Canadian Tire not worried about supply chain issues ahead of holidays, company says

Click to play video: 'What the supply chain crisis might mean for the holidays'
What the supply chain crisis might mean for the holidays
WATCH: What the supply chain crisis might mean for the holidays – Oct 30, 2021

Global supply chain problems won’t leave Canadian Tire Corp. Ltd. shelves bare this holiday season, the retailer said Thursday, as it detailed how it has successfully coped with issues stymying competitors.

As material and semiconductor shortages, COVID-19 factory shutdowns and backlogs at ports hamper many companies, Canadian Tire chief executive Greg Hicks said his company’s supply chain is ready for the challenge.

“The fact that we are neither a grocer nor a fast-fashion retailer means that in times like these we can be very flexible when it comes to holding inventory from quarter to quarter with a significantly lower risk of aging,” he told a conference call with financial analysts to discuss the company’s latest results.

“The non-perishable nature of products gives us flexibility around lead times and commercial terms and as the owner of significant distribution and storage capacity through our store network, corporate-owned real estate and the real estate investment trust, we can easily hold excess inventory in Canada.”

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The access to space and lack of worries about products rotting or falling out of fashion are giving Canadian Tire an edge in a growing fight to get items into customers hands in time for the holiday season.

Throughout the pandemic, retailers have warned consumers could be waiting longer for purchases to arrive or find few of their most desire products available because of port worker strikes and closures, slowdowns at factories and soaring shipping container costs.

The Drewry World Container Index showed the rate to move a container from Rotterdam to New York reached US$6,255 this week and surged by 211 per cent since last year. The Shanghai-Rotterdam route was even more expensive at US$13,801, up 498 per cent from last year.

To cope, Canadian Tire chartered four ships to get its products — namely Christmas and winter items — to Canada in time for the fourth quarter.

Click to play video: 'Supply chain issues, earlier holiday shopping could lead to empty shelves, higher prices: economist'
Supply chain issues, earlier holiday shopping could lead to empty shelves, higher prices: economist

It also turned its attention to parts of the supply chain it can exert more influence over.

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For example, Hicks said more than one-third of the company’s revenue comes from its own brands or products it has exclusive selling rights to like lights line Noma, Mastercraft tools and Denver Hayes apparel.

The arrangements mean “we are in control of when and where goods are produced,” Hicks said, and gave the company the ability to “order more and earlier” to stave off shortages.

“We also have line of sight into the shipping from factories and a clear understanding where input shortages may require longer lead times, where cost inflation might lead to higher product costs, or in cases of longer term shortages and inflation, a product redesign,” he said.

The handle Canadian Tire has on its supply chain gave it the confidence to raise its quarterly dividend to $1.30 per share, up from $1.175 per share.

The increased payment to shareholders came as the company reported a profit attributable to shareholders of $243.7 million or $3.97 per diluted share for quarter ended Oct. 2, down from a profit of $296.3 million or $4.84 per diluted share in the same quarter last year.

Revenue totalled $3.91 billion, down from $3.99 billion a year earlier.

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On a normalized basis, Canadian Tire says it earned $4.20 per diluted share, down from a normalized profit of $4.93 per diluted share in the same quarter last year.

Analysts on average had expected an adjusted profit of $4.30 per share and $3.97 billion in revenue, according to financial markets data firm Refinitiv.

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