TORONTO, May 11, 2023
/CNW/ - Canadian Tire Corporation, Limited (TSX: CTC) (TSX:
CTC.A) ("CTC" or the "Company") today released its first quarter
results for the period ended April 1,
2023.
- Diluted Earnings Per Share (EPS) of $0.13 included the impact of costs relating to
the fire at the Company's A.J. Billes distribution centre in
Brampton, Ontario on March 15, 2023; normalized diluted
EPS1 was $1.00
- Financial Services delivered a strong contribution, at
$118.7 million of income before
income taxes (IBT)
"Our Q1 financial results were impacted by a number of factors.
Our Retail segment was impacted by the fire at our A.J. Billes
distribution centre, as well as unseasonably mild winter weather
and a slow start to spring in several regions of Canada," said Greg
Hicks, President and CEO, Canadian Tire Corporation. "The
Financial Services business historically makes a significant
contribution to Canadian Tire Corporation's performance in the
first quarter, and this quarter was no different. The strength of
our teams and our diligent focus on our Better Connected strategy
leaves us confident in our ability to deliver long term returns for
shareholders and value to our customers," added Hicks.
"Our unrivalled competitive advantage lies in our deep
understanding of Canadians, and in the context of a challenging
macroeconomic environment, we intend to fully leverage this
strength to maximize returns."
FIRST QUARTER HIGHLIGHTS
- Consolidated comparable sales1 were down 2.5% versus
strong growth in 2022, in a more challenging consumer demand
environment, driven by the impact of a mild winter and late arrival
of spring
-
- Canadian Tire Retail comparable sales1 were down
4.8%. Lower sales of winter and spring products were partially
offset by growth in non-winter related Automotive categories and in
Living categories, driven by an expanded pet offering
- Mark's registered its eleventh consecutive quarter of
comparable sales1 growth, up 4.8%, on sales of men's and
ladies' casualwear
- SportChek comparable sales1 grew 3.7% as athletic
and casualwear sales offset softer outerwear demand
- Helly Hansen revenue was up 22.9%, with the strongest growth in
sports wholesale revenue and ecommerce
- Consolidated income before income taxes was $66.6 million, a decrease of $228.3 million compared to the prior year, with
Financial Services segment income offset by a loss of $79.3 million in the Retail segment, resulting in
diluted EPS of $0.13. Excluding the
direct costs relating to the fire at the Company's A.J. Billes
distribution centre, normalized IBT1 was $134.3 million and normalized diluted EPS was
$1.00. Results for the quarter also
included the impact of a change in accounting estimate2
relating to the Company's Margin-Sharing Arrangement with Dealers
(the "change in accounting estimate").
-
- The normalized Retail segment loss before income
taxes1 was $11.6
million. Excluding the impact of a change in accounting
estimate2, the main factors affecting the Retail segment
results were the anticipated lower Canadian Tire Retail
Spring/Summer shipments, shipment delays relating to the
distribution centre fire ("DC fire"), higher operating costs and a
one-time cost to exit a supply chain contract.
- Financial Services delivered income before income taxes of
$118.7 million, down 5.3% against a
strong 2022 result. Receivables growth of 10.4% and higher credit
card sales growth1, up 6.1%, drove an 11.5% increase in
revenue, while higher net impairment losses and funding costs
contributed to lower gross margin.
- Since the beginning of 2023, the Company has continued to
invest in its strategic differentiators as part of its
Better Connected strategy, including:
-
- Expanding the reach of the Triangle Rewards program and
opportunities for engagement with our 11.4 million active members,
including through the launch of the new Triangle Select
subscription membership program, with more than 22,000 members
signed up since the program's January
2023 launch.
- Continuing to steadily grow its portfolio of Owned Brands
products, with the launch of the Stratus Owned Brand in the cycling
category and the acquisition of plumbing faucets and fixtures brand
Danze in Canada; Owned
Brands1 accounted for 35.8% of Retail sales in Q1
2023.
