Article content

A New York-based firm with a history of shorting TSX-listed stocks made Canadian Tire Corp. its latest target on Thursday, outlining the challenges the company faces in its “antiquated” retail stores and in eliminating its debt.

In a report, Spruce Point Capital Management argues that Canadian Tire’s issues begin at the retail level, where it faces a threat from Amazon.com Inc. and is at a disadvantage due to its higher prices, lack of free shipping and “old-fashion promotion” strategy, which relies on fliers and Canadian Tire money.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or U.S. short-seller with penchant for Canadian companies makes Canadian Tire its latest target Back to video

As short sellers, we look for companies with challenged business models and bad balance sheets Spruce Point founder Ben Axler

Spruce Point believes that Canadian Tire is saving face by making its earnings appear better than they actually are with “accounting tricks.”

But that struggling retail narrative isn’t unique to Canadian Tire. What makes the situation more pressing, the report argues, is the company’s over-leveraged balance sheet.

“As short sellers, we look for companies with challenged business models and bad balance sheets,” Spruce Point founder Ben Axler said. “In the case of Canadian Tire, the debt has been rising, and in fact, there doesn’t seem to be a complete understanding of how much debt the company has.”