Thanks, Marie
It was a pretty big miss ($3.38 EPS vs $4.81 expected). We don't like the 17% drop in sales, especially in an inflationary environment. Eroding consumer demand in a difficult economy could keep weighing on Canadian Tire's results, particularly in 1H. Revenue for 4Q tumbled 16.8% on weak performance across all banners. There could be a relatively flat gain in 1H as dealer inventories switch to essentials and demand remains soft, particularly for seasonal items. Weaker operating leverage, an unfavorable product mix -- essentials are less profitable than discretionary items -- and higher interest expense managed to offset SG&A savings and make adjusted Ebitda margin narrow 630 bps. This could continue with more pressure on margins this year. It is not the first 'miss' for the company, and in fact it has missed five of the past eight quarters. Certainly not great, but the stock is also very cheap at 9X earnings. It is hard to call it a trend, but we doubt the stock does much this year. We would not consider it a disaster due to the low valuation, but think investors can sit this one out for a while.