According to Canadian Tire Corp, sales increased double-digit in the fourth quarter Helly Hansen and were easy on SportChek Segment due to COVID-19 restrictions. The company also announced plans to close all 18 National sport Shops in Southern Ontario.
The closure of National Sports resulted in a $ 27 billion write-off in Canada.
Gregory Craig, CFO of Canadian Tire, told investors Thursday morning that the company expects it will reduce overlap in its sports car lineup and make time to market more efficient by limiting sales to fewer banners.
“It was a tough decision to make, especially given its human impact,” said Craig during the conference call. “We are trying to include affected employees in our corporate family.”
The SportChek segment had 397 branches at the end of the year compared to 402 a year ago. Banners include SportChek, Sports Experts, Atmosphere, National Sports, Sports Rousseau, and Hockey Experts.
The closure of National Sports is part of the company’s strategy to increase operational efficiencies and focus on core assets, added Greg Hicks, President and CEO of Canadian Tire Corp..
“It sure is a smaller banner for us, but the decision to close the deal is a matter of focus,” he told investors. “There has always been a lot of overlap with this banner and both SportChek and (Canadian Tire).”
In addition to a density of physical stores, there is also an overlap between e-commerce functions.
An “investor mindset” assessment of the company’s portfolio as part of its operational efficiency program led to the closure of the branches, Hicks said.
“This has been a company that has received just enough capital for maintenance over the years and it just wasn’t a central capital for us,” he said, adding, “We just couldn’t find another purpose.”
SportChek’s Q4 Comps are down 3 percent
Revenue in the same SportChek segment’s store declined 3 percent in the fourth quarter as the banner among Canadian Tire’s banners was hit hardest by COVID-19 restrictions and bans during the quarter. From a product range perspective, categories related to outdoor activities such as hiking, cycling, skiing, winter clothing and accessories showed the strongest performance for SportChek and recorded double-digit growth.
SportChek postponed its promotional calendar to an earlier start for the fourth quarter sales season, according to Hicks, and it paid off as a “good chunk” of Christmas sales hit the beginning of the quarter before store restrictions hit in mid-November. By the end of November, SportChek’s sales in the same store were 5.7 percent.
“That trend reversed in December when our stores were exposed to increasingly stringent retail policies,” said Hicks.
A highlight for SportChek was e-commerce, which increased sales by 90 percent in the quarter. Hicks said, “The team has made operational improvements to improve in-store customer pickup by reducing order fulfillment time, including a commitment to keep roadside orders available within an hour or less.”
SportChek’s gross margins improved in the quarter due to a profitable product mix and lower advertising activity.
“Stephen Brinkley and his team continued to value the SportChek banner’s profitability and were selective about the sales they tracked,” said Hicks. “Additionally, SportChek ended the year with healthy closing inventory levels, with the business focused on increasing productivity and improving in 2021.”
The year-end inventory decline was partly due to lower purchases in cornerstone categories such as hockey, licensed apparel and team sports as demand was lower during the pandemic.
Overall, SportChek retail sales, including sales from corporate and franchise stores, were relatively flat for the quarter, increasing 0.5 percent. Total sales were $ 604.8 million versus $ 619.4 million, a decrease of 2.3 percent.
For the full year, SportChek retail sales decreased 8.5 percent and total sales decreased 10.9 percent from $ 2.04 billion last year to $ 1.81 billion.
Helly Hansen’s global fourth quarter sales up 12 percent
Revenue from Helly Hansen, acquired in 2018, increased 12.1 percent for the quarter on a currency-neutral basis despite global restrictions and closings. Hicks stated, “We were very pleased with Helly Hansen’s performance over the quarter.”
Helly Hansen’s direct-to-consumer (DTC) business was “exceptionally strong,” accounting for 40 percent of branded business for the quarter. E-commerce was the main driver of DTC performance, up 120 percent over the previous year. “Serving is a clear indication of the global appeal of the Helly Hansen brand,” said Hicks.
Helly Hansen’s revenue for the quarter was $ 196.1 million, up 11.4 percent. In the reporting year, Helly Hansen’s sales amounted to CAD 541.9 million, a decrease of 2.2 percent compared to 2019. At constant exchange rates, Helly Hansen’s sales increased 2.0 percent in 2020.
Photos courtesy of Canadian Tire, Helly Hansen