Canadian Tire Reports Q3 Profit Down From Year Ago, Raises Dividend
Consumer spending on essentials like grocery, gas and services remains strong but demand for non-essential goods is showing signs of softening, the head of Canadian Tire Corp. said. The insight, gleaned from purchases made using the company’s credit cards and sales across its network of stores, suggests that Canadians are beginning to shift spending as inflation increases the cost of living, Greg Hicks, president and CEO of the retail and financial services giant, said.
“In aggregate, spend remains strong. What we are seeing is a mix shift in that spend,” he said. “Spend appears to be softening in non-grocery merchant sales and remains strong across grocery, gas and services.”
Across the company’s multiple banners, including the eponymous retail store, Mark’s and SportChek, overall consumer demand in the latest quarter was “choppy,” Hicks said. “Demand was strong in the early part of the quarter, trailed off in the middle and then finished strong in the last few weeks of September,” he said of the company’s third-quarter results.
Consolidated retail sales in the quarter ended Oct. 1 were up 2.8% compared with the same period in 2021, but slowed from the previous quarter.
At the company’s Canadian Tire retail stores, some shoppers appeared to be increasingly price sensitive. Canadian Tire retail customers that aren’t part of the Triangle Rewards program were looking for discounted value, Hicks said.
“Our percentage of baskets in which all items in the basket are discounted is on the rise,” he said. There was also evidence of more “performance separation” for essential and non-essential categories, Hicks said.
Spending on tires and automotive products, plumbing supplies and pet needs increased, while spending on exercise equipment, electronics and furniture dropped, he said.
One of the biggest declines was in the non-essential “boredom busters” category, Canadian Tire retail president TJ Flood said. Sales of items like bikes, backyard amusement games and home entertainment goods — in strong demand during pandemic lockdowns — dropped about 30% during the quarter, he said. But sales of “boredom buster” items were still up 16% compared with 2019, while growth in categories like automotive offset the decline, Flood said.
Meanwhile, ongoing supply issues appear to influence some of change in sales mix.
“Our living, fixing and playing divisions were down in the quarter compared to last year due to supply challenges in areas like vacuums and portable power tools,” Canadian Tire CFO Gregory Craig said.
Higher fuel costs, ocean freight rates and inflation were the company’s biggest headwinds in the third quarter, Craig said. However, these headwinds are expected to ease in its fourth quarter, he said.
Canadian Tire raised its dividend as it reported its third-quarter profit fell compared with a year ago. The company said it will now pay a quarterly dividend of $1.725 per share, up from $1.625 per share.
The increased payment to shareholders came as Canadian Tire said its net income attributable to shareholders amounted to $184.9 million or $3.14 per diluted share for the quarter, down from a profit of $243.7 million or $3.97 per diluted share in the same quarter a year earlier. Revenue totalled $4.23 billion, up from $3.91 billion in its third quarter last year.
Canadian Tire said on a normalized basis it earned $3.34 per diluted share in its latest quarter, down from a normalized profit of $4.20 per diluted share a year earlier. Analysts on average had expected a profit of $3.92 per share and $4.23 billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.
RBC Dominion Securities Inc. analyst Irene Nattel called the company’s third-quarter results “messy.” In a client note, she said the company is on a bumpy road as weaker-than-expected results show cost headwinds are taking a toll.
To view the full results, visit the Canadian Tire Website.
Home Depot Q3 Earnings and Revenues Beat Estimates
The Home Depot®, the world’s largest home improvement retailer, has reported sales of $38.9 billion for the third quarter of fiscal 2022, an increase of $2.1 billion, or 5.6% from the third quarter of fiscal 2021. Comparable sales for the third quarter of fiscal 2022 increased 4.3%, and comparable sales in the U.S. increased 4.5%.
Net earnings for the third quarter of fiscal 2022 were $4.3 billion, or $4.24 per diluted share, compared with net earnings of $4.1 billion, or $3.92 per diluted share, in the same period of fiscal 2021, representing an 8.2% increase in diluted earnings per share.
“We delivered another solid performance in the third quarter, driven by strength in project- related categories across the business,” said Ted Decker, chair, president and CEO. “Our team has done a fantastic job serving our customers while continuing to navigate a challenging and dynamic environment. I would like to thank them and our many partners for their hard work and dedication to our customers.”
