Canadian Tire sales flat as inflation-weary consumers spend on essentials but cut back elsewhere

Retail sales were flat in the fourth quarter for Canadian Tire Corp. Ltd., as the company’s automotive business continued to offset declines in demand for products such as home improvement and entertainment products.

On Thursday, the Toronto-based retailer reported that comparable sales were up 0.3 per cent across its store banners in the fourth quarter, and down 0.1 per cent at the flagship chain, citing declines in categories it refers to as “playing” and “fixing.”

The results for the 13 weeks ended Dec. 31 – including the all-important holiday period – showed that sales held steady at Canadian Tire CTC-A-T +0.48%increase compared to a strong period the prior year when comparable sales grew by nearly 10 per cent. But the purchasing trends still pointed to an ongoing shift in consumer behaviour across the country, as inflation-weary shoppers continue to spend on essential products such as tires and pet supplies, while cutting back on non-essential expenses.

Comparable sales at Sport Chek were down by 1.6 per cent, as demand waned across categories and especially in outerwear. At Mark’s, sales grew 4.4 per cent as customers continued to stock up on casual clothing and footwear, and industrial items.

Revenue at the company’s financial services segment grew by 14.3 per cent in the quarter on higher interest income and fees related to growth in credit card sales.

Overall, Canadian Tire’s profits were up as revenues increased and gross margins improved in its retail segment. The company reported net income of $562.6-million, or $9.13 per share in the quarter, compared to $535.7-million or $8.40 per share in the same period the prior year.

Total revenue in the 13 weeks ended Dec. 31 grew by 3.9 per cent to $5.3-billion.

At an investor presentation last March, Canadian Tire announced a four-year growth strategy with the goal of growing its comparable sales by 4 per cent on average annually – not including fuel sales at its gas stations – and to improve its e-commerce operations and supply-chain efficiency. For the full year 2022, comparable sales grew by 2.7 per cent. The fourth-quarter report to shareholders acknowledged that the company “is now operating in a more challenging environment in 2023″ than expected at the time the growth strategy was announced, and that some of the assumptions behind those goals “could be challenged” if consumer spending patterns continue to be affected by inflation. “While the company remains committed to achieving its financial aspirations outlined at investor day, by continuing to invest in its building blocks for the longer term, the pacing will be different than originally planned,” the report stated.