- CTC remains committed to making life in Canada better through communities and
sport
-
- Jumpstart hit a new quarterly record for disbursements with
more than a quarter of a million kids helped in Q1, in addition to
delivering Respect in Sport training to more than 5,000 new
community coaches and youth activity leaders across Canada
- CTC announced a new multi-million investment in the Women's
Sports Initiative, aimed at leveling the playing field, with a
commitment to allocating 50% of our sports sponsorship to women's
professional sports by 2026
CONSOLIDATED OVERVIEW
- Unless otherwise specified, Consolidated results include the
impact of a change in accounting estimate2.
- Revenue was $3,707.2 million
compared to $3,837.4 million in the
same period last year; excluding the change in accounting
estimate2, Revenue (excluding Petroleum)1
decreased 4.9%. Financial Services segment revenue growth partially
offset the Retail segment decline, mainly due to the anticipated
lower revenue at Canadian Tire Retail.
- Consolidated income before income taxes was $66.6 million, a decrease of $228.3 million compared to the prior year, due in
part to costs of $67.7 million
relating to the distribution centre fire. Normalized income before
income taxes was $134.3 million.
- Diluted EPS was $0.13 compared to
$3.03 in the prior year; Normalized
diluted EPS was $1.00, down
$2.06, or down $2.72 excluding the $0.66 favourable impact of the change in
accounting estimate2, mainly attributable to a decline
in earnings in the Retail segment.
- Refer to the Company's Q1 2023 MD&A section 4.1.1 for
information on normalizing items and the change in accounting
estimate and for additional details on events that have impacted
the Company in the quarter.
RETAIL SEGMENT OVERVIEW
- Unless otherwise specified, Retail results include the impact
of a change in accounting estimate2
- Retail revenue was $3,337.9
million, a decrease of $166.6
million, or 4.8%, compared to the prior year; Retail revenue
(excluding Petroleum)1 was down 5.0%. Excluding the
favourable impact of the change in accounting estimate2,
Retail revenue (excluding Petroleum)1 decreased
$201.4 million
- Retail sales1 were $3,326.5
million, down 2.8%, compared to the first quarter of 2022
and Retail sales (excluding Petroleum)1 and consolidated
comparable sales were both down 2.5% against strong comparatives in
the prior year in a more challenging consumer demand environment,
driven by the impact of a mild winter and late arrival of
spring
- CTR retail sales1 were down 4.9% and comparable
sales were down 4.8% over the same period last year
- SportChek retail sales1 increased 3.9% over the same
period last year, and comparable sales were up 3.7%
- Mark's retail sales1 increased 5.0% over the same
period last year, and comparable sales were up 4.8%
- Helly Hansen revenue was up 22.9% compared to the same period
in 2022
- Retail gross margin was down 2.5% compared to the first quarter
of 2022, or down 2.1% excluding Petroleum1; Retail gross
margin rate (excluding Petroleum)1 increased 103 bps to
35.2%. Excluding the favourable change in accounting
estimate2, Retail gross margin rate (excluding
Petroleum)1 was down 17 bps despite higher promotional
intensity
- Retail loss before income taxes was $79.3 million, compared to retail income before
income taxes of $148.8 million in the
prior year; normalized retail loss before income taxes was
$11.6 million in Q1 2023
- Retail Return on Invested Capital (ROIC)1 calculated
on a trailing twelve-month basis, was 11.3% at the end of the first
quarter, compared to 13.8% at the end of the first quarter of 2022,
due to the decrease in earnings and the increase in Average Retail
Invested Capital over the prior period
- Refer to the Company's Q1 2023 MD&A section 4.1.1 and 4.2.1
for information on normalizing items and the change in accounting
estimate and for additional details on events that have impacted
the Company in the quarter
FINANCIAL SERVICES OVERVIEW
- Gross average accounts receivable ("GAAR")1 was up
10.4% relative to the prior year, due to increases in both active
accounts and average account balance1, up 4.4% and 5.8%
respectively in the quarter
- Financial Services gross margin was $211.3 million, a decrease of $6.2 million, or 2.8% compared to the prior year;
higher net impairment losses and funding costs were partially
offset by strong revenue growth
- Financial Services IBT was $118.7
million, down $6.6 million, or
5.3% compared to the prior year
- Refer to the Company's Q1 2023 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 a 3.5% distribution increase that will be
effective with the July 2023 payment
to unitholders
- Received Zero Carbon Building Design Certification for new
distribution centre development in Calgary, Alberta
- For further information, refer to the Q1 2023 CT REIT earnings release issued on
May 8, 2023
CAPITAL ALLOCATION
CAPITAL EXPENDITURES
- Operating capital expenditures1 were $106.7 million in Q1 2023, compared to
$142.0 million in Q1 2022
- Total capital expenditures were $118.3
million, compared to $154.3
million in Q1 2022
QUARTERLY DIVIDEND
- The Company declared dividends payable to holders of Class A
Non-Voting Shares and Common Shares at a rate of $1.725 per share, payable on September 1, 2023, to shareholders of record as
of July 31, 2023. The dividend is
considered an "eligible dividend" for tax purposes.