Fiscal 2022 Guidance
The Company reaffirmed fiscal 2022 guidance of:
- Comparable sales growth of approximately 3.0%
- Operating margin of approximately 15.4%
- Net interest expense of approximately $1.6 billion
- Tax rate of approximately 24.6%
- Diluted earnings-per-share-percent-growth to be mid-single digits
Walmart Raises Outlook as Groceries Boost Sales, Inventory Glut Recedes
Walmart announced that sales rose by nearly 9% in the fiscal third quarter, as Americans across income levels bought the company’s low-priced groceries. The discounter beat Wall Street’s expectations for the quarter and raised its full-year outlook to reflect that beat.
Here’s what Walmart reported for the three-month period ended Oct. 31, according to Refinitiv:
- Earnings per share: $1.50 adjusted vs. $1.32 expected
- Revenue: $152.81 billion vs. $147.75 billion expected
Walmart posted a net loss of $1.8 billion, or 66 cents per share, down from a profit of $3.11 billion, or $1.11 per share, a year earlier.
On an adjusted basis, the company reported earnings of $1.50 per share. The retailer, which also offers pharmacy services, recorded a charge of nearly $3.33 billion, or $1.05 a share, as part of opioid-related legal charges. It announced a nationwide settlement of $3.1 billion on Tuesday to resolve lawsuits and potential lawsuits by state, local and tribal governments. In a statement, Walmart said it “strongly disputes the allegations in these matters, and this settlement framework does not include any admission of liability.”
Along with selling groceries, Walmart CEO Doug McMillon said on a call with investors that the retailer also got a boost in the three-month period from a strong back-to-school season in the U.S. and sales events across the globe, including The Big Billion Days, an annual event for Flipkart. Walmart owns the majority of the Indian e-commerce giant.
In the U.S., e-commerce sales grew 16% year over year, or 24% on a two-year basis As online sales grow, Walmart’s ad business has grown, too. Its global advertising business grew more than 30% year over year, led by gains in the U.S. In the third quarter, Walmart had the highest ad spend all year for sponsored search, a type of ad that suggests products as people browse online.
“Pocketbooks are stretched”
Shoppers are watching how they spend, Walmart Chief Financial Officer John David Rainey said on a call with CNBC. “Pocketbooks are stretched,” he said. “People have less discretionary income or less disposable income to spend on things — and so they’re looking for value.”
People are trading down in grocery items and other categories, too, he said on a call with investors. They are buying less expensive versions of baby items and baking goods — including more products from Walmart’s own brands.
As inflation runs hot, the big-box retailer has attracted more high-income shoppers. About 75% of its market share gains in food came from households that make more than $100,000 a year, Rainey said. The discounter saw that same pattern in the previous quarter.
Walmart cut its profit outlook in July, aggressively marking down some merchandise, as it noticed consumers buying fewer high-margin discretionary items. At the time, however, it raised its comparable sales projection because of stronger-than-expected grocery sales.
The discounter also made progress with an industry-wide headache: a glut of excess inventory. Walmart’s inventory was up 13% year over year in the third quarter. That’s down from about 26% in the second quarter and 32% in the first quarter.
Comparable sales for Walmart U.S. rose 8.2%, excluding fuel. That topped analysts’ expectations of 3.6% growth, according to StreetAccount. The key retail metric, also called same-store sales, includes sales from Walmart stores and clubs open for the at least a year, including remodels, relocations and expansions.
Gearing up for the holidays
Walmart is navigating a more challenging backdrop as it gears up for the holidays. The retailer gave a more conservative outlook for the holiday quarter. It said it anticipates comparable sales for Walmart U.S. will rise about 3%, excluding fuel. That is below Wall Street’s expectations of 3.5% growth, according to StreetAccount.
It expects adjusted earnings per share to drop by 3% to 5% in the fourth quarter and consolidated net sales to grow by about 3%, as it is, negatively affected by approximately $1.3 billion from currency fluctuations.
To view the full release, visit the Walmart Website.
Lowe’s Not Seeing Negative Impact of Inflation as Sales, Profit Top Expectations
Lowe’s Companies, Inc. has reported net earnings of $154 million and diluted earnings per share (EPS) of $0.25 for the quarter ended Oct. 28, 2022, which included a pre-tax non-cash asset impairment charge of $2.1 billion related to its Canadian retail business, compared to diluted EPS of $2.73 in the third quarter of 2021. Excluding the impairment charge, third quarter adjusted diluted EPS increased 19.8% to $3.27 compared to the prior year.
