Canadian Tire CEO says consumer confidence ‘lowest we’ve seen in a long time’ as profit rises

Canadian Tire Corp. (CTC-A.TO) reported a profit increase in its latest quarter, despite constrained consumer spending and a confidence level that the company’s CEO says “is the lowest we’ve seen in a long time.”

“Economic factors like cost of living and unemployment have continued to constrain consumer spending. At the same time consumer sentiment, or the confidence with which they spend their money, is the lowest we’ve seen in a long time. This sentiment is not unique to a specific cohort of household income,” Canadian Tire chief executive Greg Hicks said on a conference call with analysts on Thursday.

“We believe the dual challenges of lower spending power and consumer sentiment are temporary. That said, given impending factors like mortgage renewals, we believe the near term will still be tough.”

Total sales at Canadian Tire, which also operates Sportchek, Mark’s and other brands, were $4.19 billion in the third quarter, down 1.4 per cent compared to $4.25 billion last year. Sales at Canadian Tire’s flagship brand stores were down 2 per cent annually, with comparable sales – a key metric in the retail industry that excludes new store openings – down 2.2 per cent. Sportchek sales increased 2 per cent and comparable sales rose 2.9 per cent, with sales in discretionary categories remaining soft, but back-to-school categories like backpacks and kids’ footwear helping offset the weakness.

Despite concerns about the state of the Canadian consumer, Canadian Tire reported a normalized net income attributable to shareholders of $200.6 million, or $3.59 per diluted share in the third quarter, compared to $165.2 million last year, or $2.96 per diluted share during the same time last year. Part of this year’s increase was due to the sale of a retail property in Toronto, and insurance recoveries related to a 2023 distribution centre fire. The normalized data excludes a charge last year related to when Canadian Tire bought back a 20 per cent financial services stake from Scotiabank.

The results come as the Bank of Canada has embarked on a loosening cycle, cutting it benchmark rate in four consecutive decisions. Last month, the central bank cut rates by 50 basis points, bringing the policy rate to 3.75 per cent. While consumer expectations for inflation have improved, Bank of Canada Governor Tiff Macklem noted last month that “there is a lot of hesitancy” among consumers. But he also said that Canadians “don’t have to worry as much about big changes in their cost of living.”

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