Delivered Retail Sales Growth of
9.3%
eCommerce Sales Surged 400%
TORONTO, Aug. 6, 2020 /CNW/ - Canadian Tire
Corporation, Limited (TSX:CTC) (TSX: CTC.A) today released its
second quarter results for the period ended June 27, 2020.
"This quarter we drove extraordinary retail sales growth,
particularly at our core Canadian Tire Retail (CTR) banner, further
reinforcing the relevancy of our unique, multi-category assortment
to our customers," said Greg Hicks,
President and CEO, Canadian Tire Corporation. "With a significant
percentage of our store network closed for much of the quarter,
customers turned to our online platforms and we saw eCommerce sales
surge across all banners by 400%. Our strong results in CTR clearly
demonstrate the advantage of our Dealer model and our ability to
quickly adapt to local market and customer needs."
"We continue to fulfill our deep-rooted purpose of being there
for life in Canada, no matter what
life may look like. I am incredibly proud of the contributions of
our dedicated frontline store, distribution centre and contact
centre employees, as well as our Associate Dealers, who place the
customer at the heart of everything we do," Hicks continued.
HIGHLIGHTS
- CTC delivered exceptional retail sales growth of 9.3%
(excluding Petroleum) in the quarter, despite approximately 80% of
its total store network operating under closures and restrictions
for much of the quarter
-
- CTR delivered record performance of 20.3% retail sales growth,
an increase of almost $600 million,
despite temporary store closures in Ontario, which account for 40% of the
network
- Sales performance at CTR steadily improved throughout the
quarter, moving from a decline of 1.8% in April, to growth of 25%
in May and 38% in June
- In June, SportChek and Mark's experienced retail sales growth
of 3.2% and 3.4%, respectively. Due to store closures, these
banners saw retail sales declines of 24.9% and 36.4% in the
quarter
- In the quarter, the Company's operations and diluted
earnings per share (EPS) were impacted by COVID-19 and its effect
on consumer purchasing behaviour and the global economy
-
- Diluted EPS were $(0.33) and
normalized diluted EPS were $(0.25),
compared to normalized diluted EPS of $2.97 in the prior year
- Performance in the quarter was impacted by the following
factors:
-
- Decrease in revenue, compared to last year, of $300 million, primarily at SportChek, Mark's and
Helly Hansen banners due to store closures
- CTR revenue grew by 1.4%, however, it lagged retail sales
growth. Revenue was negatively impacted by store closures in
Ontario. In June, when full
operations resumed, revenue grew 24% across the network
- Revenue at Financial Services decreased 5.9% in the quarter due
to lower cardholder spend, and net allowance for expected credit
losses increased by $27.4 million
compared to last year
- Consolidated Earnings were negatively impacted by $41.7 million or $0.57 EPS, due to the following COVID-19 related
items:
-
- $41.2 million, or $0.50 EPS of additional operating expenses,
incurred as a result of the Company's COVID-19 actions, including a
special support payment for active frontline employees and enhanced
safety protocols for employees and customers
- $27.9 million, or $0.36 EPS net expense due to impairment costs
related to the Company's Musto sailing brand and select SportChek
stores, reflecting the broader economic challenges COVID-19 is
having on the timing of certain growth strategies and future cash
flows
- $27.4 million, or $0.29 EPS improvement in operating expenses due
to the recovery in share price from the first quarter, resulting in
a mark-to-market adjustment on the Company's equity hedges related
to share-based compensation awards
- CTC continued to accelerate its digital and eCommerce
efforts across all banners with eCommerce sales reaching
$600 million in the quarter, far
exceeding full year eCommerce sales in 2019
-
- eCommerce sales grew 400% in the quarter, led by 500% growth at
CTR
- eCommerce demand peaked in April and May during store closures.
In June, new heightened levels relative to pre-COVID activity were
established
- Digital traffic increased 75% across all banners and over 100%
at CTR
- In the quarter, CTC continued its actions to ensure a strong
cash position and financial flexibility
-
- Although not utilized, the Company secured an additional
$710 million credit facility from
five Canadian financial institutions. This is in addition to the
existing funding channels available to CTC and its related
entities
- Continued to pause the repurchase of shares
- Prudently managed working capital, operating costs and capital
expenditures across the enterprise
- As a result, the Company ended the quarter with $2.3 billion in cash and marketable securities,
including a $700 million pre-emptive
draw on the note purchase facility with Scotiabank
CONSOLIDATED OVERVIEW
- Consolidated retail sales increased $72
million or 1.7% in the second quarter. Excluding Petroleum,
consolidated retail sales were up $346
million or 9.3% over the same period last year
- Consolidated revenue decreased $524.8
million, or 14.2%. Excluding Petroleum, consolidated revenue
decreased $253.6 million, or 8.0% in
the quarter, primarily due to store closures at SportChek, Mark's
and Helly Hansen
- Diluted EPS were $(0.33),
normalized diluted EPS were $(0.25),
compared to normalized diluted EPS of $2.97 in the prior year, due to COVID-19 and its
effect on consumer purchasing behaviour and the global economy
- The Company remains committed to its Operational Efficiency
program and continues to make progress towards its previously
stated $200+ million target in annualized savings by 2022
- Refer to the MD&A section 4.1.1 for information on
normalizing items and to sections 3.0, 4.2.2 and 4.3.1 for
information on 'Significant Events that Impacted the Company this
Quarter' and the specific impacts to the Retail and Financial
Services segments
RETAIL OVERVIEW
- The following financial results reflect Q2 2020 performance
compared to Q2 2019:
-
- Retail segment revenue decreased 15.2%. Excluding Petroleum,
Retail segment revenue decreased 8.4%, primarily due to store
closures at SportChek, Mark's and Helly Hansen
- Canadian Tire retail sales increased 20.3%
- SportChek retail sales decreased 24.9%
- Mark's retail sales were down 36.4%
- Helly Hansen revenue in the quarter was $68.9 million, a decrease of 21.4%. On a constant
currency basis, Helly Hansen revenue decreased 12.6%
- Normalized income before income taxes decreased $207.1 million, due to COVID-19 and its effect on
consumer purchasing behaviour and the global economy
- Refer to the MD&A section 4.1.1 for information on
normalizing items and to sections 3.0, 4.2.2 and 4.3.1 for
information on 'Significant Events that Impacted the Company this
Quarter' and the specific impacts to the Retail and Financial
Services segments
CT REIT OVERVIEW
- As disclosed in the Q2 2020 CT
REIT earnings release on August 4,
2020, CT REIT delivered 2.8% growth in AFFO per unit and
invested $36 million in previously
disclosed investments that were completed in the second
quarter
- CT REIT also announced an increase in the annual rate of
distribution to $0.06693 per unit, an
increase of 2.0%, beginning in September
2020
FINANCIAL SERVICES OVERVIEW
- Financial Services is in a strong financial position. The
business is well capitalized with access to multiple sources of
liquidity and has an experienced Management Team and proven credit
risk capabilities. The Bank remains comfortable with the level of
risk in its portfolio
- In Q2, revenue decreased $19.4
million or 5.9% over the prior year, due to lower credit
charges resulting from a decline of 3.6% in gross average credit
card receivables, reflecting lower credit card sales
- An increase, compared to last year, of $27.4 million of net allowance for expected
credit losses, reflecting Management's expectations of increases in
future delinquencies and account defaults
- Income before income taxes decreased 46.6% in the second
quarter to $51.0 million
- Refer to the MD&A section 4.1.1 for information on
normalizing items and to sections 3.0, 4.2.2 and 4.3.1 for
information on 'Significant Events that Impacted the Company this
Quarter' and the specific impacts to the Retail and Financial
Services segments
CAPITAL EXPENDITURES
- Operating capital expenditures were $52.0 million in the second quarter, down from
$116.1 million in the second quarter
of 2019
- Total capital expenditures decreased $55.1 million in Q2 2020, to $71.4 million
QUARTERLY DIVIDEND
- The Company has declared dividends payable to holders of Class
A Non-Voting Shares and Common Shares at a rate of $1.1375 per share payable on December 1, 2020 to shareholders of record as of
October 31, 2020. The dividend is
considered an "eligible dividend" for tax purposes.
SHARE REPURCHASE
- On November 7, 2019, the Company
announced its intention to repurchase a further $350 million of its Class A Non-Voting Shares, in
excess of the amount required for anti-dilutive purposes, by the
end of fiscal 2020. Purchases of Class A Non-Voting Shares pursuant
to the 2020 Share Repurchase Intention were paused after
March 13, 2020 and continued to be
paused during the second quarter.
FORWARD-LOOKING STATEMENTS
Certain statements made in this press release may constitute
forward-looking information under applicable securities laws. These
statements are being provided for the purposes of providing
information about management's current expectations and plans and
allowing investors and others to get a better understanding of our
anticipated financial position, results of operations and operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes. Although CTC believes that the
forward-looking information in this press release is based on
information, assumptions and beliefs which are current, reasonable
and complete, this information is necessarily subject to a number
of factors, risks and uncertainties, including as a result of the
outbreak of COVID-19, that could cause actual results to differ
materially from management's expectations and plans as set forth in
such forward-looking information. For more information on the
risks, uncertainties and assumptions that could cause the CTC's
actual results to differ from current expectations, refer to
section 2.8 (Risk Factors) of our Annual Information Form for
fiscal 2019 and to section 10 (Key Risks and Risk Management) of
our Management's Discussion and Analysis for the quarters ended
March 28, 2020 and June 27, 2020, as well as CTC's other public
filings, available at www.sedar.com and at
https://investors.canadiantire.ca. CTC does not undertake to update
any forward-looking information, whether written or oral, that may
be made from time to time by it or on its behalf, to reflect new
information, future events or otherwise, except as is required by
applicable securities laws.
CONFERENCE CALL
Canadian Tire will conduct a conference call to discuss
information included in this news release and related matters at
8:00 a.m. ET on August 6, 2020. The conference call will be
available simultaneously and in its entirety to all interested
investors and the news media through a webcast at
https://investors.canadiantire.ca and will be available
through replay at this website for 12 months.
To view a PDF version of Canadian Tire Corporation's full
quarterly earnings report please see:
https://mma.prnewswire.com/media/1224788/CTC_MDA_and_FS___Q2_2020___combined_ID_82779ac48317.pdf
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.
FOR MORE INFORMATION
Media: Jane Shaw, (416) 480-8581,
jane.shaw@cantire.com
Investors: Lisa Greatrix,
(416) 480-8725, lisa.greatrix@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED