TORONTO — Canadian Tire Corp. Ltd. executives are seeing early signs that consumers could soon ease up on the careful shopping habits they adopted to cope with inflation, but their outlook on the economy is still far from rosy.
“Our customer data tells us that the impact of (cuts to) interest rates has yet to translate into significantly different spending behaviour,” said chief financial officer Gregory Craig on a Thursday call with analysts.
“Although trends did improve a little quarter-over-quarter, Canadians are still generally making fewer trips and putting fewer items in their baskets than a few years ago with more of their spend going to essentials.”
His observations were echoed by the retailer’s chief executive Greg Hicks who has noticed the cost of living and rising unemployment are straining consumers so much that the confidence with which they’re spending their money is the lowest he’s seen in a long time.
That lack of confidence, he added, is not unique to a specific shopper cohort or household income range because over the past five quarters, spending has declined across every segment.
However, he sees a recent succession of interest rate cuts as “a potential catalyst” to get Canadians to open their wallets again. The cuts have already narrowed the gap between essential and discretionary spending and could be interpreted as “a gradual unlock of consumer restraint.”
“But even with the recently announced rate cuts, we still think there’s lots to be concerned about in the economy right now,” he warned.
“The mortgage renewal cycle is real today and will continue to be real for a couple more years, at least.”
The unemployment rate is his biggest worry. Job growth just isn’t keeping pace with population growth, he said, “so even with the rate cuts, there’s still a wide swath of Canadians that are really struggling right now and it’s going to take some time for the easing cycle to affect consumption.”
Though consumers are having a hard time, Canadian Tire still managed to record a profit in its third quarter and announced Thursday that it would now pay a quarterly dividend of $1.775 per share, up from $1.75 per share.
The Toronto-based company, which also owns Mark’s, SportChek and Pro Hockey Life, achieved a net income attributable to shareholders of $200.6 million, or $3.59 per diluted share in the period ended Sept. 28.
The third-quarter result compared with a loss attributable to shareholders of $66.4 million or $1.19 per diluted share in the same quarter last year, when it recorded a charge related to its deal to buy back the 20 per cent stake in Canadian Tire Financial Services that was owned by Scotiabank.