Tariff Tussles' Impact on Canadian Tire Corp. Ltd.
The Tariff Battlefield in 2025
Shoppers have displayed a greater ability to cope with tariffs than Canadian Tire CEO initially anticipated, indicating a level of resilience surprised the Canadian retail executive.
Recent tariff hostilities in 2025 have cast a shadow of unpredictability over North American retailers and manufacturers. Key occurrences involve:
- 25% extra tariffs on steel and aluminum since March 12, 2025.
- 10% "reciprocal" tariffs on all goods since April 10, 2025.
- 25% extra tariffs on auto parts since May 3, 2025, with exemptions for USMCA-compliant products[2].
Canadian Tire's Tariff Vulnerability
Canadian Tire Corp. (CTC.A), a significant Canadian retail player, has largely weathered these tariffs:
- 15% of its product sourcing and manufacturing costs are tied to the U.S.
- However, a "manageable fraction" of this sum is currently impacted by the tariffs.
Canadian Tire Customers: Resilient in the Face of Turmoil
Greg Hicks, Canadian Tire’s CEO, expressed surprise at shoppers' resilience in coping with the tariffs' effects on prices. In contrast to his initial concerns, customers across all income levels have displayed "healthy" spending patterns:
- An 8% surge in essential spending.
- A 1% increase in discretionary goods purchases, the first rise in this category in three years.
Despite low consumer confidence levels, Canadian Tire communities seem relatively unaffected, with no sign of softness even in auto manufacturing regions burdened by tariffs.
A Tariff Warfare Response Team
To tackle the global trade onslaught, Canadian Tire has established a dedicated "tariff task force." The team's mission encompasses:
- Investigating alternative U.S. goods.
- Negotiating with suppliers.
- Managing margins to keep potential price inflation at bay for consumers.
The company is prepared to implement these strategies should the situation escalate further.
Canadian Tire's First-Quarter Results: A Mixed Picture
Canadian Tire reported a drop in first-quarter profit compared to the previous year due to restructuring costs. The retailer's key figures include:
- Net income from continuing operations: CAD 27.3 million ($21.2 million USD).
- Net income from discontinued operations: CAD 9.9 million ($7.5 million USD).
- Normalized net income from continuing operations: CAD 200 per diluted share, up from CAD 108 per diluted share last year.
- Revenue for the quarter: CAD 3.46 billion ($2.63 billion USD).
These figures cover a period when Canadian Tire unveiled its new True North strategy, a four-year plan to modernize its retail operations, harness customer data, and enhance its technology and loyalty program.
Mergers and Acquisitions: A Top Priority?
Hicks announced that Canadian Tire is concentrating on advancing its True North strategy, prompting analysts to question the potential role of mergers and acquisitions. Hicks stated that his company was not considering an acquisition of Hudson's Bay's entire operations due to "not being a good fit at the moment, given all we have going on." He declined to comment on rumors regarding a possible bid for Hudson's Bay's intellectual property. However, he did mention that the company remains open to attractive "tuck-ins" and brands.
This report by The Canadian Press was first published May 8, 2025.
Tara Deschamps, The Canadian Press
- The extra tariffs on steel and aluminum, auto parts, and all goods have created an unpredictable climate in the North American retail and manufacturing industries, threatening business resilience.
- Canadian Tire Corp. Ltd., a significant Canadian retail player, has, to a degree, managed the impact of the tariffs on its operations, with 15% of its costs tied to the U.S. and a "manageable fraction" hit by the tariffs.
- Despite initial concerns, customers across different income levels have demonstrated a surprising degree of resilience, with an 8% surge in essential spending and a 1% rise in discretionary goods purchases.
- To combat the complexities of the tariff warfare, Canadian Tire has set up a dedicated task force to investigate alternative goods, negotiate with suppliers, and manage margins to prevent further price inflation.
- The company's first-quarter results showed a drop in profit due to restructuring costs, but the retailer was able to report a normalized net income from continuing operations of CAD 200 per diluted share.
- Despite the potential for mergers and acquisitions, Canadian Tire's CEO has emphasized the priority of focusing on their four-year strategy, called True North, which aims to modernize retail operations, utilize customer data, and improve technology and loyalty programs.
