Canadian Tire TSE: CTC reported higher third-quarter earnings and sales across its major retail banners, but executives cautioned that a slower start to the fourth quarter and a challenging comparison with last year could weigh on results.
Diluted earnings per share were CAD 4.27, up 13% year over year on a normalized basis, Chief Financial Officer Darren Myers said. Retail sales rose 4.4%, while retail revenue increased 5%, aided by higher gasoline prices. Excluding petroleum, retail sales grew 1.7% and revenue rose 1.5%.
Comparable sales increased 3.2% across the retail business, with growth of more than 3% at each of Canadian Tire Retail, SportChek and Mark’s. The comparisons were adjusted for the 53rd week in the prior year, matching weeks 27 through 39 this year with weeks 28 through 40 last year.
“Q3 for us showed that Canadians will spend when the value proposition is right,” President and CEO Greg Hicks said. He added that an independent data source used by the company indicated it gained market share across all three banners.
Promotions and online sales drive growth
Hicks said promotional pricing was a determining factor in the quarter’s performance as consumers continued to seek value. Loyalty sales rose 6%, while loyalty traffic increased 3.6%.
At Canadian Tire Retail, comparable sales rose 3.2% and e-commerce sales increased 25%, helped by store pickup and the expansion of ship-to-home service. Myers said both essential and discretionary categories grew, with living, seasonal and gardening products among the strongest performers. Automotive posted its 25th consecutive quarter of growth.
SportChek’s comparable sales rose 3.2%, with fan wear contributing about one-third of the increase. Mark’s comparable sales grew 3.3%, supported by industrial footwear, workwear and back-to-class demand.
Retail gross margin excluding petroleum was 35.6%, down 16 basis points from a year earlier, reflecting fuel surcharges and promotional spending. Retail selling, general and administrative expenses were broadly flat in dollar terms, helped by cost discipline, timing benefits and savings from the prior year’s restructuring, Myers said.
Retail income before taxes increased nearly 3% to CAD 198 million, while normalized retail EBITDA rose 2% to CAD 495 million.
Bank earnings rise as credit holds steady
Financial services income before taxes grew 18%, as record revenue and gross margin expansion more than offset higher operating expenses. Gross average receivables increased 4.2%, supported by higher card spending and improved cardholder retention.
Myers said credit performance remained resilient: the net write-off rate held at 7.2%, and the allowance for credit losses was unchanged at CAD 935 million. Insolvencies were lower than expected during the quarter, although he cautioned that they are difficult to predict.
He said the company expects further improvement in financial services profitability if credit conditions remain stable and insolvencies do not rise sharply.
Slower start to the holiday quarter
Myers said fourth-quarter sales began slowly in October, with winter weather yet to arrive as the company lapped storms during the same period last year. He declined to quantify the weather impact and noted that much of the quarter remained ahead.
The company also faces a comparison with last year’s strong holiday quarter, which benefited from favorable weather and Toronto Blue Jays World Series-related merchandise sales at SportChek. The prior year’s extra week contributed approximately CAD 40 million in income before taxes, Myers said.
Management expects pressure on the fourth-quarter gross margin rate from the comparison with last year, promotional investment and transportation costs. Myers also said operating expense leverage would likely move in the opposite direction from the third quarter on a reported basis, partly because the company is no longer receiving the same restructuring tailwind and is lapping the extra week.
Chief Operating Officer TJ Flood said fuel and transportation costs would remain a headwind into at least the first half of 2027. Canadian Tire continues to target a retail gross margin rate above 35% over the long term, he said.
Transformation and shareholder returns
Hicks said the company’s True North transformation is increasingly contributing to results through new store formats, loyalty partnerships, online services and artificial intelligence tools. New-format stores accounted for 30% of year-to-date sales growth at Mark’s and SportChek, he said.
The company is applying customer insights to its holiday assortment, including lower-priced wrapping products and ornaments and an expanded selection of decorations and toys. Hicks said the approach follows a back-to-class campaign that increased sales and market share.
Canadian Tire plans to increase its annual dividend to CAD 7.30 per share beginning in March, marking its 17th consecutive annual increase. Myers said the company had completed close to 80% of its CAD 400 million share repurchase intention for 2026 by quarter-end and expects to finish the program by year-end. It continues to expect capital expenditures of CAD 450 million to CAD 500 million for 2026.
About Canadian Tire (TSE:CTC)
Canadian Tire Corporation, Limited, TSX: CTC.A TSX: CTC or 'CTC', is a group of companies that includes a Retail segment, a Financial Services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal & Gardening divisions. Party City, PartSource and Gas+ are key parts of the Canadian Tire network. The Retail segment also includes Mark's, a leading source for casual and industrial wear; Pro Hockey Life, a hockey specialty store catering to elite players; and SportChek, Hockey Experts, Sports Experts and Atmosphere, which offer the best active wear brands.
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