CIBC Lowers Canadian Tire's Price Target to C$190.00 From C$193.00
CIBC Capital Markets maintained its neutral rating on the shares of Canadian Tire (CTC-A.TO) and lowered its price target to C$190.00 from C$193.00 after the company reported its first-quarter results.Q1 results reflected "noisy comparisons and a persistently value-seeking consumer," said CIBC.CIBC is "increasingly cautious" on the consumer as 2026 evolves and has reduced its forecasts modestly.Q1 same-store sales (SSS) growth was below expectations across all banners, with unfavorable weather dynamics, particularly lapping a tailwind in 2025, said CIBC."Q2 is clearly also off to a slow start, but with roughly two-thirds of Q2 sales still to come, the die is not cast," said CIBC. "Management also added that in markets with more normal spring weather-only BC, sadly-sales growth is positive. Even still, we have heard from multiple consumer companies in the last two weeks-the Canadian consumer took a turn to be (even more) cautious in April, and we believe this will impact virtually all Canadian retailers."CIBC also noted that dealer inventory levels are likely a modest headwind. At end of Q1, dealer inventories were up 5% vs. last year, further noted CIBC and added that management noted that much of this was in winter seasonal categories and this will likely present a headwind to shipments (vs. sales) in H2."Dealers were also better stocked for spring/summer, so unless sales accelerate soon this could present risk to re-stocking order flow in Q2," said CIBC. "Net, we expect revenue growth will lag sales growth for the balance of 2026, which presents a headwind to earnings."Q1 margins showed good stability with multiple forces, including price investments at CTR, higher IT spend, favorable banner mix, and the flow-through of prior restructuring and cost-cutting work, stated CIBC."Higher energy costs have begun to work their way into the supply chain; they will take some time to emerge but will clearly be an incremental headwind to margins in H2," said CIBC. "Depending on how consumer demand evolves, we could see this as increasing risk to growth as the year develops.""Despite the headwind of a catch-up on opex spending" in 2025, CIBC believes CTFS has performed well and delivered healthy results again in Q1.Overall, CIBC views this as a well-run business with strong controls over financing and credit risk. However, CIBC noted that, the uncertainty on consumer credit is rising, with a weaker trajectory in Canadian employment as the number one risk factor. CIBC has made small adjustments to its forecasts, but noted that this would be an area of additional downside if conditions materially deteriorate from here."Though CTC is navigating the environment well and has developed strong defences to macro and competitive pressures, we believe it will be difficult to generate meaningful growth until the demand environment improves," added CIBC. "Our price target moves to $190 (with $3 from a higher REIT target) and our rating stays at Neutral."Price: $170.39, Change: $-4.56, Percent Change: -2.61%
