Canadian retail giant Canadian Tire (TSE:CTC) made news just days ago for responding to the potential incoming tariffs on Canadian goods. Now, it makes news for another reason: it sold off its Helly Hansen line of outdoor apparel. The move made little impact among investors, who sent shares up fractionally in Wednesday morning’s trading.
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Canadian Tire sold the brand to Kontoor Brands (KTB) for C$1.28 billion Canadian, and serves as a way to not only get Canadian Tire a little extra cash flow, but also allows Canadian Tire to better focus on its primary operations: the home market. The move will also prove slightly a hit to cash flow, as Canadian Tire will now be a customer of the Helly Hansen brand rather than a producer of same.
Canadian Tire plans to continue selling the Helly Hansen lineup in its stores, as it has for more than six years now since acquiring it from the Ontario Teachers’ Pension Fund for C$985 million. Given that Helly Hansen brought in C$894 million last year alone, it is a safe bet that Helly Hansen has more than made Canadian Tire’s money back.
A Good Time for More Cash
Reports note that Canadian Tire plans to use the cash it gets from selling Helly Hansen to buy back some shares, as well as pare back its debt load and augment its retail storefronts. Good signs all, and given the current economic environment, some potential winning moves to come.
Canadian Tire is still struggling with a bit of an economic downturn in Canada, and the potential that it may have to reorient a lot of its supply chain to work around tariffs in the near future. But just weeks ago, Canadian Tire landed an upgrade at RBC, as analyst Irene Nattel hiked the price target from $192 to $195, and kept the Outperform rating on the stock. That is thanks in large part to Canadian Tire’s investments in technology, which should help keep its advantage even in an environment where
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 4.97% loss in its share price over the past year, the average TSE:CTC price target of C$161 per share implies 28.38% downside risk.
