Canadian Tire Profit Slips, Hits Cost-Cutting Target Ahead of Schedule
Retailer Canadian Tire Corp Ltd missed market expectations for quarterly profit and revenue, as consumers spent less on home furnishings and indoor supplies over the summer. As pandemic-related restrictions eased, Canadians have redirected their attention back to outdoor activities, away from the home-related items they splurged on last summer while they took up new hobbies and revamped their living spaces.
While shoppers returned to the 99-year-old retailer’s SportChek and Mark’s stores, its online business, which had thrived during the lockdowns, took a beating. E-commerce sales in Canadian Tire’s retail segment fell 2.2% in the third quarter.
The retailer’s revenue fell 1.8% to $3.91 billion in the quarter ended Oct. 2, missing analysts’ estimate of $3.97 billion, according to Refinitiv IBES. Excluding items, Canadian Tire earned $4.20 per share, falling short of estimates of a $4.30 profit. The company also raised its annual dividend by 10.6% to $5.20 per share, and resumed its share repurchase plan with a view to buying back up to $400 million Class A shares by the end of 2022.
Similar to other retailers, Canadian Tire has been spending more to stock up its shelves ahead of the crucial holiday shopping season, as it grapples with increased commodity inflation and rising freight costs. Chief executive, Greg Hicks said the company was well-positioned to meet the holiday demand,”[o]ur strong supply chain capabilities have put us in an excellent inventory position as we head into the important fourth quarter. We are well-positioned through our unique multi-category assortments to deliver the products our customers need as they prepare to celebrate the holiday season.”
As Canada’s largest general-merchandise and apparel retailer, Canadian Tire is getting its “fair share” of in-demand products from national brands, Mr. Hicks added. And owned brands such as Noma and Mastercraft give the company more control over production, and more insight into issues such as cost inflation, input shortages that require longer lead times on products, and longer-term shortages or inflation effects that may require products to be redesigned. Because of its size as an importer, the company benefits from strong relationships with vendors and the shipping industry, Mr. Hicks said.
Canadian Tire is also taking advantage of storage capacity at its stores and corporate-owned real estate to hold excess inventory – a strategy made possible by the fact that its merchandise is less “perishable” than that of fashion retailers, for example. And it has turned to third-party logistics companies to increase its storage capacity. By the end of the year, Canadian Tire will have shipped 15% to 20% more containers than in 2020, in order to meet shopping demand, Mr. Hicks said.
“While we’re pleased with how we’ve set ourselves up, managing the current supply chain challenges has resulted in incremental operating expense … and we expect this trend will continue into 2022,” he said. The company is assessing where cost pressures can be absorbed or offset, he added, but those pressures “are not insignificant.”
Home Depot Earnings Top Estimates Fuelled by 9.8% Jump in Sales
The Home Depot has reported third-quarter earnings and revenue that beat analysts’ forecasts as customers spent more on home improvement projects. The company saw sales of $36.8 billion for the third quarter of fiscal 2021, an increase of $3.3 billion, or 9.8% from the third quarter of fiscal 2020. Comparable sales for the third quarter of fiscal 2021 increased 6.1%, and comparable sales in the U.S. increased 5.5%.
Net earnings for the third quarter of fiscal 2021 were $4.1 billion, or $3.92 per diluted share, compared with net earnings of $3.4 billion, or $3.18 per diluted share, in the same period of fiscal 2020. For the third quarter of fiscal 2021, diluted earnings per share increased 23.3 percent from the same period in the prior year.
“As evidenced by our strong performance in the quarter, our team continues to do an outstanding job of operating with flexibility and agility,” said Craig Menear, chairman and CEO. “Ultimately, this is what has allowed us to respond to the elevated home improvement demand that has persisted.”
On a two-year basis, all of Home Depot’s departments saw same-store sales growth. But its lumber and indoor garden departments fell short compared with a year ago. Facing comparison to same-store sales growth of more than 50%, lumber fell negative this quarter. Indoor garden same-store sales were roughly flat.