SHARE REPURCHASES
- On November 10, 2022, the Company
announced its intention to repurchase an additional $500 million to $700
million of its Class A Non-Voting Shares (the "Shares"), in
excess of the amount required for anti-dilutive purposes, by the
end of 2023 as part of its capital management plan (the "2022-23
Share Repurchase Intention"). As at April 1,
2023, the Company has repurchased $279.3 million of its Shares in partial
fulfilment of its 2022-23 Share Repurchase Intention.
NORMAL COURSE ISSUER BID AND AUTOMATIC SECURITIES PURCHASE
PLAN
- On February 16, 2023, the TSX
accepted the Company's notice of intention to make a normal course
issuer bid to purchase up to 5.1 million Shares between
March 2, 2023 and March 1, 2024 (the "2023-24 NCIB"). Also on
February 16, 2023, the TSX accepted
the Company's new automatic securities purchase plan which expires
on March 1, 2024 and which allows a
designated broker to purchase Shares under the 2023-24 NCIB during
the Company's blackout periods.
1) NON-GAAP FINANCIAL MEASURES AND RATIOS AND
SUPPLEMENTARY FINANCIAL MEASURES
This press release contains non-GAAP financial measures and
ratios and supplementary financial measures. References below to
the Q1 2023 MD&A mean the Company's Management's Discussion and
Analysis for the First Quarter ended April
1, 2023, which is available on SEDAR
at www.sedar.com and is incorporated by reference herein.
Non-GAAP measures and non-GAAP ratios have no standardized meanings
under GAAP and may not be comparable to similar measures of other
companies.
A) Non-GAAP Financial Measures and
Ratios
Normalized Diluted Earnings per Share (EPS)
Normalized diluted EPS, a non-GAAP ratio, is calculated by
dividing Normalized Net Income Attributable to Shareholders, a
non-GAAP financial measure, by total diluted shares of the Company.
For information about these measures, see section 9.1 of the
Company's Q1 2023 MD&A.
The following table is a reconciliation of normalized net income
attributable to shareholders of the Company to the respective GAAP
measures:
(C$ in millions, except
per share amounts)
|
Q1
2023
|
Q1 2022
|
Net income
|
$
42.8
|
$
217.6
|
Net income attributable
to shareholders
|
7.8
|
182.1
|
Add normalizing
items:
|
|
|
Distribution Centre
(DC) fire
|
49.8
|
—
|
Operational Efficiency
program
|
—
|
1.5
|
Normalized net
income
|
$
92.6
|
$
219.1
|
Normalized net
income attributable to shareholders
|
$
57.6
|
$
183.6
|
Normalized diluted
EPS
|
$
1.00
|
$
3.06
|
Consolidated Normalized Income Before Income Taxes and Retail
Normalized (Loss) Income Before Income Taxes
Consolidated Normalized Income Before Income Taxes and Retail
Normalized (Loss) Income before Income Taxes are non-GAAP financial
measures. For information about these measures, see section
9.1 of the Company's Q1 2023 MD&A.
