Canadian Tire Faces Higher Inventory

A late start to warm weather sales combined with early shipments of fall and winter products has left Canadian Tire Corp. Ltd. facing higher than usual inventory. It had an additional $465.6 million in merchandise inventories at the end of its most recent quarter, an increase of about 18 per cent compared with the same period last year. This raises concerns that it could experience similar excess inventory issues that U.S. retailers have warned about. However, Greg Hicks, president and CEO of Canadian Tire Corp., says, "We feel good about our inventory levels and don't see any meaningful margin risk or incremental markdown requirements to clear inventory. While higher merchandise inventories at the end of June partially reflected a later start to spring this year, the company recorded "good movement on these products in July once the warmer weather finally arrived," he says. The inventory levels also reflect more than $260 million of goods in transit for fall and winter categories, which the company ordered early to ensure minimal supply chain disruptions. Canadian Tire reported a lower second-quarter profit compared to a year ago despite double-digit revenue growth.