Stock of the Week: Canadian Tire

The iconic store needs to digitize to survive.

Andrew Willis 23 August, 2021 | 4:48AM
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Andrew Willis: In its second quarter of this year, Canadian Tire (CTC.A) saw more in e-commerce sales than in all of 2019. The company adapted to a new retail environment, with an encouraging adoption of curbside and in-store pickup offerings.   

The old Canadian Tire down the street opened up“omnichannel” sales with solid results, with year-to-date revenue growth of 21% - well above our full-year target of 4%. This has us eyeing an increase to our fair value for the company, but only by a bit – because we need to see more changes for long-term viability. 

Equity analyst Zain Akbari says the coronavirus pandemic threatens to permanently accelerate the retail digitization trend and that many purchases that were pushed online may never return. Rapidly changing business models and profit margins are the name of the game. 

We think the company may be able to position itself in the long term with the help of a home team advantage that can also bide it some time. Like a Canadian shield for retail, the geographic dispersion of consumers here means that digital retailers may struggle to beat the shipping speed, and prices, of a local business that’s been digitized. 

For Morningstar, I’m Andrew Willis. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian Tire Corp Ltd220.00 CAD-4.76
Canadian Tire Corp Ltd Class A135.65 CAD-0.35Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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