Canadian Tire Corporation, Ltd. (CTC), parent of Helly Hansen and the SportChek, Sports Experts, Atmosphere, Pro Hockey Life, Sports Rousseau, Hockey Experts, and Mark’s retail banners, reported top-line pressures in the second quarter were balanced by strong margin and cost control, improving retail profitability for the Canadian retail, financial services and real estate giant.

“In a quarter that traditionally skews heavily to discretionary purchases, consumers remained cautious, and weather conditions compounded declines,” offered Greg Hicks, president and CEO of Canadian Tire Corporation. “Yet, Canadians continued to turn to our banners for new products, seasonal favorites and innovative Triangle Rewards campaigns with categories and regions of our business providing us positive signals.”

CTC reported second-quarter revenue of CN$4.13 billion, down 2.9 percent from CN$4.26 billion in the Q2 period last year. Revenue, excluding Petroleum, was CN$3.58 billion, a decrease of 3.4 percent compared to the prior year’s Q2 period.

Retail sales, which include inter-company sales, were CN$5.00 billion, down 4.1 percent year-over-year, compared to the second quarter of 2023. Retail sales, excluding Petroleum, and consolidated comparable sales were down 4.7 percent and 4.6 percent, respectively.

Retail revenue was CN$3.75 billion in Q2, a decrease of CN$141.3 million, or 3.6 percent, compared to the prior year; Retail revenue, excluding Petroleum, was down 4.3 percent.

Canadian Tire reports in Canadian dollars (CN$).

Consolidated comparable sales were down 4.6 percent year-over-year in the second quarter, as consumers continued to prioritize essential spending in Canadian Tire Retail’s (CTR) most discretionary quarter, the company noted in a media release and Q2 financial report. The company said the consumer demand environment remained challenging, compounded by cold and wet weather, contributing to sales declines in all regions outside Atlantic Canada.

CTR retail sales were down 5.5 percent, and CTR comparable sales were down 5.6 percent, compared to growth of 0.1 percent in Q2 2023.

Automotive grew, offset by declines in other divisions. CTR Retail sales were down 5.5 percent driven by declines in Seasonal & Gardening, Living, Playing and Fixing categories, partially offset by growth in Automotive.

SportChek retail sales decreased 1.7 percent year-over-year to CN$441.7 million, and comparable sales were down 0.9 percent reportedly led by declines in Cycling, Casual Clothing and Electronics, partially offset by strong performance in Footwear and Team Sports. Sales per square foot amounted to CN$312.

Mark’s retail sales decreased 0.9 percent year-over-year to CN$343.8 million, and comparable sales were down 0.8 percent, reportedly driven by declines in Industrial Businesses, Accessories and Men’s Shorts, partially offset by growth in Outerwear, Ladies’ Casualwear, and Casual Footwear. Sales per square foot amounted to CN$410.

Helly Hansen revenue was up 1.2 percent to CN$137.3 million in the quarter, compared to CN$135.6 million in the 2023 Q2 period. Helly Hansen has a 175 million Norwegian Krone (NOK) secured overdraft facility ($22.4 million of Canadian dollar equivalent) provided by a Norwegian bank, expiring in January 2025. As of June 29, 2024, Helly Hansen had no borrowings outstanding on its facility.

Loyalty sales outperformed non-loyalty sales, with record penetration rates at each banner. Innovative incremental Triangle promotions across CTC banners and the company’s strong Petro-Canada partnership were competitive differentiators. These reportedly resulted in elevated loyalty traffic, engagement and new customer acquisition, driving strong electronic Canadian Tire Money (eCTM) issuance and redemption, the company reported.

At SportChek and Mark’s, in-store net promoter score (NPS) was up for the fourth and thirteenth consecutive quarters, respectively, as store investments and a focus on strong in-stock availability of key brands drove positive customer sentiment.

Retail gross margin rate, excluding Petroleum, was up 36 basis points to 36.0 percent of sales in the quarter. Margin improvement at CTR and Helly Hansen offset higher promotional intensity. Favorable freight rates also reportedly contributed to the improvement.

Consolidated income before income taxes (IBT) was CN$295.8 million, compared to $173.9 million and $281.8 million on a normalized basis in the prior year.

Retail IBT was CN$170.1 million, up CN$84.5 million, or CN$9.9 million on a normalized basis. Significant supply chain reductions and tighter cost control led to lower operating expenses, offsetting lower Retail revenue and margin dollars.

CTC said in its Q2 report that it continues to make solid progress in the key areas within its Better Connected strategy to enhance the customer experience and drive efficiencies, including:

  • Prioritizing the integration of in-store technology and improving access to assortment through the refresh, expansion or replacement of approximately 20 percent of CTR stores since March 2022, including 18 in Q2 2024. CTC also opened new Pro Hockey Life stores in four key Ontario hockey communities and seven new Mark’s stores across Ontario, Alberta and British Columbia.
  • Completing the supply chain rollout of goods-to-person automation at the company’s Calgary and Montreal Distribution Centers by the end of Q3 2024.
  • Enhancing broadband connectivity at over 800 retail locations, or over half the company’s retail store network, improving IT resiliency and security.
  • Building traction with key Owned Brands such as MotoMaster, Vida by Paderno, Sherwood, and Forward with Design, to offset discretionary category headwinds and hold market share while maintaining the gross margin differential relative to National Brands.

Retail Return on Invested Capital (ROIC), calculated on a trailing twelve-month basis, was 8.5 percent at the end of the second quarter of 2024, compared to 11.2 percent at the end of the second quarter of 2023, due to the decrease in earnings over the prior-year period.

Consolidated income before income taxes was CN$295.8 million, up CN$121.9 million compared to the prior-year period, due, in part, to the costs related to the A.J. Billes Distribution Center fire and the GST/HST-related charge recorded in the prior year.

On a normalized basis, consolidated income before income taxes was up CN$14.0 million.

Diluted and Normalized Earnings Per Share (EPS) were CN$3.56 in Q2, compared to CN$1.76 and CN$3.08, respectively, on a normalized basis in Q2 2023.

Image courtesy Helly Hansen