Canadian Tire Corporation Announces Outstanding Fourth Quarter and Full Year Results

Canadian Tire Corporation, Limited (“CTC” or the “Company”) released its fourth quarter and full year results for the period ended January 2, 2021.

– Fourth quarter diluted Earnings Per Share (“EPS”) was $7.97; normalized diluted EPS grew 51.9%

– CTR comparable sales grew 12.8% and consolidated comparable sales grew 9.5% in the fourth quarter

– Fourth quarter Retail segment normalized income before income taxes increased by 70.1%

– Full year 2020 eCommerce sales across all retail banners soared to $1.6 billion, up 183%

“We achieved outstanding operational and financial results in 2020, driven by sustained strong growth in eCommerce and Owned Brands, and the addition of 1.8 million new customers to the Triangle Rewards program. Despite countless unprecedented challenges, our commitment to being there for Canadians was unwavering throughout the year. I am incredibly proud of all of our people across CTC, our Associate Dealers, and especially our frontline employees for their achievements, their support of one another and their continued commitment to serving our customers amidst the ongoing pandemic,” said Greg Hicks, President and CEO, Canadian Tire Corporation.

“Looking forward, the proven resilience of our business model, the strength of our Triangle Rewards program, and the relevance of our assortment position us well to continue engaging with our customers and supporting them in 2021 and beyond,” added Hicks.

Fourth Quarter Highlights

Strong omni-channel performance in the quarter drove CTC’s comparable sales growth of 9.5%

– CTR’s strong growth of 12.8% was driven by double digit growth in almost 70% of product categories and Owned Brands growth of 18%

– Mark’s delivered strong comparable sales of 7.6%, driven primarily by eCommerce sales and strong performance of national brands

– SportChek’s comparable sales growth declined 3%, due to reduced promotional activity, temporary store closures and restrictions

– Over 600,000 new members joined the Triangle program and contributed $168 million in sales

eCommerce sales in the quarter grew 142%, with penetration rate more than doubling 2019 levels

– eCommerce sales surged across all retail banners, with CTR up 179%

– Digital visits across retail banners grew almost 50% to over 230 million visits

Significant increase in EPS performance in the quarter was driven by topline sales and Dealer demand at CTR

– Diluted EPS was $7.97; normalized diluted EPS was $8.40, an increase of 51.9%

– Normalized income before income taxes in the Retail segment significantly increased, by 70.1%: Retail revenue (excluding Petroleum) grew 20.1%, with CTR revenue growing by 28%; Normalized retail gross margin rate (excluding Petroleum) grew by 168 bps, driven primarily by CTR

– Financial Services income before income taxes grew 5.6% in the quarter: Aging metrics continue to be favourable; Consistent with industry trends, growth in cardholder sales and receivables volume were lower; Due largely to the year over year decline in receivables, the allowance for loans receivable was reduced by $27 million in the quarter

Select Annual Highlights

CTC’s retail sales grew 11% (excluding Petroleum), primarily driven by 17.6% growth at CTR

eCommerce sales reached $1.6 billion, up $1 billion or 183%, with CTR delivering over 250% growth

Strong performance in the last half of 2020 resulted in full year normalized diluted EPS of $13.00, only slightly lower than 2019, despite the impact that the COVID-19 pandemic had on the operations and results in the first half of 2020

– Retail segment normalized earnings grew 15.7% for the year

Cash and investments in the Retail segment grew by $196 million in the year, driven by higher retail earnings and lower capital expenditures

The Company ended the year with $2.0 billion in cash and short-term investments and $3.0 billion, $3.9 billion, and $298.9 million in available liquidity in its Retail, Financial Services and REIT segments, respectively

Consolidated Overview

The fourth quarter and full year 2020 results include one additional week of retail operations compared to the fourth quarter and full year 2019 results, except for comparable sales growth.

