SportChek’s same-store sales declined slightly in the fourth quarter against challenging year-ago comparisons but were also impacted by a lack of snowy weather and a pickup in promotional activity in the marketplace. Helly Hansen delivered growth of over 20 percent for the second straight year.
Comps were down 1.7 percent at the overall SportChek segment in the three months ended December 31 against a gain of 15.9 percent in the 2021 fourth quarter.
The SportChek segment includes stores that operate in Canada under the SportChek, Sports Experts, Atmosphere, Sports Rousseau, and Hockey Experts banners. Canadian Tire Corp. also owns Canadian Tire and Mark’s workwear and casual chain.
On a conference call with analysts, Gregory Craig, Canadian Tire’s EVP and CFO, said SportChek’s double-digit growth in the year-ago period was boosted by the post-COVID resumption of team sports, including the return of hockey.
A highlight in the 2022 fourth quarter came from fanwear, the chain’s new name for sports-licensed apparel, with growth driven by World Cup-related demand.
Craig said, “We also had better national brand product availability as the supply chain started to normalize. However, the softening consumer demand environment and milder weather resulted in lower sales in categories like outerwear, skiing and snowboarding.”
The SportChek segment also experienced “higher promotional intensity,” according to Craig.
In the Q&A section of the call, Greg Hicks, Canadian Tire’s president and CEO, said the promotional “really magnified” at SportChek in the fourth quarter that he attributed to “big brands” marking down their inventories in its direct-to-consumer (DTC) channels.
“When Nike and Adidas or DTC store marks down the same inventory that we’re carrying in our stores, it becomes pretty difficult for us not to react,” said Hicks. Many major sports brands, including Nike and Adidas, have faced elevated inventories as consumer spending has recently slowed and as supply chain bottlenecks have eased.
Hicks also said the “minimal snow” seen in Canada during the fourth quarter led to markdowns arriving “a little bit quicker” in outerwear and other cold-weather categories than in recent years.
Total sales at the SportChek segment reached Canadian$637.9 million ($475 mm) in the quarter against C$625.8 million a year ago, representing a gain of 1.9 percent.
For the full year, sales in the SportChek segment reached C$2.1 billion ($1.6 bn) against C$2.4 billion in 2021, representing a gain of 3.1 percent. Same-store sales managed a 1.8 percent gain against a 17.7 percent jump in 2021.
The SportChek segment had 375 locations at the close of 2020, the same amount as the close of 2021.
Helly Hansen’s Q4 Revenues Climb 21 Percent
Among its other businesses, Helly Hansen, acquired by Canadian Tire in 2018, grew sales by 20.6 percent in the fourth quarter, to C$301.8 million. The gains came on top of growth of 27.6 percent in the 2021 fourth quarter.
Craig said Helly Hansen was helped by “strong sell-through for both sportswear and workwear across wholesale and e-commerce channels. We had double-digit revenue growth across most markets, including North America and Europe. In the U.S., a continued focus on e-commerce, direct-to-consumer and retail channels drove exceptional growth. We also continue to build our sales through CTC (Canadian Tire Corp) banners in Canada, and on a full-year basis, sales for CTC banners were up 8 percent.”
For the full year, Helly Hansen’s sales were C$781.2 million, up 21.2 percent.
Canadian Tire’s Normalized Q4 EPS Improves 11 Percent
Companywide, normalized diluted EPS in the quarter was up 11 percent to C$9.34, after C$20 million of normalization costs related to an operational efficiency program, which represented around 25 cents per share.
Consolidated retail sales were up 1.2 percent compared to the fourth quarter of 2021, and up 17.6 percent on a three-year stacked basis. Consolidated comparable sales were flat with 2021’s strong performance and up 21.1 percent on a three-year stacked basis.
Among its banners outside the Sportchek segment, Canadian Tire Retail comparable sales were flat in the quarter compared with 2021, when comparable sales were up 9.8 percent. Mark’s had its tenth consecutive quarter of comparable sales growth, up 4.3 percent, driven by strength in footwear categories.
Full-year normalized EPS of C$18.75 was within 1 percent of last year’s record EPS despite the headwinds caused by higher freight and supply chain costs and a stronger U.S. dollar as well as investments behind its Better Connected strategy, according to Hicks.
Hicks also noted that Canadian Tire continued to grow its Triangle Rewards loyalty program and credit card with loyalty sales up 8 percent and loyalty penetration approaching 60 percent for the year. Additionally, in 2022, Canadian Tire reached its goal of achieving more than C$300 million of operating efficiencies.
Hicks still said trends at its Triangle credit card data and loyalty program confirm market reports that consumer spending is slowing.
Canadian Tire’s credit card spending has “materially softened” since September and was up 4 percent in the fourth quarter compared to 16 percent growth on a full-year basis.
In its Triangle Rewards Loyalty membership program, Canadian Tire is finding higher income Triangle members spending softened in the quarter relative to previous quarters. At the same time, lower-income members, who traditionally have had lower levels of engagement with CTC, and middle-income members, who have traditionally had a higher engagement with the company, have accelerated their spending. Hicks said, “We think these are bullish indicators of our increased relevance in a tougher economic backdrop.”
Hicks said offering value will be prioritized as the company is also seeing customers trade down at its flagship Canadian Tire chain and softness in non-essential categories. Hicks said, “Given the macro backdrop combined with what we are seeing in the performance of our business, we are expecting a more constrained demand environment as we look forward, especially in the first six months of this year. We believe it’s fair to say that our customers are in a position where they’re looking for more value. And that’s where you can expect us to be laser-focused in 2023.”
Photo courtesy Helly Hansen
