same period the prior year. Those results included a $197.4-million gain in the quarter on the sale of its distribution centre in Brampton, Ont. Adjusting for this and other items, normalized net income attributable to shareholders grew to $227.3-million or $4.07 in normalized diluted earnings per share, compared with $188.4-million or $3.38 per share in the prior year.
For the full year, consolidated revenue fell by 1.8 per cent to $16.4-billion. Normalized net income attributable to shareholders grew to $703.5-million or $12.62 in normalized diluted earnings per share in 2024, compared with $585.3-million or $10.37 per share in 2023.