Fourth Quarter

Consolidated retail sales increased $479 million in the fourth quarter, or 9.9% over the same period in 2019. Excluding Petroleum, consolidated retail sales were up 13.6% over the same period last year

Consolidated revenue increased $557.8 million, or 12.9% in the fourth quarter. Excluding Petroleum, consolidated revenue increased 17.4%

Diluted EPS was $7.97 in the quarter, up $2.55 per share, or 47%, compared to the prior year. Normalized diluted EPS in the quarter was $8.40, an increase of $2.87 per share or 51.9%

Refer to the Q4 and Full Year 2020 MD&A section 5.1.1 for information on normalizing items, and to the Q4 and Full Year MD&A section 4.0 for additional details on events that have impacted the Company in the year

Full Year

Consolidated retail sales increased $985.4 million, or 6.2%, over the prior year. Excluding Petroleum, consolidated retail sales increased 11%

Consolidated revenue increased $336.6 million for the full year, or 2.3%, over the prior year. Excluding Petroleum, consolidated revenue increased 6.9%

Diluted EPS was $12.31, a decrease of $0.27 per share, or 2.2%, over the prior year. Normalized diluted EPS of $13.00 decreased $0.04 per share or 0.3%

Refer to the Q4 and Full Year 2020 MD&A section 5.1.1 for information on normalizing items, and to the Q4 and Full Year MD&A section 4.0 for additional details on events that have impacted the Company in the year

Retail Segment Overview

The fourth quarter and full year 2020 results include one additional week of retail operations compared to the fourth quarter and full year 2019 results, except for comparable sales growth.

Fourth Quarter

Retail segment revenue increased $593 million, or 14.9%. Excluding Petroleum, Retail segment revenue increased 20.1%

CTR sales increased 17.1% and comparable sales were up 12.8%

SportChek retail sales were relatively flat, up by 0.5% and comparable sales were down 3%

Mark’s retail sales increased 11.9% and comparable sales were up 7.6%

Helly Hansen revenue was $196.1 million, up 11.4%, or 12.1% on a constant currency basis

Income before income taxes increased $226.3 million, or 64.4%. Normalized income before income taxes increased $252.7 million or 70.1%

Refer to the Q4 and Full Year 2020 MD&A section 5.1.1 for information on normalizing items, and to the Q4 and Full Year MD&A section 4.0 for additional details on events that have impacted the Company in 2020

Full Year

Retail segment revenue increased $410.2 million, or 3.1%. Excluding Petroleum, Retail segment revenue was up 8.4%

CTR sales increased 17.6%

SportChek’s retail sales decreased 8.5%

Mark’s retail sales decreased 5.5%

Helly Hansen revenue was $541.9 million, down 2.2%. On a constant currency basis, Helly Hansen revenue grew 2.0%

Income before income taxes increased $90.5 million or 14%. Normalized income before income taxes increased by $108.1 million or 15.7%

Refer to the Q4 and Full Year 2020 MD&A section 5.1.1 for information on normalizing items, and to the Q4 and Full Year MD&A section 4.0 for additional details on events that have impacted the Company in 2020

Financial Services Overview

Financial Services is in a strong financial position with access to multiple sources of liquidity, an experienced management team and proven credit risk capabilities. The credit card portfolio continues to demonstrate strong operational metrics, including ending the quarter with improved aging, mainly due to strong customer payments.

Fourth Quarter

Revenue was down 11.3%, primarily due to lower receivables volume

Gross margin improved 10.8% despite revenue declines; primarily due to a $27.3 million reduction to the allowance for loans receivable, reflecting the impact of lower receivables balances

Income before income taxes increased $6.1 million, or 5.6%

Refer to the Q4 and Full Year 2020 MD&A section 4.0 for additional details on events that have impacted the Company in 2020

Full Year

Revenue was down 6.4% for the full year over 2019, primarily due to lower receivable volume

Gross margin declined by 12.4% primarily due to lower revenue

Income before income taxes decreased $99 million or 23.2%

Refer to the Q4 and Full Year 2020 MD&A section 4.0 for additional details on events that have impacted the Company in 2020

CT REIT Overview

As disclosed in the Q4 and year-end 2020 CT REIT earnings release on February 8, 2021, CT REIT invested approximately $209 million, adding over 800,000 square feet of gross leasable area to the portfolio in 2020.

