Canadian Tire’s net earnings down $74.6 million due to Brampton fire as cautious consumer spending drag down profits

Canadian Tire cut back its sales growth targets this week due to increasing pressures caused by inflation, higher interest rates, and a loss of more than $74 million in earnings in a Brampton fire.

In the three months ended July 1, the Toronto-based retail giant said net income attributable to shareholders fell 32 per cent to $99.4 million from $145.2 million in the same period a year earlier.

Canadian Tire is also reeling from a fire at its Brampton distribution centre on March 15, which caused the facility to close and cost the company some  $74.6 million, searing its net earnings.

The 101-year-old retailer said revenue in its second quarter fell three per cent to $4.26 billion from $4.40 billion the previous year, and its target of four per cent average annual sales growth by 2025 is no longer appropriate, the company said.

“As inflation persisted and rate hikes continued, consumer demand for discretionary goods softened, particularly in the latter half of the quarter, and Canadians shifted to more essentials within our multi-category assortment,” said Canadian Tire president and CEO Greg Hicks in a press release.

It said Thursday that since early 2022, “the cumulative effect of increasing inflationary pressure and higher interest rates on consumer spend and financing costs, along with higher inventory costs, has significantly impacted the company’s ability to deliver against its previous expectations.”

All employees were safely evacuated when the fire broke out, but the blaze also led to a lawsuit from a Calgary-based robotics company Attabotics, which claims the company is liable for damages it has suffered, including loss of property, reputation and market share. None of the allegations have been proven in court.

Canadian Tire said the warehouse services its stores nationally and inventory was being transferred to other distribution centres as well as temporary facilities following the fire to manage the flow of products.

The company said costs from the fire included lost inventory, building damage, cleanup, repairs and delayed shipments due to the temporary shutdown of the facility.

With files from The Canadian Press