David George-Cosh

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Canadian Tire Corp.’s chief financial officer is defending the retailer’s credit card business after famed short-seller Steve Eisman said he was betting against the company’s stock based on an assumption that credit trends will eventually sour.  

“Through recessions, we tend to outperform the banks,” said Dean McCann, Canadian Tire’s CFO, in an interview with BNN Bloomberg Friday. “I’m a dark cloud guy generally speaking, but at the end of the day we don’t see any evidence in our portfolio of consumer challenge.”                 

McCann said Canadian Tire’s credit card portfolio contributes about one-third of the company’s earnings and has steadily grown to approximately $8 billion in size due to what he called the retailer’s “secret sauce around credit risk management.”  

“We know what you buy in the store,” he said. “Data is power when making credit decisions.”

Eisman told BNN Bloomberg on Thursday he thinks Canadian Tire’s credit card business makes the retailer susceptible to the same pressures as the Canadian banks if faced with an economic slowdown. He also pointed at Canadian Tire facing margin pressure from e-commerce giant Amazon.com Inc.

"They have a fairly significant credit card portfolio, which — if I’m right about the credit in the Canadian banks — eventually those problems will show up in Canadian Tire’s credit card business," Eisman said.  

McCann said that Canadian Tire has been growing its margins “in the face of enormous exchange pressure” despite some “bumpy” quarters that he attributed to weather-related issues. He also stated he welcomes competition from e-commerce players such as Amazon.

“We love competitors. They’re the best thing that happened to Canadian Tire,” he said. “Canadian Tire responds to the change in the marketplace. We have to stop thinking of e-commerce as a threat. We’re a huge e-commerce player. You’d be shocked at how big we are in the Canadian marketplace.”

McCann said to win in the current retail environment the company’s strategy is to have a robust bricks-and-mortar network and e-commerce platform.

“Our job is to take advantage of the asset base that we have to service customers any way they want to shop with us. I don’t care how we sell it to you as long as we sell it to you,” McCann said.

When Canada faced recessions in 2008-2009 and 2015, McCann said the company’s credit card business performed “extraordinarily well” and was a good test of the company’s ability to manage its business in terms of risk and collections.

“Make no mistake, any business in the credit business will get hit somewhat [in a recession], I just think we’ll outperform others in that particular scenario,” he noted.