Improved in-store sales offset reduced online sales and led to a 15.5% revenue increase for this company during the most-recent quarter.
An ongoing efficiency improvement plan and new sales initiatives should help to boost the bottom line and solid dividend.
The stock trades at just 8.6 times the company’s 2022 earnings forecast.
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CANADIAN TIRE CORP. (Toronto symbol CTC.A) lets investors tap the company’s 504 Canadian Tire stores. They sell automotive parts and services, and household and sporting goods; franchisees run most of the locations. Still, the company’s other operations also enrich its outlook. They include 161 stores operating under the PartSource (auto parts) and Party City (party supplies) banners.
Canadian Tire has several other major retail chains: Mark’s sells casual and work clothing through 380 stores; and the Sport Chek Group sells sporting goods and athletic wear through 375 outlets, including Sport Chek and Sports Experts.
Meantime, the company continues to benefit from improving customer traffic as more regions relax their COVID-19 restrictions.
In the quarter ended April 2, 2022, its overall sales rose 15.5%, to $3.84 billion from $3.32 billion a year earlier. That beat the consensus forecast of $3.44 billion.
Overall same-store sales rose 6.4%. That reflects gains of 4.5% at the Canadian Tire chain, 10.2% at Sport Chek, and 17.1% at Mark’s. However, due to the re-opening of its stores, e-commerce sales in the quarter fell 46.7%, to $240 million from $450 million a year earlier.
The higher sales also helped lift Canadian Tire’s earnings in the quarter by 16.1%, to $183.6 million from $158.2 million. Per-share earnings improved 19.1%, to $3.06 from $2.57, on fewer shares outstanding. That easily topped the consensus estimate of $1.75.
Value Stocks: Efficiency and planning improvements will enhance results
The company continues to improve efficiency by closing unprofitable stores and consolidating administrative functions for its chains. It expects the plan will cut at least $300 million from its annual costs by the end of 2022.
Additionally, Canadian Tire recently announced it will spend $3.4 billion on a new strategic plan over the next four years.
Under this new plan, the company will launch over 12,000 new private-label products by 2025. It will also expand its Triangle loyalty rewards program—it aims to increase loyalty sales from 58% of retail sales to 63%. Other initiatives include renovating 225 Canadian Tire stores and speeding up its click-and-collect services.
This retail giant expects these investments will increase its same-store sales by at least 4% annually. It also sees its earnings rising by 37.5%, from $18.91 a share in 2021 to $26.00 a share in 2025.
Starting with the September 2022 payment, Canadian Tire will raise your quarterly dividend by 25.0%. Shareholders will then receive $1.625 a share instead of $1.30. The new annual rate of $6.50 yields 3.9%.
Including this latest increase, the company’s dividend has now grown an average 20.1% annually over the last 5 years. Its TSI Dividend Sustainability Rating is Highest.
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