TORONTO — Canadian Tire Corp. executives said April weather put a damper on the business and proved so dismal that it caused the retailer’s second-quarter profit to plunge by about 20 per cent when compared with the year before.
The Toronto-based company that also owns Mark’s and Sport Chek said bad weather in April — which included ice storms in some parts of the country — cut into sales of cycling, spring outerwear and camping products and prompted its net income attributable to shareholders to fall to $156 million or $2.38 per share, down from $195.2 million or $2.81 per share a year earlier and far lower than the $3.06 per share that analysts expected, according to Thomson Reuters Eikon.
However, the company rebounded quickly enough for it to report $3.48 billion in revenue, a 3.2 per cent increase from the year before.
“We turned in good results, but we could have turned in extremely good results had the weather been on our side…Sport Chek wasn’t able to recapture lost sales in April,” admitted Allan MacDonald, the company’s executive vice-president of retail.
“Q2’s recovery after a dismal April, and I can’t spell dismal with enough capital letters, demonstrated the value of investing to build non-weather dependent categories.”
Many of the retailers wares — from tires to outdoor furniture to sporting goods — are highly seasonal and merchandise is overhauled depending on the season, so weather is often a topic in its earnings discussions, but this quarter proved much more “complex” than any other chief executive officer Stephen Wetmore said he could remember.
On top of a shorter spring selling season that meant the company was “not a happy place for the first four or five weeks of the quarter,” he said Canadian Tire was dealing with the launch of its Triangle customer loyalty and credit card programs and the purchase of sportswear maker Helly Hansen for $985 million.
Wetmore indicated there was work to do in expanding the assortment of Helly products, establishing a distribution network for the brand and growing the company in the U.S. and Europe.
Shoppers won’t start seeing Helly items in stores until the fall of 2019, he said.
Wetmore appeared optimistic about a deal that was announced after the quarter ended on June 30 for Canadian Tire to become the exclusive Canadian retailer for U.S. brand Petco’s animal food.
Executives also said they would closely watch tariffs Canada placed on some goods being imported from the U.S., some of which Canadian Tire’s brands stock.
So far, the effects of the tariffs have been “not material in the grand scheme of things,” but executives said they were mindful of the possibility that the situation could continue to escalate and affect the business’ performance.
Following the release of Canadian Tire earnings on Thursday, shares closed down about eight per cent at $168.08.
Shares hit a record intraday high on Wednesday before closing at $182.40, giving the company a market value of nearly $11 billion.
Companies in this story: (TSX:CTC, TSX:CTC.A)
Tara Deschamps, The Canadian Press