Canadian Tire Delivers Strong Q1 with Normalized EPS Jump to $2.18

Canadian Tire Corporation (TSX: CTC.A) has reported a robust first quarter of 2025, driven by strategic execution and cost discipline. The retailer’s normalized diluted earnings per share (EPS) surged to $2.18, a $0.80 increase compared to the same period in 2024, marking a significant turnaround in profitability after facing headwinds in recent years. This outperformance underscores the effectiveness of its “True North” transformation strategy, which prioritizes retail modernization, loyalty program expansion, and capital reallocation.

Key Drivers of EPS Growth

The EPS jump reflects both top-line momentum and operational efficiency. Consolidated revenue rose 3.7% year-over-year to $3.46 billion, fueled by strong sales across its core banners: Canadian Tire, SportChek, and Mark’s. Retail sales (excluding petroleum) increased 4.9%, with Canadian Tire stores leading the way with a 5.0% sales gain. The Triangle Rewards loyalty program, now boasting 10 million active members, played a critical role in boosting repeat purchases and customer engagement.

However, the most notable improvement came in profitability. While reported net income dipped to $47 million due to $84 million in strategic transformation costs, normalized net income jumped 66% to $131 million, excluding one-time expenses. This highlights the success of cost management initiatives, including store renovations and supply chain optimization, which are central to the “True North” plan.

Strategic Moves Pay Off

Canadian Tire’s decision to divest non-core assets, such as the sale of Helly Hansen to Kontoor Brands, has freed up capital to reinvest in high-potential areas. The company also announced a $2 billion capital allocation plan through 2028, focusing on store modernization, e-commerce enhancements, and geographic expansion. Notably, 30 new Canadian Tire stores and 18 Mark’s outlets are planned for 2025 alone, reinforcing its dominance in Canadian retail.

The partnership with WestJet, launched this quarter, further strengthens its loyalty ecosystem. By integrating travel rewards into Triangle Rewards, Canadian Tire aims to deepen customer ties and drive incremental spending.

Analyst Reactions and Valuation

Despite the strong EPS results, the stock initially reacted cautiously, reflecting lingering concerns over macroeconomic pressures and retail sector competition. However, the normalized EPS beat and management’s confidence in long-term growth have started to sway sentiment.

Analysts have begun revising their outlooks. National Bank Financial raised its full-year 2025 EPS estimate to $12.90, while GuruFocus projects a 3% upside to its intrinsic value estimate of $156.92. The consensus price target of $159.36 (vs. the current $152.25) suggests investors may now reward the stock for its strategic progress.

Risks and Considerations

While Canadian Tire’s Q1 performance is encouraging, challenges remain. The $84 million in transformation costs highlights the financial burden of its modernization efforts, which could pressure earnings in the near term. Additionally, inflationary pressures and consumer spending trends could impact discretionary purchases, particularly in categories like automotive and outdoor gear.

Conclusion: A Turning Point for Canadian Tire?

Canadian Tire’s Q1 results signal a pivotal shift toward profitability and strategic clarity. The $2.18 normalized EPS, up 60% year-over-year, demonstrates that its “True North” strategy is delivering on its promise of margin expansion and customer engagement. With $3.46 billion in revenue growth, a strengthened loyalty program, and disciplined capital allocation, the company is well-positioned to capitalize on its market leadership in Canadian retail.

While short-term costs and macroeconomic risks linger, the long-term outlook appears bright. Investors should monitor execution on its $2 billion capital plan and the WestJet partnership’s performance. If Canadian Tire can sustain this EPS trajectory, it could finally shake off its reputation as a laggard and emerge as a high-quality, defensive retail stock—a compelling buy for patient investors.

Final Take: Canadian Tire’s Q1 marks a critical inflection point. With normalized EPS up $0.80, strategic moves gaining traction, and a $159 price target on the table, the stock looks primed to reward shareholders who bet on its turnaround.