Canadian Tire Corporation is a leading retail company in Canada with a presence in finance and real estate.

The company’s retail and financial services businesses include Canadian Tire, PartSource, Petroleum, SportChek, Marks, Helly Hansen, CT REIT, and a financial services division. Retail is the largest segment, accounting for more than 90% of total sales, while the financial services segment makes up the rest.

The financial services segment offers credit cards and other financial products. Canadian Tire has a 76% stake in CT REIT, a closed-end real estate investment trust in Canada, of which it is the main tenant.

Canadian Tire’s more than a century of existence has allowed the company to gain significant market share and build a loyal customer base. The company has a huge network of nearly 1,740 retail stores and gas bars. It offers a wide range of products in the Automotive, Tools & Hardware, Home & Essentials, Sports and Outdoor Living categories.

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Investment data

Sales growth and market exposure

Most Canadian tire stores are located in high-density areas and serve Canadians from coast to coast. The company is improving the customer experience by introducing home delivery, world-class stores, and digital experiences nationwide. It is one of the largest e-commerce providers in Canada. The company is better able to address the changing needs and shopping patterns of Canadian shoppers with its rich retail experience and strong portfolio of national and consumer brands.

Customers trust the Canadian tire brand for their product quality and leading reputation. Thanks to a diverse product range, marketing expertise, a dealer network and a large presence, Canadian Tire was able to expand its presence in the retail sector. The company offers a wide range of products that range from automobiles, apparel, wholesale, and home to repair, sports, and financial products. Canadian Tire’s Triangle Rewards is one of its key assets, providing customers with a seamless and integrated shopping experience across brands with more than 10.8 million active Triangle Rewards members and credit card holders. This further improves customer relationships.

Canadian Tire is one of the top selling general goods retailers in Canada. The acquisition of Helly Hansen also provided a platform for international expansion. The other brands like Petroleum and Mark’s are some of the largest independent gasoline dealers and leading clothing and shoe brands in Canada.

Canadian Tire’s business is diversified in retail, financial services and the CT REIT. The company saw strong e-commerce sales growth, strong national brand performance, and reached 1.8 million customers for the Triangle Rewards program so far in 2020. Canadian Tire’s e-commerce sales rose 142% in the fourth quarter, and the penetration rate more than doubled from 2019 levels.

CTC’s retail sales (excluding petroleum) rose 11% last year and performed strongly in the second half of 2020. A strong business model and triangle rewards program should improve customer loyalty in the future.

Dividends

Canadian Tire recently increased its dividend by 3.3%. It has increased its dividend for 11 straight years. This Canadian dividend aristocrat has boosted its dividend growth by double digits in recent years and has maintained a dividend growth rate of 17% + CAGR for the past decade. It has a dividend yield of 2.6% and a payout ratio of currently only 38%. An appropriate payout ratio offers enough room for future growth. Canadian Tire aims to maintain dividend payments of 30% to 40% of normalized earnings for the previous year. It intends to acquire shares under NCIB 2021-22.

Canadian Tire earnings per share have increased more than 11% CAGR over the past decade, driven by strong revenue and margin growth. The company’s profits are backed by a reputation for providing Canadians with a single point of contact for their home and garden needs. Canadian Tire is focused on future growth by expanding its private label portfolio and product development. Some of the company’s endeavors such as Triangle Rewards, home delivery and digital services have helped earnings growth.

Higher retail banner revenues and operational efficiency also translate into improved margins. Higher retail profits and lower investments during the year resulted in a strong year-end cash position. Canadian Tire seeks future growth by expanding the Helly Hansen branding offering in Canada and is well positioned to grow its own brands through Helly Hansen’s international platform. Superior real estate locations, a national branch network and a strong dealer network are the company’s core strengths.

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competition

Canadian Tire Corp. is exposed to intense competition from independent retailers, specialty stores, dealers, brick-and-mortar stores and online shopping channels. Ecommerce sites like Amazon.com are putting pressure on Canadian Tire’s retail business. Major US retail brands like Walmart, Costco, Home Depot, and Cabela are also strong competitors. However, world-class brands and market-leading merchandising strategies set Canadian Tire apart from its competitors.

Bottom line

As the leading retail brand in Canada, Canadian Tire continues to grow through its extensive Owned Brands portfolio, developing curated and high-quality products, acquisitions and in-house developments. It invests in both the branch network and digital growth to drive sales growth. Canadian Tire is transforming to focus on being customer-centric and digitally savvy. The company is well positioned to remain competitive over the long term after this pandemic ends.

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