Canadian Tire To Close Stores As It Restructures To Focus On Growth

Canadian retailers are facing some considerable challenges ahead as U.S. tariffs weigh on their growth prospects. One top retailer, Canadian Tire (TSX:CTC.A) is already taking steps to try and improve is operations and be less dependent on U.S. supply.

The company has announced plans to invest $2 billion over the next four years in an effort to streamline its operations. This will involve closing down some stores, but the end result will be greater efficiency and more agility. The company currently buys 15% of its inventory from south of the border, but it could source up to 30% of that supply from domestic suppliers.

Over the years, Canadian Tire's operations have been fairly stable, although growth has been hard to come by. Last year's sales totaled $16.4 billion, which were down 2% from the previous year. And that was the second consecutive year where the top line declined. With thin profit margins of around 5%, there isn't a lot of room for error or for Canadian Tire to absorb large cost increases, hence the need to trim costs where it can and adapt to tariffs as quickly as possible.

This can make for a good dividend stock to hold as Canadian Tire yields 4.9%. And in the past five years, the stock has risen by 44%. At a price-to-earnings multiple of just nine, it's not an expensive stock to own and its low valuation does give investors a good margin of safety should it struggle this year. For long-term investors, it can be a good investment to buy and hold inside of a tax-free savings account.

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