A strong housing market has helped Home Depot and rival Lowe’s. Consumers have been investing more as home prices climb, increasing nearly 20% compared with a year ago. Demand for materials has been rising from home professionals, helping to offset lower demand from do-it-yourself projects. Home Depot holds a larger share of the professional market, although Lowe’s is trying to win more of that business.
Home Depot executives told analysts that professionals are still working through backlogs of projects as consumers feel comfortable having electricians, plumbers and contractors in their homes again. The retailer also recently relaunched its loyalty program for professionals, drawing more traffic to its mobile app in the hopes of convincing them to shop at Home Depot for all of their jobs.
Walmart Tops Earnings Estimates, Wins Back Grocery Shoppers as Inflation Heats Up
Walmart’s fiscal third-quarter earnings topped analysts’ expectations as price-sensitive grocery shoppers flocked to its stores amid rising costs for household staples. The retailer’s size is helping it manage through snarled supply chains, as it negotiates with manufacturers, bulks up its inventory and charters its own ships to move goods across the globe. Walmart raised its forecast for the year, saying adjusted earnings per share will be around $6.40 versus its prior expectations of between $6.20 and $6.35.
Walmart CEO Doug McMillon said the retailer is optimistic about the holidays and will have shelves stocked. Inventory for Walmart in the U.S. is up 11.5% ahead of the busy shopping season, he said. The retailer ordered its seasonal merchandise early and has prioritized space for it on ships.
Here’s what the company reported for the fiscal third quarter ended Oct. 31, according to Refinitiv consensus estimates:
- Earnings per share: $1.45 adjusted vs. $1.40 expected
- Revenue: $140.53 billion vs. $135.60 billion expected
- Walmart’s net income fell to $3.11 billion, or $1.11 per share, from $5.14 billion, or $1.80 per share, a year earlier. Excluding items, the company earned $1.45 per share. Analysts were expecting Walmart would earn $1.40 per share, according to Refinitiv.
- Total revenue grew by about 4% to $140.53 billion from $134.7 billion a year earlier, exceeding Wall Street’s expectations of $135.60 billion.
- Walmart’s same-store sales in the U.S. rose by 9.2%, excluding fuel, higher than the 6.9% expected by a StreetAccount survey.
- Walmart’s e-commerce sales in the U.S. increased 8% versus the year-ago quarter — or 87% on a two-year basis.
Inflation is hitting consumers as they go about daily routines. Walmart, known for its emphasis on “everyday low price,” is one of the retailers that stands to better weather a period of rising prices. As consumers feel sticker shock, they may buy more of their groceries, clothes and other goods at the retailer’s stores and website instead of turning to competitors.
Walmart CFO, Brett Biggs said food inflation was in the low to mid single digits in the three-month period. He said the company is feeling pressure from the rising cost of fuel, shipping and products, but it has been able to reduce the number of promotions without hurting its sales. Also, it has gotten a boost from new revenue from its growing advertising business.
Biggs said the company has not seen signs so far of trading down — such as buying smaller packs or cheaper brands — but said the retailer may be picking up customers who are looking to save money and time. McMillon said in a press release that the company is gaining market share in grocery as U.S. consumers return to stores. At Walmart’s membership-based warehouse club, Sam’s Club, same-store sales grew 13.9%, excluding fuel, compared with the 8.7% growth expected by StreetAccount.
Biggs said the retailer is seeing shoppers buy holiday items early. He said it’s already sold enough candy canes to stretch from its Bentonville, Arkansas, headquarters to the North Pole.
Yet he said there has been “no material pull forward” of holiday shopping in the third quarter. He said the fourth quarter is off to a good start. “Overall, the consumer appears to us to be in really good shape,” he said. “Wages are up. Jobs are available and spending appears to be strong.”
Lowe’s Third Quarter Results Shot That the Home Boom Isn’t Over
Lowe’s Companies, Inc. has reported net earnings of $1.9 billion and diluted earnings per share (EPS) of $2.73 for the quarter ended October 29, 2021 compared to net earnings of $692 million and diluted EPS of $0.91 in the third quarter of 2020. Excluding charges in the prior-year period related to the extinguishment of debt, third quarter diluted EPS of $2.73 increased 38% from adjusted diluted EPS of $1.98 in the third quarter of 20201.
Total sales for the third quarter were $22.9 billion compared to $22.3 billion in the third quarter of 2020, and comparable sales increased 2.2%. Comparable sales for the U.S. home improvement business increased 2.6% for the third quarter.
For the seventh consecutive quarter, 100% of Lowe’s stores earned a Winning Together profit-sharing bonus, resulting in an expected total payout of $138 million to front-line hourly associates. This payment is $70 million above the target level.
“Our momentum continued this quarter, with U.S. sales comps up nearly 34% on a two-year basis, as our Total Home strategy is resonating with the Pro and DIY customer alike. In the quarter, we drove over 16% growth in Pro and 25% on Lowes.com. We also delivered operating margin expansion by driving productivity through disciplined operational execution and cost management,” commented Marvin R. Ellison, Lowe’s chairman, president and CEO.
Lowe’s also announced a new program called Livable Home aimed at aging seniors who have special home improvement needs, such as grab bars for bathrooms. The initiative, which targets the baby boomer generation, is being launched in connection with AARP, the retired persons’ organization.
With a disciplined focus on its robust capital allocation program, Lowe’s continues to create sustainable value for its shareholders. During the quarter, Lowe’s repurchased 13.7 million shares for $2.9 billion and paid $563 million in dividends. Given its better-than-expected performance, Lowe’s now plans to repurchase approximately $3 billion in shares in the fourth quarter, bringing the expected total share repurchases for the year to approximately $12 billion. This incremental share repurchase is consistent with Lowe’s long-term commitment to returning excess capital to shareholders.
As of October 29, 2021, Lowe’s operated 1,973 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space, and it serviced approximately 230 dealer-owned stores.
The Company delivered very strong financial results through the first three quarters of 2021, with sales momentum continuing into November. While the business environment remains uncertain, the Company is once again raising its outlook for the operating results of Full Year Fiscal 2021.
Full Year 2021 Financial Outlook (comparisons to full year 2020)
- Revenue of approximately $95 billion, representing approximately 33% comparable sales growth on a two-year basis.
- Gross margin rate up slightly, compared to prior year.
- Operating income as a percentage of sales (operating margin) of 12.4%.
- Total share repurchases of approximately $12 billion.
- For Fiscal 2021, the Company expects capital expenditures of up to $2 billion.
Loblaw Companies Reports Q3 Profit and Revenue Up From Year Ago, Beats Expectations
Loblaw Cos Ltd. raised its annual earnings outlook after posting third-quarter revenue and profit that beat estimates, helped by robust demand for groceries and other essential items during the COVID-19 pandemic. Canada’s largest grocery and pharmacy chain says it earned a profit attributable to common shareholders of $431 million or $1.27 per diluted share for the 16-week period that ended Oct. 9. The result compared with a profit of $342 million or 96 cents per diluted share in the same period last year.
Revenue in the quarter totalled $16.05 billion, up from $15.67 billion a year earlier. On an adjusted basis, Loblaw says it earned $1.59 per diluted share for the quarter, up from an adjusted profit of $1.28 per diluted share a year ago. Analysts on average had expected an adjusted profit of $1.48 per share and $15.89 billion in revenue, according to financial markets data firm Refinitiv.
Loblaw said that demand for back-to-school and Thanksgiving seasons was also strong, signalling a return to pre-pandemic routines. The company also said its online sales remained above pre-pandemic levels and are on track to exceed $3 billion in 2021, which would be higher than the $2.8 billion recorded a year earlier. As a result, Loblaw said it now expects adjusted profit per share to rise by the low-to-mid 30% range, compared with a prior forecast of low-to-mid twenties percentage growth.
In the summer, Loblaw announced a strategic review of the business, intended to focus on what chairman and president Galen G. Weston called “retail fundamentals.” On November 17, Loblaw announced that it would be converting the banners of 17 unprofitable stores and closing three locations. In a release, the company said it will continue “optimizing its store and office network,” which could lead to additional changes in the coming months.