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Canadian Tire cuts about 3% of workforce as customer spending slows

TORONTO — Canadian Tire Corp. Ltd. has cut about three per cent of its workforce in its fourth quarter as tougher economic times weigh on consumer's willingness to spend.
Shoppers come and go from a Canadian Tire store in Ottawa on Friday, Aug. 11, 2023. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO — Canadian Tire Corp. Ltd. has cut about three per cent of its workforce in its fourth quarter as tougher economic times weigh on consumer's willingness to spend.

The retailer said Thursday that it also won't fill most of its current job vacancies, resulting in a further reduction of three per cent.

The president and chief executive of the Toronto-based retailer, which also owns SportChek, Party City, Mark's and Helly Hansen, characterized the decision to slash jobs as "tough" and said it was made "with a heavy heart."

"There's no question that the most difficult business decisions are the ones that impact your people," Greg Hicks said on a Thursday call with analysts.

"At the same time, we know this is what's required to continue to execute our strategy and ensure we are equipped to deliver on our commitments to our customers, employees and shareholders."

Canadian Tire said it expects to take a charge of between $20 million and $25 million in its fourth quarter in connection with the decision, putting it on pace for annualized savings of about $50 million.

The cuts came as Canadian Tire and other retailers are seeing their customers become stretched ahead of the typically bustling Black Friday and holiday shopping season. High inflation and a high interest rate are pushing more to seek deals or put off purchases that are seen as discretionary.

"Customers are shifting away from higher ticket discretionary items and also reducing the number of items in their basket, with an increase in single-unit baskets," said chief financial officer Gregory Craig on the same call as Hicks.

Much of the softness Canadian Tire is seeing in discretionary spending is coming from indebted households, especially in Ontario and B.C.

Less spending, attributed to "debt-burdened" customers, drove 70 per cent of the sales decline the company recent saw, Hicks said.

Mark's, however, saw its sales increased. The company took the resilience as a sign that customers are looking for more value and see the retailer's prices agreeable.

Canadian Tire offered such insights as it raised its quarterly dividend and reported a loss in its latest quarter, weighed down by a one-time charge related to its deal to buy back the 20 per cent stake in Canadian Tire Financial Services that is owned by Scotiabank.

It will now pay a quarterly dividend of $1.75 per share, an increase of 2.5 cents per share.

Canadian Tire reported a net loss attributable to shareholders of $66.4 million, or $1.19 per diluted share, for the quarter ended Sept. 30 compared with a profit of $184.9 million, or $3.14 per diluted share a year earlier.

The results included a $328-million charge related to the Scotiabank transaction, offset in part by a $131-million insurance recovery related to a fire at a distribution centre in March.

On a normalized basis, Canadian Tire earned $2.96 per diluted share in its latest quarter, compared with $3.34 per diluted share a year earlier.

Revenue was $4.25 billion, up from $4.23 billion in the same quarter last year, while consolidated comparable sales fell 1.6 per cent.

RBC analyst Irene Nattel said the numbers show the company's "operating segments (are) behaving as expected as consumer spending moderates and financial household headwinds increase."

The results pushed the company's share price up by almost six per cent or $15 to $264.94 in mid-morning trading.

Canadian Tire's next quarter is typically its biggest because people shop for holiday gifts, outdoor apparel and gear and staples they will use to cope with inclement weather.

Executives expected to see shoppers return to some of their usual end of year shopping patterns, but also cautioned monetary policy will impact their business.

The Bank of Canada's recent interest rate pause was "couched in a hawkish tone around risks of further inflation and the potential of more policy rate moves down the road," Hicks said.

With that uncertainty still looming, he said, "We are operating with the assumption that there will be continued pressure on discretionary retail and credit metrics going forward."

This report by The Canadian Press was first published Nov. 9, 2023.

Companies in this story: (TSX:CTC.A)

Tara Deschamps, The Canadian Press

Note to readers: This is a corrected story. An earlier version said Canadian Tire's job cuts had not yet been made.