The Monthly Gems by Allan Tong Canadian Tire Corporation Ltd CTC-T TOP PICK Nov 02, 2023

Retail does well in November and maybe into December. He wants the stock to show some strength though. If so, CTC should do well.

Historically a great Canadian retail business. However, business not performing as well due to eCommerce etc. Unsure on future of business. Better names for retail companies like Aritzia. 

Retail is a difficult business to operate in. Capital intensive business with lots of inventory. If recession occurs, will be hard on business. Better options for investors out there. 

Does not own shares, and would not recommend buying. Not a strong business model. Footprint limited to Canada with low growth. 

Does not own shares. Retail business tough. Current valuation starting to enter attractive area. Competition amongst retail very hard to earn profits on (high capital investments). Consumers not coming back to brand - yet, would wait to buy. 

Many retailers are coming off a rough quarter, but CTC is a seasonally sensitive stock. Last winter saw weak demand for winter items like snowblowers (due to a mild winter), and that's impacted CTC shares. Assuming regular seasonal weather in spring and summer, business should pick up. Hold if you already own and don't sell. He doesn't see long-term weakness.

Why own this now? There's so much online competition and inflation is hurting the Canadian consumer. They bought back a lot of shares in 2023, but didn't work for their shares. Needs to see lower inflation and better employment numbers first.

The stock is 'bouncy' certainly. We think it is a decent company but we did not like the decline in sales in the last quarter, especially in a period where inflation is still present. Yes, some of its weakness was clearly related to the weather. But at 22X earnings, we think the valuation could be adjusted to reflect the current lack of growth. Thus, we would fairly reluctant to start an aggressive buy program on the stock today. 
Unlock Premium - Try 5i Free

Traditional bricks and mortar business that will face competition from eCommerce. Undifferentiated shopping experience that is not enjoyable. Discretionary product offering makes it difficult to retain customers. Would not recommend investing at this time. Housing slowdown in Canada will also be hard on the business.