Canadian Tire Corporation Reports Second Quarter Results

Canadian Tire Corporation, Limited today released its second quarter results for the period ended July 2, 2022.

• Consolidated Comparable sales (excluding Petroleum)¹ grew 5.0%
• Loyalty sales as a percentage of retail sales¹ on a rolling 12-month basis was 59.0%
• Diluted Earnings Per Share (EPS) was $2.43; normalized diluted EPS¹ was $3.11

“Our strong comparable sales growth clearly demonstrated that customer demand for CTC’s unique multi-category product assortment remained healthy in the second quarter,” said Greg Hicks, President and CEO, Canadian Tire Corporation.

“Our results reflect our continued ability to effectively navigate a challenging and dynamic environment. Our retail team’s outstanding focus on inventory and margin management have enabled us to continue to execute well and stay focused on the delivery of our Better Connected strategy,” continued Hicks. “Also, receivables and new account acquisitions at Canadian Tire Bank remained strong, in line with our expectations to drive long-term growth,” said Hicks.

Second Quarter Highlights

• Consolidated retail sales¹ were up 9.9% and consolidated comparable sales (excluding Petroleum) were up 5.0%, with growth benefiting from the breadth of our assortment and a higher mix of in-store shopping compared to the second quarter of 2021 when COVID-19 restrictions remained in place
  • Canadian Tire Retail (CTR) comparable sales¹ grew 3.9%; performance in Automotive categories grew as customers returned to driving, and customers shopped across a broader set of categories, including in Living and Fixing, as they returned in-store
  • Mark’s had its eighth consecutive quarter of exceptional comparable sales growth¹, up 20.9% on demand for casualwear and industrial apparel
  • Team sports was the leading driver of 4.1% comparable sales growth¹ at SportChek; the Q1 2022 introduction of athleisure brand FWD (Forward with Design) also contributed to strong sales growth
  • eCommerce sales continue to run well above pre-pandemic levels
• The Company made further progress in implementing the enablers of its Better Connected strategy and enhancing the customer experience
  • Engaging Triangle members continued to be a focus across the company’s banners, resulting in loyalty sales as a % of retail sales at 59.0% on a rolling twelve-month basis; credit and new member acquisition was also strong, with approximately 594,000 joining the program in the quarter
  • Owned brand sales¹ remained strong at 37.6% of sales in the quarter
  • Investment in enhancing the customer experience at CTR saw 12 stores refreshed, expanded or replaced in Q2
  • New digital and human capital platforms being rolled out, along with distribution centre investments aimed at longer term operational efficiency
• Shareholders continued to benefit from strong returns, a key element of the Company’s balanced capital allocation strategy
  • As at July 2, 2022, returns to shareholders under the Company’s existing $400 million share repurchase commitment reached $326.9 million
  • Dividends paid in the quarter were $73.1 million, up 10.6% on a per share basis compared to the prior year
• Diluted Earnings Per Share (EPS) was $2.43; normalized diluted EPS was $3.11
  • Normalizations included one-time costs related to the exit of Helly Hansen operations in Russia, and operational efficiency program costs, which in total represented a $46.2 million impact to income before income taxes, or around $0.68 at the EPS level
• Performance in the quarter also reflected:
  • Strong Retail segment revenue and increased gross margin dollars, partially offset by higher expenses including foreign exchange, which resulted in Retail segment earnings below prior year but which remain significantly above pre-pandemic levels on a normalized basis
  • Financial Services revenue growth, up 15.0% driven by growth in receivables and growth in credit card sales, due to increased customer activity and new account acquisition
  • An increase in the incremental allowance for expected credit loss (“ECL”) in the Financial Services segment, which resulted in a year-on-year variance to Q2 of 2021 of $57.6 million in income before income taxes or ($0.56) at the EPS level, due to the decrease in the allowance last year