The following table reconciles Consolidated Normalized Income
Before Income Taxes to Income Before Income Taxes:
(C$ in
millions)
|
Q1
2023
|
Q1 2022
|
Income before income
taxes
|
$
66.6
|
$
294.9
|
Add normalizing
items:
|
|
|
DC fire
|
67.7
|
—
|
Operational Efficiency
program
|
—
|
2.1
|
Normalized income
before income taxes
|
$
134.3
|
$
297.0
|
The following table reconciles Retail Normalized (Loss) Income
Before Income Taxes to Income Before Income Taxes:
(C$ in
millions)
|
Q1
2023
|
Q1 2022
|
Income before income
taxes
|
$
66.6
|
$
294.9
|
Less: Other operating
segments
|
145.9
|
146.1
|
Retail (loss) income
before income taxes
|
$
(79.3)
|
$
148.8
|
Add normalizing
items:
|
|
|
DC fire
|
67.7
|
—
|
Operational Efficiency
program
|
—
|
2.1
|
Retail normalized
(loss) income before income taxes
|
$
(11.6)
|
$
150.9
|
Retail Return on Invested Capital
Retail Return on Invested Capital (ROIC) is calculated as Retail
return divided by the Retail invested capital. Retail return is
defined as trailing annual Retail after-tax earnings excluding
interest expense, lease related depreciation expense, inter-segment
earnings, and any normalizing items. Retail invested capital is
defined as Retail segment total assets, less Retail segment trade
payables and accrued liabilities and inter-segment balances based
on an average of the trailing four quarters. Retail return and
Retail invested capital are non-GAAP financial measures. For more
information about these measures, see section 9.1 of the Company's
Q1 2023 MD&A.
|
Rolling 12 months
ended
|
(C$ in
millions)
|
Q1
2023
|
Q1 2022
|
Income before income
taxes
|
$
1,355.5
|
$
1,742.2
|
Less: Other operating
segments
|
535.5
|
520.2
|
Retail income before
income taxes
|
$
820.0
|
$
1,222.0
|
Add normalizing
items:
|
|
|
Operational Efficiency
program
|
45.0
|
34.3
|
Helly Hansen Russia
exit
|
36.5
|
—
|
DC fire
|
67.7
|
—
|
Retail normalized
income before income taxes
|
$
969.2
|
$
1,256.3
|
Less:
|
|
|
Retail intercompany
adjustments1
|
211.2
|
198.2
|
Add:
|
|
|
Retail interest
expense2
|
262.8
|
245.5
|
Retail depreciation of
right-of-use assets
|
607.3
|
550.5
|
Retail effective tax
rate
|
26.4 %
|
27.0 %
|
Add: Retail
taxes
|
(429.6)
|
(499.9)
|
Retail
return
|
$
1,198.5
|
$
1,354.2
|
|
|
|
Average total
assets
|
$
21,884.0
|
$
21,491.6
|
Less: Average assets in
other operating segments
|
4,302.7
|
5,018.4
|
Average Retail
assets
|
$
17,581.3
|
$
16,473.2
|
Less:
|
|
|
Average Retail
intercompany adjustments1
|
3,542.8
|
3,432.5
|
Average Retail trade
payables and accrued liabilities3
|
2,989.7
|
2,583.5
|
Average Franchise Trust
assets
|
474.7
|
482.1
|
Average Retail excess
cash
|
—
|
167.4
|
Average Retail
invested capital
|
$
10,574.1
|
$
9,807.7
|
Retail
ROIC
|
11.3 %
|
13.8 %
|
1
|
Intercompany
adjustments include intercompany income received from CT
REIT which is included in the Retail segment, and intercompany
investments made by the Retail segment in CT REIT and
CTFS.
|
2
|
Excludes
Franchise Trust.
|
3
|
Trade payables and
accrued liabilities include trade and other payables, short-term
derivative liabilities, short-term provisions and income tax
payables.
|
Operating Capital Expenditures
Operating capital expenditures is a non-GAAP financial measure.
For more information about this measure, see section 9.1 of the
Company's Q1 2023 MD&A.