Capital Allocation

Capital Expenditures

Operating capital expenditures were $267.7 million for the year, a decrease of $176.5 million

Total capital expenditures were $452.4 million for the year, a decrease of $84.9 million

Quarterly Dividend

The Company declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $1.175 per share payable on June 1, 2021 to shareholders of record as of April 30, 2021. The dividend is considered an “eligible dividend” for tax purposes.

Normal Course Issuer Bid

The Company announced its intention to make a normal course issuer bid (the “2021-22 NCIB” to purchase from March 2, 2021 to March 1, 2022 up to 5.4 million Class A Non-Voting Shares (the “Shares”), which represents 9.9% of the 54.7 million approximate public float of Shares issued and outstanding as at February 17, 2021. There were 57,383,758 Shares issued and outstanding as at February 17, 2021.

The Company intends to purchase Shares under the 2021-22 NCIB to offset the dilutive effect of the issuance of Shares pursuant to its dividend reinvestment and stock option plans, consistent with the Company’s policy. The Company retains the flexibility to purchase additional Shares beyond its anti-dilutive requirements but does not intend to do so at this time.

Purchases of Shares pursuant to the 2021-22 NCIB will be made by means of open market transactions through the facilities of the TSX and/or alternative Canadian trading systems, if eligible, at the market price of the Shares at the time of purchase or as otherwise permitted under the rules of the TSX and applicable securities laws. Purchases may also be made by way of private agreements or share repurchase programs under issuer bid exemption orders issued by securities regulatory authorities. Any private purchase made under an exemption order issued by a securities regulatory authority will generally be at a discount to the prevailing market price.

For open market transactions, the Company will be subject to a daily purchase limit of 69,845 Shares, which represents 25% of 279,380, the average daily trading volume of the Shares on the TSX, net of purchases made by the Company through the TSX, for the six months ended January 31, 2021. The Shares purchased by the Company pursuant to the 2021-22 NCIB will be restored to the status of authorized but unissued shares.

The Company’s proposed 2021-22 NCIB is subject to regulatory approval.

Under the Company’s normal course issuer bid which began on March 2, 2020 and expires on March 1, 2021 (the “2020-21 NCIB”), the Company received approval to purchase up to 5.5 million Shares. To date, the Company has purchased a total of 355,102 Shares by means of open market transactions through the facilities of the TSX and alternative Canadian trading systems under the Company’s 2020-21 NCIB, at the volume weighted average price of $125.24.

For the full fourth quarter results, click here.

About Canadian Tire Corporation

Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: CTC) or “CTC”, is a family of businesses that includes a Retail segment, a Financial Services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal & Gardening divisions. Party City, PartSource and Gas+ are key parts of the Canadian Tire network. The Retail segment also includes Mark’s, a leading source for casual and industrial wear; Pro Hockey Life, a hockey specialty store catering to elite players; and SportChek, Hockey Experts, Sports Experts, National Sports, Intersport and Atmosphere, which offer the best active wear brands. The more than 1,740 retail and gasoline outlets are supported and strengthened by CTC’s Financial Services division and the tens of thousands of people employed across Canada and around the world by CTC and its local dealers, franchisees and petroleum retailers. In addition, CTC owns and operates Helly Hansen, a leading global brand in sportswear and workwear based in Oslo, Norway. For more information, visit Corp.CanadianTire.ca.

Contact:

Jane Shaw – Media Contact – jane.shaw@cantire.com – (416) 480-8581

Source: Canadian Tire Corporation Limited