“We’re not seeing the negative impacts of inflation,” Marvin R. Ellison, Lowe’s chairman, president and CEO said, adding instead customers have been spending money to renovate and trade up for better products. Ellison said that the tough housing market and rising interest rates haven’t affected Lowe’s customer base, noting that many homeowners in the U.S. have fixed interest rates or have paid off their mortgages, and are unaffected by the Fed’s increases. He added that many homeowners have seen increases in their home equity values, driving them to investing and renovating.
Total sales for the third quarter were $23.5 billion compared to $22.9 billion in the third quarter of 2021, and comparable sales increased 2.2%. Comparable sales for the U.S. home improvement business increased 3.0% for the third quarter.
“We delivered better-than-expected results this quarter, with U.S. comps up 3%, driven by Pro growth of 19% and improved DIY sales trends. Sales on Lowes.com grew 12%, on top of 25% growth last year. We also drove substantial improvement in adjusted operating margin through disciplined execution and cost management. This enabled us to award $200 million in bonuses to our front-line hourly associates, while also announcing $170 million in permanent wage increases,” commented Ellison.
As of Oct. 28, 2022, Lowe’s operated 1,969 home improvement and hardware stores in the U.S. and Canada representing 208 million square feet of retail selling space, and it serviced approximately 212 dealer-owned stores.
The company is increasing its full year 2022 financial outlook reflecting stronger-than-expected operating results. All Adjusted measures exclude asset impairment and expected transaction costs associated with the sale of our Canadian retail business, which is currently expected to close in early 2023.
Full Year 2022 Outlook — a 53-week Year (comparisons to full year 2021 — a 52-week year)
- Total sales of approximately $97 – $98 billion, including the 53rd week
- 53rd week expected to increase total sales by approximately $1.0 billion to $1.5 billion
- Comparable sales expected to be flat to down -1% as compared to prior year
- Gross margin rate up slightly compared to prior year
- Depreciation and amortization of approximately $1.75 billion
- Adjusted operating income as a percentage of sales (adjusted operating margin) of 13.0%
- Interest expense of $1.1 to $1.2 billion
- Adjusted effective income tax rate of approximately 25%
- Adjusted diluted earnings per share of $13.65 to $13.80 (previously $13.10 to $13.60)
- Total share repurchases of approximately $13 billion (previously $12 billion)
- Adjusted ROIC of over 37%
- Capital expenditures of up to $2 billion
The Canadian retail business represents less than 6% of consolidated full year 2022 sales outlook, and approximately 60 basis points of dilution on the consolidated full year 2022 operating margin outlook.
Loblaw Sales and Profit Grow as Canadian Grocers Face Inflation Scrutiny
Loblaw Companies Ltd. reported its third-quarter profit rose about 30% compared with a year ago. Loblaw attributed its profit growth to increased sales of drugstore categories such as beauty products and cough and cold medicines, which have high profit margins.
The grocery and drugstore retailer says its net earnings available to common shareholders totalled $556 million or $1.69 per diluted share for the quarter ended Oct. 8. The result was up from $431 million or $1.27 per diluted share in the same quarter last year.
Revenue totalled $17.39 billion, up from $16.05 billion in its third quarter of 2021. Food retail same-stores sales rose 6.9%, while drug store same-store sales added 7.7%.
Sales were led by strong performance in the grocer’s discount banners, including No Frills and Real Canadian Superstore, the company said. The grocer also noted a continued shift to private label brands like President’s Choice and No Name.
Loblaw said Canadian retail food inflation remained among the lowest of G7 countries but that “global inflationary forces continued to increase the cost of food in the quarter. Loblaw’s efforts to moderate cost increases and provide superior value to customers through its PC Optimum Program and promotions resulted in strong sales and stable gross margins in food retail,” the company said in a report to shareholders.
In its drugstores like Shoppers Drug Mart, revenues benefited from elevated sales of higher margin categories like beauty, cough and cold, Loblaw said.
On an adjusted basis, Loblaw says it earned $2.01 per diluted share, up from an adjusted profit of $1.59 per diluted share a year ago. Analysts on average had expected a profit of $1.96 per share and $16.85 billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.