Canadian retail giant Canadian Tire (TSE:CTC) is concerned about tariffs out of the United States. That really is not much of a surprise, given its proximity to the United States, but there are more specific reasons that have Canadian Tire pretty worried. Investors are feeling the concern as well, and Canadian Tire shares are down nearly 2% in Friday morning’s trading.
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Canadian Tire’s fourth quarter results were looking up. Shopping patterns were starting to improve, reports noted, and things might have been on the way back up. But the potential for tariffs has the retailer concerned, and it is already taking steps to find alternate sources of goods if the tariffs come back or stay around longer than expected.
With around 15% of its entire inventory coming out of the United States, it is little surprise that Canadian Tire bumped up some order dates and pulled forward, locking in current prices to escape any potential tariffs. And this should prevent any serious price increases from hitting the retailer, as long as the tariffs do not drag on particularly long. Should that happen, Canadian Tire warns, it may not be able to “insulate our customers” in the fashion it—not to mention its customers—would like.
Knock-On Effects
Reports also note that Canadian Tire has another, less expected concern about tariffs: the potential for unemployment. The fact that 15% of Canadian Tire’s inventory comes from the U.S can be a problem, but not a problem that cannot be worked around. But tariffs out of the United States, especially when followed by tariffs from Canada, can mean “heightened unemployment.”
Tariffs may also mean issues for interest rates in Canada. Reports noted that the threat of tariffs has “substantially erased” the gains in consumer confidence from the previous half-dozen interest rate cuts already seen. In order to gain that confidence back, there may have to be more rate cuts in turn. And there is a growing risk of credit card write-offs, which are already at a level not seen in the last 10 years.
Is Canadian Tire a Good Company to Invest In?
Turning to Wall Street, analysts have a Hold consensus rating on TSE:CTC stock based on one Buy and one Sell assigned in the past three months, as indicated by the graphic below. After a 5.31% loss in its share price over the past year, the average TSE:CTC price target of C$160.99 per share implies 28.13% downside risk.
