TORONTO — Canadian Tire Corp. Ltd.'s CEO says consumers have started to ease up on the frugality they adopted to cope with the economic slowdown, but that progress has likely been "substantially erased" by tariff threats.
Greg Hicks, who runs the retailer and its SportChek, Mark's and Party City banners, said Thursday that the chains have noticed a succession of interest rate cuts have had a "distinct positive psychological effect on consumers," coaxing many to pick up their spending.
Yet Hicks worries the trend is fleeting.
"The short story is that like our business, the economy is in a much better place than it was a year earlier," he told analysts on a conference call.
"The long story is a bit more complex."
The complexity is coming from a few fronts. Though consumer confidence ended the year on an uptick, he said it remains low and stands to be hampered by a forthcoming cycle of mortgage renewals that will keep shelter costs high.
It could also be dramatically impeded by a range of tariffs U.S. President Donald Trump has threatened Canada with.
The American leader promised a 25 per cent duty on Canadian goods and a 10 per cent tariff on energy will come into effect early next month. Aluminum and steel are slated to get hit with their own 25 per cent tariff around the same time.
Canada intends to retaliate, but the animosity between the trading partners could have significant ramifications for retailers. Economists have said a trade war would send prices for many goods skyrocketing, put pressure on consumer savings and perhaps even result in layoffs and writedowns.
Hicks is preparing Canadian Tire for many possibilities, including a further drop in the loonie, which would challenge foreign exchange rates.
"We have already begun to try to insulate our customers from the risk of higher trade costs hitting our shelves," he said.
"We are reviewing products and U.S. suppliers and assessing alternatives to the inevitable inflationary pressure these tariffs would deliver."
Canadian Tire purchases about 15 per cent of its goods from the U.S. It predicts it could see "minor residual impacts" from Mexico, where Trump has also threatened 25 per cent tariffs next month, and China, where a round of tit-for-tat duties are also in play with the U.S.
The company figures it could find Canadian suppliers for between 25 and 30 per cent of the items it gets from the U.S., but in some categories like auto parts, it may likely have to look overseas for alternatives.
The company, however, considers itself fortunate that it has upped its dependency on Canadian businesses even more in recent years.
"If you think about anything that kind of goes into a bag or a bottle, it's likely that is a Canadian supplier," Hicks explained.
Homegrown ties have become increasingly important to Canadian shoppers these days. They've been fervently checking labels at stores and promising to boycott brands from south of the border in recent weeks.
How much of that behaviour is spilling over to Canadian Tire's balance sheet is unclear because bouts of cold weather, which tend to spur sales, have come at the same time as the buy Canadian movement.
His company is preparing for either possibility, launching discussions with suppliers, but also business leaders and the government.
Hicks has told them the "unjustified economic assault from our nation's longest-standing ally" is proof that Canada is in need of "a national plan to build Canadian prosperity."
Those discussions have come on the heels of Canadian Tire's fourth-quarter results, which delivered a net income attributable to shareholders of $411.5 million or $7.37 per diluted share for the quarter, up from $172.5 million or $3.09 per diluted share a year earlier.
Revenue for the quarter ended Dec. 28 was $4.51 billion, up from $4.44 billion, as consolidated retail sales rose 1.1 per cent.
The company says comparable sales at its Canadian Tire stores grew 1.1 per cent, while SportChek comparable sales gained 0.4 per cent. Mark's comparable sales rose 1.8 per cent.
The quarter tends to be Canadian Tire’s busiest because it includes the holiday season and the onset of cold weather.
Last October and November were “unusually warm,” so parts of the business that benefit from dropping temperatures were “significantly down” headed into December, Hicks said.
Holiday shopping also got pushed further into December because Black Friday didn’t come until late November and the federal government didn’t begin its temporary GST break on a wide swath of goods like Christmas trees and toys until Dec. 14.
Convincing customers to shop with the company during the period took more work than usual because a Canada Post strike halted mail service, having “a big impact” on the retailer, Hicks said.
Canadian Tire relies on the Crown corporation to deliver flyers, but without Canada Post offering service, it set up a “war room” to find alternative distributors, navigate how to double print flyers and amp up digital marketing.
Hicks said all the efforts came in Canadian Tire’s “most important weeks” and amounted to “a giant unplanned” test pitting flyers against digital advertising but teaching the company a lot about what mediums work best.
“We think it will just help us adapt our current strategy given the current situation with Canada Post has the potential to re-emerge,” he said.
This report by The Canadian Press was first published Feb. 13, 2025.
Companies in this story: (TSX:CTC, TSX:CTC.A)
Tara Deschamps, The Canadian Press
