Recently, Canadian Tire (TSX: CTC.A) stock has piqued the interest of investors. This is due in part to the stock’s modest but meaningful rise of 2% over the past month. The company’s emphasis on offering guaranteed value to customers has driven its sales growth over the years.
The company’s brand factor, modern and contemporary store network, and global sourcing capabilities make for its competitive advantage in the Canadian market. Here are a few reasons why Canadian Tire can be a viable choice for investors at this moment.
Exceptional Q4 2022 and full-year performance
In the fourth quarter (Q4) of 2022, Canadian Tire reported an 11.3% rise in its comparable sales, which is in line with the Q4 performance of FY 2021. The company’s diluted earnings per share increased to $9.09, and the normalized diluted EPS has increased to $9.34, showing growth rates of 9% and 11% respectively.
According to experts, this performance can be attributed to the company’s higher revenue earnings from its financial services and retail segments. Moreover, there was a 3.9% increase in revenue earnings from Q4 2021, amounting to a total of US$5,340.4 million.
In 2022, the company had consolidated retail sales worth $19.2 billion. When compared to last year, this depicts a 5.4% increase in revenue, amounting to $984.2 million. Additionally, its yearly revenue has reached $17.8 billion, showing a growth of 9.3%.
Petco shop-in-shops expansion
Another major reason for the dynamic stock price rise of this Canadian retail giant is because of its decision to continue the expansion of Petco shop-in shops across the country. This will be done through an exclusive partnership with the Petco Health and Wellness Company. Canadian Tire will be providing a dedicated retail store space for the latter’s products.
By doing so, Canadian Tire will continue to expand into the US$5.3 billion Canadian pet market. Currently, more than 80% of Canadian Tire stores feature Petco shop-in shops. However, by summer of 2023, the organization is planning to increase it to 90%.
Canadian Tire Retail’s General Merchandising senior vice president Michael Magennis says that this move will enable the company to book significant profits. Almost 60% of Canadian households either have a dog or a cat, and the pet products category has strong growth potential in the time to come. Expanding into this sector could be a lucrative option for Canadian Tire.
Canadian Tire to deliver increased annual dividends
According to a report published on November 10, 2022, Canadian Tire will be increasing its annual dividends. This year, it will amount to $6.90 per share, which depicts a 33% cumulative quarterly dividend appreciation from the previous year. The company has maintained this feat of increasing its dividend rate for the past 13 years.
Bottom line
These three factors are proof that there are high chances of Canadian Tire’s stock price further appreciating in value. Thus, investors who are considering investing in the retail sector and earn moderate to high returns can invest in this trusted brand.