Consolildated Overview

• Retail sales were $5,363.8 million, up 9.9%, compared to the second quarter of 2021; consolidated comparable sales (excluding Petroleum) increased 5.0%
• Revenue increased $485.5 million to $4,404.0 million, up 12.4%; Revenue (excluding Petroleum)¹ increased 5.9% over the same period last year
• Consolidated income before income taxes (IBT) was $238.1 million, down 33.4% compared to the second quarter of 2021; and $284.3 million, down 22.0%, on a normalized¹ basis
• Normalized diluted EPS was $3.11, compared to $3.72 in the prior year. Q2 Diluted EPS was $2.43 per share, compared to $3.64 in the prior year
• Retail Return on Invested Capital (ROIC)¹ calculated on a trailing twelve-month basis, remained strong at 13.5% at the end of the second quarter, compared to 14.1% at the end of the second quarter of 2021
• Refer to the Company’s Q2 2022 Management Discussion and Analysis (MD&A) section 4.1.1 for information on normalizing items and for additional details on events that have impacted the Company in the quarter

Retail Segment Overview

• Retail revenue was $4,067.2 million, an increase of $444.0 million, or 12.3%, compared to the prior year. Excluding Petroleum, Retail revenue¹ increased 5.1%
• Retail sales (excluding Petroleum)¹ were up 4.6%
• CTR retail sales¹ increased 3.8% in the quarter, and comparable sales were up 3.9% over the same period last year
• SportChek retail sales¹ increased 0.6% in the quarter, and comparable sales were up 4.1% over the same period last year
• Mark’s retail sales¹ increased 21.1% in the quarter, and comparable sales were up 20.9% over the same period last year
• Helly Hansen revenue was up 38.9% compared to the same period in 2021
• Retail Gross margin for the second quarter was up 5.9%, or 4.9% excluding Petroleum¹
• IBT was $123.8 million, including the impact of costs related to the exit of Helly Hansen operations in Russia, compared to $208.6 million in the prior year. Normalized income before income taxes was $170.0 million, due to higher expenses, including foreign exchange costs, offsetting strong revenue growth and increased gross margin dollars.
• Refer to the Company’s Q2 2022 MD&A section 4.1.1 for information on normalizing items and to sections 4.2.1 and 4.2.2 for additional details on events that have impacted the Company in the quarter

Financial Services Overview

• Gross average accounts receivable (“GAAR”)¹ was up 14.6% relative to prior year and average active accounts were up 7.6%, as customer activity increased and investments drove new card acquisition
• Credit card sales growth¹ was 25.4% in the quarter
• Gross margin was $187.9 million, a decrease of $25.2 million, or 11.8 percent compared to the prior year, mainly due to higher write-offs and net impairment losses, attributable to the increase in ECL allowance for loans receivable, compared to a reduction in the allowance in the prior year, which offset revenue growth of 15.0%
• Income before income taxes was $90.0 million, down $35.3 million compared to the prior year, due mainly to the impact of the year-on-year change in incremental allowance on the credit card portfolio
• Risk levels remain below historic levels
• Refer to the Company’s Q2 2022 MD&A section 4.3.1 and 4.3.2 for additional details on events that have impacted the Company

CT REIT Overview

• CT REIT announced two new investments, which will require an estimated total investment of $30 million to complete and which will add approximately 149,000 square feet of incremental gross leasable area to the portfolio, and completed $111 million of previously announced investments
• CT REIT delivered 2.5% growth in Adjusted Funds From Operations (AFFO) per unit¹ on a diluted basis in the second quarter
• Distributions per unit were $0.212, up 5.7% compared to the second quarter of 2021
• For further information, refer to the Q2 2022 CT REIT earnings release issued August 8, 2022

Capital Allocation

Capital Expenditures

• Operating capital expenditures¹ were $168.8 million in the quarter, compared to $160.0 million in the second quarter of 2021
• Total capital expenditures were $188.2 million, compared to $184.6 million in the second quarter of 2021

Quarterly Dividend

• The Company has declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $1.625 per share payable on December 1, 2022 to shareholders of record as of October 31, 2022. The dividend is considered an “eligible dividend” for tax purposes.

Share Purchases 

• On November 11, 2021, the Company announced its intention to purchase up to $400 million of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of fiscal 2022. As at July 2, 2022, the Company had purchased $326.9 million (~82%) under the existing $400 million program.

For the complete press release, click here.

About Canadian Tire Corporation

Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: CTC) or “CTC”, is a group of companies 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 and Atmosphere, which offer the best active wear brands. The more than 1,700 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 technical outdoor brand 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