Canadian Tire Beefs Up Supply Chain ‘Monster Machine’ to Secure Inventory, Customers and Reports Second-Quarter Profit, Revenue Up More Than 20% From Year Ago
In a pandemic world where inventory is king, Canadian Tire Corp. hopes to secure its spot as one of Canada’s reigning retailers by strengthening its supply chain. The company, which beat analysts’ expectations with its latest quarterly results, said it purchased a 25% stake in a B.C. inland port facility.
The $40-million deal with Ashcroft Terminal Ltd., about 300 kilometres east of Vancouver with direct access to CP and CN rail mainlines, bolsters Canadian Tire’s long-term supply chain capabilities, said president and CEO Greg Hicks.
“Our retail supply chain is a monster machine that needs to do its job before the customer order gets fulfilled,” he said during a conference call. “This $40-million investment will enhance the flexibility of our supply chain and drive longer-term savings and lower carbon emissions by allowing us to stage more inventory in B.C. rather than shipping it back and forth across the country.”
His comments came as the company posted a second quarter revenue of $3.92 billion, up more than 20% from $3.16 billion a year ago, while profit attributable to shareholders climbed to $223.6 million, or $3.64 per diluted share, compared with a loss of $20 million or 33 cents per share in 2020. Analysts on average had expected $3.85 billion in revenue and an adjusted profit of $2.88 per share, according to financial market data firm Refinitiv.
Despite the strong results, Canadian Tire still faced headwinds in the quarter ended July 3. Many of its retail stores, which include banners like Canadian Tire, SportChek and Mark’s, faced capacity limits or were closed to in-person shopping for several weeks due to COVID-19 public health measures.
“We left sales on the table in Q2 as a result of the restrictions,” Hicks said. “But despite the closures, restrictions and some headwinds around transportation and supply availability, we continue to move product through our supply chain at significantly elevated levels.” He added: “We leverage relationships with vendors, transportation providers, and third-party logistics facilities to get inventory to the dealers.”
TJ Flood, president of the Canadian Tire retail chain, said the company’s strong inventory availability has been fuelling the store’s growth. “Since the beginning of the pandemic, with a strained global supply chain, our strategy has been to be aggressive in securing inventory to fill the customer demand that exists,” he told analysts. “We’ve continued to deploy this strategy throughout 2021.”
The company has placed a renewed focused on strengthening its supply chain given that securing inventory is expected to be an ongoing issue, Flood said. “The global supply chain continues to be strained and things could be choppy … but we continue to work with our vendor partners every day to explore innovative ways to navigate the supply chain,” he said.
For example, the company recently chartered three vessels with 2,000 containers each to transport goods — the first time ever the retailer has chartered its own boats, Flood said. Yet rising freight costs have created some “inflationary pressure,” Flood said.
Canadian Tire is also dealing with commodity cost pressure in certain product categories, including items made with plastic resin and exercise weights, he said. “We’ve built strong capabilities to help us navigate this inflationary pressure and manage our margin rates,” Flood said. “We’re not going to give an inch on being priced competitively.”
View the full press release and financial results here.
Home Depot Misses Estimates for U.S. Same-Store Sales as DIY Frenzy Tapers Off
The Home Depot, reported sales of $41.1 billion for the second quarter of fiscal 2021, an increase of $3.1 billion, or 8.1% from the second quarter of fiscal 2020. However, Home Depot Inc. fell short of U.S. same-store sales estimates for the first time in nearly two years as pandemic-fuelled do-it-yourself projects tapered off, sending shares of the retailer down as much as 5.5%.
Home-improvement chains had a blockbuster 2020 as revenue and profit surged from stuck-at-home Americans splurging on paint, tools and gardening equipment to upgrade their living spaces through DIY projects. A strong housing market and fresh government stimulus floated earlier this year also helped lift consumer demand. The steady rollout of COVID-19 vaccines, however, prompted more Americans to return to outdoor activities and abandon some pandemic-induced shopping habits.
U.S. same-store sales at Home Depot climbed 3.4% in the second quarter – the smallest increase in two years, and missed analysts’ estimates of a 4.9% rise, according to IBES data from Refinitiv. Underscoring the slowdown was data that showed a bigger-than-expected drop in July retail sales, partly reflecting the rotation of spending from goods to services such as travel and entertainment.
Home Depot chief financial officer Richard McPhail told Reuters that sales in the first two weeks of August were comparable with the second quarter, but any potential impact from the fast-spreading Delta coronavirus variant is still uncertain. “We don’t see anything that we would point to and say that’s the impact of Delta, not yet,” he said, as the company did not provide a full-year outlook.
Home Depot’s quarterly second-quarter net sales rose 8.1 per cent to US$41.12-billion. The home-improvement retailer earned US$4.53 on a per-share basis, beating estimates of US$4.44 a share.
View the full press release here.
