Forget Meme Stocks: Focus on High-Quality Retailers Today

Here’s why Canadian Tire (TSX:CTC.A) beats out most of the retail-focused meme stocks out there in the market right now.

| More on:
Hand of woman choosing or taking sweet products, snacks on shelves in convenience store

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The buzz created by meme stocks in 2021 came as a surprise to many investors. The jaw-dropping price movements across beaten-up sectors certainly made many individuals rich. Accordingly, retail stocks have been more in demand lately, as the Reddit trading frenzy appears to be picking up steam again.

Indeed, with the vaccine rollout gathering pace in Canada, things are looking up for retail stocks. The idea that these companies could once again take off is interesting to many investors. However, quality is everything.

In this regard, I think investors ought to consider high-quality retailers like Canadian Tire (TSX:CTC.A) right now. Here’s why.

Earnings have been excellent

For retailers coming out of this pandemic, earnings will be everything. Investors will want to see the kind of growth they’re pricing into these stocks materialize.

On this point, Canadian Tire has proven itself as a winner.

As per the company’s most recent earnings report, Canadian Tire reported much-improved year-over-year numbers. Canadian Tire reported a profit compared to a loss a year earlier. Net income attributable to shareholders came in at approximately $152 million. This marks a significant improvement, considering this company made a loss of roughly $13.3 million during the same period last year.

Furthermore, Canadian Tire recorded a 10% surge in revenue, which stands at $3.32 billion for Q1 2021 compared to $2.85 billion last year. While there has been a 10% growth in retail sales at its Canadian Tire banner, SportCheck recorded a 10% increase in sales. Moreover, retail sales at Mark’s represented almost a 14% growth.  Indeed, there appears to be a tonne of upside for this stock as we inch closer towards economic reopening.

Accelerated e-commerce growth is bullish for Canadian Tire

One of the key reasons the company’s recent earnings numbers were as good as they were can be tied to Canadian Tire’s burgeoning e-commerce sales.

Indeed, similar to most retailers around the world, Canadian Tire faced the wrath of the pandemic. Its operations were severely impacted owing to the government-imposed lockdowns and store closures. However, its e-commerce division delivered outstanding results in the fourth quarter due to its easy accessibility and focus on consumer convenience.

Indeed, the company’s e-commerce sales were up by a staggering 142%, highlighting a strong omnichannel marketing strategy. Penetration rates doubled in comparison to figures recorded during 2019. Furthermore, digital visits across the company’s retail banners increased to 230 million, which represents an increase of nearly 50%.

Additionally, more than 600,000 new customers became a part of the latter’s Triangle program, contributing roughly $168 million in terms of sales. Consolidated retail sales of Canadian Tire jumped to roughly $985 million, which marks a 6.2% year-over-year growth.

For investors focusing on the numbers, Canadian Tire is one heck of a stock. I don’t see that changing anytime soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

value for money
Energy Stocks

Got $500? 2 Insanely Cheap Energy Stocks Yielding 5.5%

While oil stocks are riding bulls, two energy stocks are sold out. This is a good time for dividend lovers…

Read more »


1 Top Value Stock to Buy After a Market Pullback

Alimentation Couche-Tard (TSX:ATD) is a wonderful retail stock that's just too cheap to ignore after the recent TSX market pullback.

Read more »

Coworkers standing near a wall
Bank Stocks

Policy Rate: 2 More Hikes After July 2022 to Reach Neutral Level

The Bank of Canada might need three more rate hikes beginning in July 2022 to reach neutral levels.

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

3 Undervalued Dividend Stocks to Buy Right Now

Dividend-paying stocks such as Bank of Montreal offers investors the opportunity to generate outsized gains in the next year.

Read more »

edit Sale sign, value, discount

Cheap Stocks to Buy: 2 Unbelievable Deals in This Environment

While there are plenty of cheap stocks to buy in this environment, these two undoubtedly offer some of the best…

Read more »

Arrow descending on a graph
Tech Stocks

2 Industries That Saw the Worst Decline Last Month

The TSX has been declining at a sharp angle since the beginning of June. And two industries (crypto and cannabis)…

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Dividend Investors: 2 Top Oversold TSX Stocks to Buy for Total Returns

RRSP investors can pick up top TSX dividend stocks at cheap prices today and get a shot at some attractive…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »