Canadian Tire (TSX:CTC.A) stock has surged 10% since May 8, when it announced its first-quarter earnings. The stock made a quick recovery to its 52-week high after a 17% correction in February. What drove this V-shaped momentum in just three months?
Canada’s largest general merchandise retailer announced its transformative growth strategy — True North — during the first-quarter earnings. Canadian Tire sells petroleum and other goods, like sports (SportChek), outdoor, leisure, seasonal, auto parts, footwear, and apparel (Mark’s). It has its own brands as well, which contribute more to the margins.
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Why did Canadian Tire stock jump in May?
The business was usual for Canadian Tire. A slowdown in consumer spending due to tariffs made investors apprehensive, and its stock fell a sharp 17% when Trump’s tariffs on Canada were announced. Even the 60-day tariff pause did not revive the retailer’s stock price.
But it is these difficult times that bring out the best in the strategy team. Instead of leaving their fate to the macroeconomic conditions, Canadian Tire decided to do something about it. The retailer underwent restructuring and hired a transformative team under whose leadership it is carrying out its True North growth strategy. The retailer will spend $2 billion over the next four years in four areas:
- Building digital and store experiences: It plans to open more than 30 Canadian Tire and 18 Mark’s stores. Among 18 Mark’s stores, seven will be “bigger, better, bolder” stores, as described in the earnings release. Meanwhile, SportChek is opening two new concept “Destination Sport” stores and optimizing its portfolio.
- Expanding Triangle Rewards loyalty system: Canadian Tire has partnered with WestJet and the Royal Bank of Canada to expand its Triangle Rewards loyalty scheme. The partnership will launch in 2026 and expand Canadian Tire Money beyond CTC’s retail banners and Canadian Tire Bank.
- Creating personalized and data-driven customer relationships; and
- Improving operating efficiency using technology.
What can investors expect from True North’s strategy?
The True North strategy aims to increase its return on invested capital by optimizing its sales efforts on existing clients. Canadian Tire already has a vast customer base. It is looking to encourage them to spend wisely by smartly targeting customers using data and technology and marketing using loyalty points.
Canadian Tire’s 54.5% of retail sales use loyalty programs, and focusing on the loyalty program could attract customers.
These efforts, if successful, could increase profits faster than sales.
Should you buy, hold, or sell Canadian Tire in 2025?
Canadian Tire stock is trading near its 52-week high but continues to trade below its 2021 peak as the retail sector was plagued with weak demand. The stock is trading at an 11 times price-to-earnings ratio as its earnings per share surged 10.8% year over year to $2.
The retail sector could be stressed in 2025 as consumer spending slows due to rising inflation from tariff wars.
- Buy: You could consider buying Canadian Tire stock when it falls near $150 as gross domestic product (GDP) growth slows and lower immigration numbers reduce retail demand.
- Hold: If you have already brought the stock near its low, consider holding it for two to three years for capital growth. Otherwise, you can hold it for the long term for its dividend growth and a 4.23% dividend yield.
- Sell: You could consider selling the stock if you bought it for short-term gains, as the stock is overbought and has high downside risk once consumer spending slows.