Walmart Tops U.S. Sales Estimates, Raises Forecast as People Return to Stores
Walmart Inc increased its annual U.S. same-store sales forecast after beating analysts’ estimates, as shoppers coming out of lockdown bought more clothes, travel gear and back-to-school merchandise. As store sales rose, however, the pace of Walmart’s online growth slowed dramatically to 6% from 37% in the first quarter.
Still, Walmart is on track to reach $75-billion in global ecommerce sales by the end of the year – the retailer reported its biggest ever online sales growth of 97% in 2020 as people used its quick delivery services to order essentials at the height of the pandemic. “Even as ecommerce growth slowed as we layered on top of tremendous growth last year … The good news for us is that we can serve them (shoppers) either way,” chief executive Doug McMillon said.
Sales at Walmart’s U.S. stores open at least a year rose 5.2%, excluding fuel, in the second quarter ended July 31. Analysts had estimated a growth of 3.69%, according to IBES data from Refinitiv.
The world’s biggest retailer has also been given a boost by stimulus checks handed out during the pandemic, and most recently from the Biden Administration’s advance child tax credits.
Walmart said it now expects fiscal 2022 U.S. same-store sales to be up 5% to 6%, compared with the low single-digit growth it had previously forecast. It also expects current quarter sales to be well above estimates. The outlook accounts for continued strength in the U.S. economy and no significant additional government stimulus for the rest of the year. Increasing third-quarter guidance shows that Walmart will continue to run on all cylinders, leaning heavily on its stores, retail analyst Charlie O’Shea said.
Walmart’s U.S. gross margin improved 20 basis points, as fewer discounts and a doubling of U.S. ad sales helped offset higher supply chain costs. Walmart reported adjusted earnings per share of $1.78, handily beating analysts’ expectations of $1.57 per share. Total revenue rose 2.4% to $141.05-billion, ahead of expectations of $137.17-billion. Shares of Walmart were up marginally, adding to the nearly 5% gains seen so far this year.
View the full financial report here.
Lowe’s Earnings Beat Estimates, as Home Professionals Help Drive Growth
Lowe’s shares soared on August 18 after the company reported better-than-expected earnings and raised its sales forecast, as its attempt to win business among home professionals gained traction and consumers looked to tackle bigger home projects. The home improvement retailer said it anticipates $92 billion in revenue this year, up from a prior forecast of $86 billion.
Lowe’s has picked up sales over the past year as consumers bought new houses, renovated kitchens and took on do-it-yourself projects while stuck at home during the pandemic. As consumers get vaccinated and become more mobile again, however, CEO Marvin Ellison said the retailer is seeing a shift in the business. He said kitchen, bath, flooring and appliances remain strong, but more customers are shopping on weekdays and spending weekends on vacations, at parks or at social events again.
He said home installations grew 10% and the pro business grew 21% in the second quarter. Sales of home decor was a bright spot, too, he said.
Still, he said he remains confident people will continue to spend on their homes — even as they juggle other spending priorities. Some have taken advantage of low interest rates to purchase a larger home or expand the one they own. They’ve added more space to work remotely, or finally tackled a renovation project after seeing home values rise.
Here’s what the company reported for the fiscal second quarter ended July 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $4.25 vs. $4.01 expected
- Revenue: $27.57 billion vs. $26.85 billion expected
Lowe’s profits rose to $3.02 billion, or $4.25 per share, from $2.83 billion, or $3.74 per share, a year earlier. The results outpaced the $4.01 per share expected by analysts surveyed by Refinitiv.
Net sales climbed to $27.57 billion from $27.30 billion last year and were higher than analysts’ expectations of $26.85 billion.
The home improvement retailer has put up quarter after quarter of eye-popping growth. However, that has teed up an almost inevitable decline of sales growth as consumers reemerge into the world and can choose to spend money in other ways.
Lowe’s same-store sales dropped by 1.6% in the quarter — marking the first time the key retail metric declined in more than eight years. That was a slightly stronger performance than expected, since analysts had predicted a 2.2% decline, according to StreetAccount. U.S. same-store sales fell 2.2%, but grew by 32% when looking over a two-year period. During the year-ago period, Lowe’s put up big numbers, including 35.1% same-store sales growth and a nearly 69% surge in quarterly profits.
Ellison said Lowe’s still sees growth opportunities. He said it will increase e-commerce sales, expand its offering of turnkey installation services, add private brands and tailor its assortment of merchandise to feel local at different kinds of stores.
Lowe’s has historically drawn more of its business from do-it-yourself customers, but it’s trying to attract home professionals with a new loyalty program and other perks. The home pros, which range from painters to electricians, tend to be more frequent visitors and bigger spenders. About 25% of Lowe’s total sales now come from pros versus about 45% at rival Home Depot. Ellison said he would like to see that grow to 30% in the coming years.
Ellison, who is leading the company’s turnaround, said Lowe’s will continue to focus on driving higher profits through higher productivity. Lowe’s also plans to buy back at least $9 billion of its stock.
View the full press release here.