Canadian Tire Corp. Ltd. , will soon begin testing a subscription membership program, charging customers a flat fee for perks such as extra loyalty rewards for in-store purchases, free home delivery of all online orders and access to Bell Media’s Crave streaming service.
The company has not yet specified what it will charge for the service, or how long the test will continue before it decides whether to roll it out more widely. The program could be part of Canadian Tire’s efforts to compete with online giants such as Walmart and Amazon.com – which also offers free shipping and streaming movies and TV through its Prime membership service. Canadian Tire struggled to keep up with surging demand for online purchases in the early days of the COVID-19 pandemic, but is now seeing significant growth in e-commerce.
“I think there was some question about our ability to compete in a digital world prepandemic, and I don’t think anybody should doubt our ability now,” chief executive Greg Hicks said on a conference call to discuss the company’s financial results on Thursday.
The company’s e-commerce sales grew by 257 per cent to nearly $450-million in the first quarter, while online sales quintupled for its flagship Canadian Tire chain, compared with the same period last year. But three-quarters of its online orders are still for curbside pickup at stores.
“As consumer preferences shift more this direction, it opens the door for increased competition from internet retailers,” Edward Jones analyst Brian Yarbrough wrote in a research note. “We expect Canadian Tire to continue to invest in its online and omnichannel capabilities to help drive growth in this changing retail environment, but we believe these investments will limit profit growth.”
Canadian Tire’s sales have continued to surge, as demand for outdoor gear, backyard items and home improvement products remains high.
The Toronto-based retailer beat analysts’ estimates for its results on Thursday, reporting revenue growth of 16.7 per cent to $3.3-billion in the 13 weeks ended April 3, compared with the same period last year. Canadian Tire’s stock price rose more than 10 per cent to close at $212.84 a share on Thursday after the news.
Comparable sales – an important metric that tracks sales growth not impacted by new store openings – grew by 19.2 per cent at the Canadian Tire chain. The company’s Sport Chek stores had comparable sales growth of 18.7 per cent, as Canadians continue shopping more often for home fitness equipment and outdoor gear. And the Mark’s chain reported comparable sales growth of 22 per cent, driven partly by demand for industrial work wear.
Canadian Tire purchased inventory aggressively to respond to higher demand for some categories, such as bikes.
“What I can tell you with certainty, is that we are buying inventory to support incremental growth in the business. We’re ready and the [store] dealers are ready,” Mr. Hicks said. However, he added that dealers are still finding themselves lean on supply in some categories.
Like other retailers selling non-essential goods, many of Canadian Tire’s stores were forced to operate under tighter restrictions at the beginning of the year, as governments across the country grappled with a third wave of COVID-19 infections.
As travel has been severely curtailed during the pandemic, Canadian Tire has benefited from shoppers redirecting some of the money they would normally spend on trips to keeping themselves and their families entertained, for example with backyard items and equipment for outdoor activities.
Canadian Tire also saw a rebound in sales of automotive products, such as tires and rooftop carriers, which Mr. Hicks said seems to indicate preparations for spring and summer travel.
In its financial services division, Canadian Tire’s credit card spending data is demonstrating some recovery in consumer spending, likely in parts of the country that have begun to open up. Other parts of Canada – such as Ontario, where roughly 40 per cent of the company’s stores are located – still face significant restrictions, however.
“While we harbour concerns regarding the sustainability of [Canadian Tire Corp.’s] recent [comparable] store sales growth, we are impressed with [Canadian Tire’s] gross margin improvement in spite of the increase in lower-margin e-commerce sales,” CFRA Research analyst Garrett Nelson wrote in a report on Thursday.
Canadian Tire reported net income attributable to shareholders of $151.8-million, or $2.50 a share, compared with a loss of $13.3-million, or 22 cents a share, in the prior year.
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