Canadian Tire faces higher inventory levels after late spring, more goods in transit

Canadian Tire Corp. Ltd. is facing higher than usual inventory levels after a late start to spring and summer sales combines with early shipments of fall and winter products.

The company had an additional $465.6 million in merchandise inventories at the end of its most recent quarter, an increase of about 18 per cent compared with the same period last year, due to higher in-transit inventory and more spring and summer goods on hand.

The situation raises concerns that Canadian retailers could experience similar excess inventory issues and markdowns U.S. retailers have warned about.

But Greg Hicks, president and CEO of Canadian Tire Corp., said the company is managing inventory levels well.

“We feel good about our inventory levels and don’t see any meaningful margin risk or incremental markdown requirements to clear inventory,” he said Thursday during a call to discuss the company’s second quarter results.

“Higher merchandise inventories at the end of June partially reflected a later start to spring this year. We saw good movement on these products in July once the warmer weather finally arrived.”

Higher inventory levels also reflect more than $260 million of goods in transit for fall and winter categories, which the company ordered early to ensure minimal supply chain disruptions, Hicks said.

Still, TJ Flood, president of Canadian Tire retail, said the stores’ dealers “are a little heavier in a few spring and summer categories and … probably wish they had fewer bikes and kayaks.”

“But there’s a lot of games still yet to play in the quarter,” he said.

Canadian Tire reported a lower second-quarter profit compared to a year ago despite double-digit revenue growth.

The company, which has retail, financial services and real estate segments, reported its net income attributable to shareholders totalled $145.2 million or $2.43 per diluted share for the quarter, down from $223.6 million or $3.64 per diluted share a year earlier.

Revenue for the three months ended July 2 was $4.4 billion, up 12.4 per cent from $3.9 million in the same quarter of 2021.

Retail sales rose 9.9 per cent and comparable sales, excluding petroleum, gained five per cent.

Same-store sales at the company’s Mark’s banner rose 20.9 per cent after posting a 43.2 per cent increase in the same period last year.

Canadian Tire’s financial services revenue grew 15 per cent, driven by growth in receivables and growth in credit card sales, due to increased customer activity and new account acquisitions.

The company recorded a $36.5 million one-time expense in the quarter after formally shutting down its Helly Hansen operations in Russia and exiting the market.