Don’t buy Canadian Tire stock, this analyst says

National Bank Financial analyst Vishal Shreedhar said earnings at Canadian Tire (Canadian Tire Stock Quote, Chart, News, Analysts, Financials TSX:CTC.A) are poised to benefit from solid retail gross margin expansion and the impact of an extra week in the fourth quarter of fiscal 2025, when the company reports results next month.

Shreedhar maintained his “Sector Perform” rating on the shares but raised his price target to $201.00 from $197.00, reflecting a roll-forward of his valuation period. The Street average target stands at $188.50.

As reported by the Globe and Mail, Shreedhar now forecasts fourth-quarter earnings per share of $3.72, about $0.15 below Street consensus but up from $3.24 a year earlier. He said the roughly 15% year-over-year increase is driven by revenue growth, including positive same-store sales across all banners and the extra week, alongside retail gross margin expansion excluding petroleum, share repurchases, and lower interest expense. Those positives are partly offset by retail SG&A deleverage, lower financial services earnings before tax, higher depreciation and amortization, and a higher tax rate, which he estimates is a $0.12 drag to EPS.

“Given uneven operating performance and ongoing disruption related to the implementation of the True North strategy, we see more attractive opportunities elsewhere in our coverage universe,” he said, adding that signs of resilient consumer spending are being offset by expectations for elevated near-term investment.

“We model Q4/25 Canadian Tire Retail same-store sales growth to moderate slightly on a sequential basis, albeit remain positive,” Shreedhar said, noting the prior quarter posted 1.2% growth. He pointed to a longer Canada Post strike year over year, which affected flyer distribution, and a less favourable comparable base, partly offset by favourable weather trends and continued e-commerce growth. “Our data similarly suggests sales trends tapered,” he added.

Shreedhar expects Canadian Tire Retail revenue to rise 5.5% year over year, outpacing same-store sales growth due largely to the extra week, though partly offset by weaker dealer inventory replenishment. In Financial Services, he forecasts margin pressure of roughly 100 basis points year over year and SG&A deleverage tied to regulatory and strategic investments, while characterizing the broader macro backdrop as supportive.

He said peer commentary, particularly from U.S. retailers, continues to emphasize value. “Our review of peer commentary suggests a financially healthy homeowner cohort, which is positive for home improvement, alongside a stressed middle-to-lower income cohort that remains focused on value,” Shreedhar said, adding that U.S. read-throughs may not fully apply to Canadian Tire’s domestic business.

“Given uneven operating performance and ongoing disruption related to the implementation of the True North strategy, we see more attractive opportunities elsewhere in our coverage universe,” he said, adding that signs of resilient consumer spending are being offset by expectations for elevated near-term investment.

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