​Canadian Tire profit sinks, misses estimates, as finance unit drags

Canadian Tire Corp.'s profit tumbled in the second quarter, but it wasn't for all the same reasons that battered Walmart Inc. and other major U.S. retailers recently.

"Our results reflect our continued ability to effectively navigate a challenging and dynamic environment. Our retail team’s outstanding focus on inventory and margin management have enabled us to continue to execute well ... Also, receivables and new account acquisitions at Canadian Tire Bank remained strong, in line with our expectations to drive long-term growth," said Canadian Tire president and chief executive officer Greg Hicks in a release.

It was a mixed picture across Canadian Tire's portfolio of retail brands. The Mark's business stood out as same-store sales surged 20.9 per cent in the quarter. SportChek's sales at stores that were open for at least a year rose 4.1 per cent, while the namesake Canadian Tire banner saw its comparable sales rise 3.9 per cent.

Profit from Canadian Tire’s retail operations was held back as selling, general and administrative expenses jumped 10 per cent year-over-year to $1 billion in the quarter, which the company attributed to marketing as well as costs tied to store operations due to the lack of COVID-19 public health restrictions.   “We anticipate a negative reaction to this morning's report, although we would argue the operations appear to be performing well in a challenging environment,” wrote TD Securities analyst Brian Morrison in a report to clients Thursday. He has a buy recommendation on Canadian Tire shares, with a 12-month price target of $250.00, implying a potential total return of 49.5 per cent from Wednesday’s closing price.