Shares of great Canadian retailer Canadian Tire (TSX:CTC.A) have had a turbulent past few years, gaining just 26% over the timespan. Compare that to a 69% gain for the TSX Composite Index.
Undoubtedly, the performance isn’t so bad when you factor in the dividend, which currently yields an attractive 4.27%. However, given tariffs and a pressured consumer, management has had to deal with more than its fair share of issues. The latest quarter revealed sluggish sales and profits, causing shares to tank by double-digit percentage points.
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Insiders have been buying their own stock
Indeed, value investors’ patience has really been put to the test this year. And while it’s clear many investors have had it, the stock looks like a bargain-basement buy after its latest dip to $166 per share. Indeed, insiders have been loading up on their own stock amid the latest tumble. If that’s not an indicator that the stock is a great deal at current market prices, I don’t know what is.
Shares remain incredibly cheap, especially after the dip
After an early-August fumble, the stock trades at just 11.35 times trailing price-to-earnings (P/E), which, I think, is way too low for a retailer that’s encountered numerous pressures that I think could subside sooner rather than later.
In any case, I expect this market laggard will be able to get back on its feet now that expectations are muted and the consumer is in a position to heal after all that inflation. Remember, Canadian Tire is a discretionary retailer, so it’s not quite immune to the bumps in the road.
It’s been buying up exclusive brands on the cheap
Canadian Tire has been making some pretty smart deals over the years. Its exclusive brand portfolio has swelled, not just through partnerships with U.S. firms (think Party City and Petco), but also acquisitions. More recently, Canadian Tire bought up the rights to Hudson’s Bay assets for a cheap $30 million.
With Hudson’s Bay changing its name to Rupert Legacy, Canadian Tire is now the home of the legendary Stripes and other timeless Canadian brands that I think will sell very well at the local Canadian Tire, Sport Check, or even Mark’s. Indeed, Canadian Tire should probably show restraint and now put stripes on all of its goods, at least according to some industry pundits.
However, given the low price paid for the assets to begin with and the hunger for Stripes (can you believe how quickly those Striped blankets flew off shelves when Hudson’s Bay announced that it’s closing its doors?), I’d argue Canadian Tire should slap the branding on a wider selection of goods to garner interest and boost sales.
Embracing AI could have an uplifting effect
Yes, even Canadian Tire, a more-than-century-old retailer, can feel some of the boost from artificial intelligence (AI). The company has been betting on various AI initiatives to improve inventory, pricing, and all the sort.
Combined with all the data it gets from its Triangle loyalty program, I think Canadian Tire is well-positioned to actually transform AI investments into profitable growth over time. Given this, I’m inclined to stay aboard as insiders buy shares and the firm keeps snatching up its own shares at a time of likely historic undervaluation.