The following table reconciles total additions from the
Investing activities reported in the Consolidated Statement of Cash
Flows to Operating capital expenditures:
(C$ in
millions)
|
Q1
2023
|
Q1 2022
|
Total
additions1
|
$
129.1
|
$
160.0
|
Add: Accrued
additions
|
(10.8)
|
(5.7)
|
Less:
|
|
|
Business combinations,
intellectual properties and tenant
allowances
|
—
|
—
|
CT REIT acquisitions
and developments excluding vend-ins from
CTC
|
11.6
|
12.3
|
Operating capital
expenditures
|
$
106.7
|
$
142.0
|
1This line appears on the
Consolidated Statement of Cash Flows under Investing
activities.
|
B) Supplementary Financial Measures and Ratios
The measures below are supplementary financial measures.
See Section 9.2 (Supplementary
Financial Measures) of the Company's Q1 2023 MD&A for
information on the composition of these measures.
- Consolidated retail sales
- Consolidated comparable sales
- Revenue (excluding Petroleum)
- Retail revenue (excluding Petroleum)
- Retail sales and retail sales (excluding Petroleum)
- Canadian Tire Retail comparable and retail sales
- SportChek comparable and retail sales
- Mark's comparable and retail sales
- Retail gross margin (excluding Petroleum)
- Gross Average Accounts Receivables (GAAR)
- Owned Brands sales
- Credit card sales growth
- Average account balance
2)
Change in Accounting Estimate
The Company's contract with its Dealers governs how margin and
expenses are shared between the two groups.
Beginning in the first quarter of 2023, the Company implemented
a change to accounting estimates associated with one component of
the contract, the MSA with the Dealers. The Company already records
a portion of its margin relating to revenue and margin on shipments
to its Dealers in the quarter incurred, but the majority of the MSA
has historically been accrued in the fourth quarter of every
year.
Effective this quarter, the Company will begin to record the MSA
throughout the year to better reflect the pattern over which the
MSA is earned. This change simply reflects a change in the timing
of this revenue and will result in less quarterly fluctuation in
Retail segment gross margin and income before income taxes
throughout the year. This change impacts quarterly results. There
is no change to the annual reported figures.
The change in accounting estimate had a $51.8 million impact on revenue and income before
income taxes, and 120 bps impact on Retail segment gross margin
rate excluding Petroleum during the first quarter of 2023.
Excluding the change in accounting estimate relating to the
Company's MSA with its Dealers, consolidated revenue was down
$182.0 million, Retail segment gross
margin rate excluding Petroleum was down 17 bps, and consolidated
income before income taxes was down $280.1
million.
To view a PDF version of Canadian Tire Corporation's full
quarterly earnings report please see:
https://mma.prnewswire.com/media/2074582/CANADIAN_TIRE_CORPORATION__LIMITED_Canadian_Tire_Corporation_Rep.pdf
FORWARD-LOOKING STATEMENTS
This press release contains information that may constitute
forward-looking information within the meaning of applicable
securities laws. Forward-looking information provides insights
regarding management's current expectations and plans and allows
investors and others to better understand the Company's anticipated
financial position, results of operations and operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes. Although the Company believes that
the forward-looking information in this press release is based on
information, assumptions and beliefs that are current, reasonable,
and complete, such information is necessarily subject to a number
of business, economic, competitive and other risk factors that
could cause actual results to differ materially from management's
expectations and plans as set forth in such forward-looking
information. The Company cannot provide assurance that any
financial or operational performance, plans, or aspirations
forecast will actually be achieved or, if achieved, will result in
an increase in the Company's share price. For information on the
material risk factors and uncertainties and the material factors
and assumptions applied in preparing the forward-looking
information that could cause the Company's actual results to differ
materially from predictions, forecasts, projections, expectations
or conclusions, refer to section 10.0 (Key Risks and Risk
Management) of the Company's Q1 2023 MD&A as well as CTC's
other public filings, available at http://www.sedar.com and at
https://investors.canadiantire.ca. The Company 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 May 11, 2023. 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.
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 Company's 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.
FOR MORE INFORMATION
Media: Stephanie Nadalin, (647) 271-7343,
stephanie.nadalin@cantire.com
Investors: Karen Keyes, (647)
518-4461, karen.keyes@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED