- Same store sales up across key retail banners - CTR up 2.0%, FGL Sports up 7.2%, Mark's up 6.4%
- Diluted earnings per share up 4.4%, excluding the impact of one-time FGL Sports banner rationalization charges in the prior year
- Company announces intention to seek a financial partner for its $4.4 billion credit card portfolio
- Company announces REIT CEO and CFO
TORONTO, Aug. 8, 2013 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.a) today released second quarter results for the period ended June 29, 2013, reflecting strong sales and margin growth. The Company also announced its intention to seek a financial partner for its credit card portfolio and to enter into an arrangement if appropriate strategic and financial conditions are met.
Q2 EARNINGS
Consolidated revenue was up $29.9 million reflecting strong sales growth at FGL Sports and Mark's and increased shipments in key categories at CTR. Consolidated net income rose 15.8% compared to Q2 2012 to $154.9 million, due in part to the impact of FGL Sports banner rationalization charges in the previous year, as well as increased revenues and stronger margin contributions in the Retail segment and strong growth in the Financial Services business. Diluted earnings per share increased to $1.91, up 16.5% over Q2 2012. Normalizing for the one-time costs associated with the FGL Sports banner rationalization initiative, diluted earnings per share increased 4.4%.
"We are excited by this quarter's strong sales performance across our company, particularly in Sport Chek where we had exceptional sales growth," said Stephen Wetmore, President and CEO Canadian Tire Corporation. "Mark's and CTR also achieved strong sales reinforcing that our strategies in those businesses are delivering results. In addition, we continued to successfully manage our retail margins and benefited from another excellent quarter from Financial Services."
| (C$ in millions, except per share amounts) | Q2 2013 | Q2 2012 | Change | YTD Q2 2013 | YTD Q2 2012 | Change | ||||
| Retail sales1 | $ | 3,557.5 | $ | 3,483.4 | 2.1% | $ | 5,993.0 | $ | 5,898.6 | 1.6% |
| Revenue | 3,021.1 | 2,991.2 | 1.0% | 5,500.9 | 5,430.7 | 1.3% | ||||
| Net income | 154.9 | 133.7 | 15.8% | 227.9 | 204.7 | 11.3% | ||||
| Basic earnings per share | 1.92 | 1.64 | 16.5% | 2.82 | 2.51 | 12.0% | ||||
| Diluted earnings per share | 1.91 | 1.63 | 16.5% | 2.80 | 2.50 | 12.0% | ||||
| 1 Retail sales refer to the point of sale (i.e. cash register) value of all goods and services sold to retail customers at Canadian Tire Dealer-operated, Mark's, PartSource and FGL Sports franchisee-operated, Petroleum retailer-operated and corporate-owned stores across the retail banners and do not form part of the Company's consolidated financial statements. Revenue, as reported in the Company's consolidated financial statements, is primarily comprised of the sales of goods to Canadian Tire Dealers and to Mark's, PartSource and FGL Sports franchisees, the sale of gasoline through agents, and the sale of goods to retail customers by Mark's, PartSource and FGL Sports corporate-owned stores. Management believes that retail sales and related year-over-year comparisons provide meaningful information to investors and are expected and valued by them to help them assess the size and financial health of the retail network of stores; these measures also serve as an indicator of the strength of the Company's brand, which ultimately impacts its consolidated financial performance. Refer to sections 2.3 and 8.3 in the Company's Q2 2013 MD&A for further information. |
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Retail Segment Overview
Retail sales increased $74.1 million or 2.1% in the quarter despite the closure of over 80 FGL Sports stores and as a result of higher sales at CTR, Mark's and FGL Sports compared to the prior year.
CTR retail sales and same store sales increased 2.9% and 2.0% respectively in the quarter, led by strong sales performances across all divisions, particularly in Automotive and Living. Automotive service centres saw improved sales in "do it for me" parts and labour while automotive maintenance, light auto parts and car care and accessories also experienced strong sales in the quarter. Increased sales in non-seasonal businesses such as key kitchen and home organization categories also contributed to the positive sales results. In addition, solid sales in key seasonal categories such as backyard living and cycling also increased in May and June, offsetting the softness seen in the first four months of the year in these categories.
FGL Sports had another very successful quarter as the business continued to move ahead with the implementation of its growth, rebranding and sports partnerships strategy. At Sport Chek, the core corporate banner, sales were up 16% (same store sales up 10%). Overall at FGL Sports, same store sales were up 7.2% over last year and retail sales were up 1.4% despite over 80 fewer stores as a result of the Company's banner rationalization initiative in Q2 2012. Sales were strong across the country, especially in athletic apparel, running and training shoes and in sports equipment.
Retail sales at Mark's grew 6.5% while same store sales increased by 6.4%, driven in part by improved in-store presentation and product assortment and by increased sales in women's casual wear, industrial apparel and accessories. Sales results reflected the success of the new rebranded Mark's stores and significantly fewer clearance sales compared to the prior year. Sales were strongest in the first two months of the quarter with positive sales performance spread across all regions of the country.
As part of ongoing efforts to manage the balance between sales and margins, the Company achieved higher gross margins in its Retail segment due to less discounting and a more favourable mix of products.
Retail segment income before income taxes was up 5.5% (down 11.8% excluding one-time charges related to the FGL Sports banner rationalization initiative) compared to the prior year. Increases in Retail segment revenue and gross margin were impacted by lower volumes and margins in the Petroleum business. Higher operating expenses in the segment was largely related to the timing of marketing expenditures and the planned incremental investment in advertising and marketing tied to a number of the Company's major strategic initiatives.
Financial Services
Financial Services continued to be a strong contributor in the second quarter. Financial Services' income before income taxes increased 32.8% compared to the prior year. The increase was due to higher revenue related to credit card receivables growth reflecting the acquisition of new customers as well as improved write-off performance.
Real Estate Investment Trust Update
In the first quarter of 2013, the Company announced its intention to create a Real Estate Investment Trust (REIT) to acquire a geographically diverse portfolio of approximately 18 million square feet of Canadian Tire's real estate assets. Since that announcement, work has progressed according to plan. The Company expects to complete the Initial Public Offering (IPO) of the REIT in the fall of 2013, subject to prevailing market conditions and receipt of required regulatory approvals, including approval to list the units on the Toronto Stock Exchange.
A highly experienced senior management team for the REIT is now in place. Ken Silver, President, Canadian Tire Real Estate Limited, has been selected as Chief Executive Officer for the REIT. In his former position, he had responsibility for Canadian Tire Corporation's real estate portfolio in addition to a number of other corporate responsibilities. Mr. Silver has more than 20 years of real estate experience in Canada and the United States.
The Company also announced that Louis Forbes has been selected as Chief Financial Officer for the REIT. Mr. Forbes is an experienced executive with over 20 years in the real estate industry and has most recently served as the Executive Vice President and Chief Financial Officer of Primaris, a Canadian-based REIT organization with approximately $5 billion in assets.
Capital Expenditures
Capital expenditures for the second quarter were $80.7 million compared to prior year spending of $68.8 million. Capital expenditures, while in line with the Company's 2013 plan, increased compared to the prior year primarily due to increased capital spending on real estate projects including costs associated with new FGL Sports banner store openings, Smart store conversions at CTR and store network rebranding and other activity at Mark's.
Quarterly Dividend
Canadian Tire Corporation has declared a quarterly dividend of 35 cents per share on each Common and Class A Non-Voting share. The dividend is payable December 1, 2013 to Common and Class A shareholders of record as of October 31, 2013. The dividend is considered an "eligible dividend" for tax purposes.
Please refer to Management's Discussion and Analysis for further detail and information on the charts below.
INTENTION TO SEEK FINANCIAL PARTNER FOR $4.4 BILLION CREDIT CARD PORTFOLIO
The Company announced that it intends to seek a financial partner for the credit card assets and related funding liabilities of its Financial Services business and to enter into an arrangement if appropriate strategic and financial conditions are met.
A new arrangement would allow the Company to continue to enjoy the meaningful financial and strategic benefits of its highly-successful Financial Services business while further reducing the financing risk of funding its credit card assets. The Company believes that the strong performance of its portfolio and current capital market conditions will make the Canadian Tire credit card portfolio an attractive asset for a potential partnership.
"In recent years, we have been working to better integrate Financial Services with our Retail operations," Wetmore said. "As a result of that work, we are now well-positioned to explore an arrangement that would allow us to increase our financial flexibility while continuing to enjoy the substantial contributions of our Financial Services business."
Any arrangement would be expected to result in minimal impact on jobs and existing operations.
| Consolidated financial results1 | ||||||||||
| (C$ in millions, except per share amounts) | Q2 2013 | Q2 2012 | Change | YTD Q2 2013 | YTD Q2 2012 | Change | ||||
| Retail sales2,3 | $ | 3,557.5 | $ | 3,483.4 | 2.1% | $ | 5,993.0 | $ | 5,898.6 | 1.6% |
| Revenue | $ | 3,021.1 | $ | 2,991.2 | 1.0% | $ | 5,500.9 | $ | 5,430.7 | 1.3% |
| Gross margin | $ | 944.0 | $ | 895.5 | 5.4% | $ | 1,710.7 | $ | 1,644.5 | 4.0% |
| Other income (expense) | (3.7) | (4.2) | (10.7)% | 4.0 | (0.3) | 1374.9% | ||||
| Operating expenses (excluding depreciation & amortization) | 616.6 | 592.1 | 4.1% | 1,179.3 | 1,138.6 | 3.6% | ||||
| EBITDA4 | $ | 323.7 | $ | 299.2 | 8.2% | $ | 535.4 | $ | 505.6 | 5.9% |
| Depreciation and amortization | 84.8 | 83.9 | 1.1% | 167.5 | 163.2 | 2.6% | ||||
| Net finance (income) costs | 26.1 | 31.5 | (16.9)% | 54.8 | 61.1 | (10.2)% | ||||
| Income before income taxes | $ | 212.8 | $ | 183.8 | 15.8% | $ | 313.1 | $ | 281.3 | 11.3% |
| Effective tax rate | 27.2% | 27.3% | 27.2% | 27.3% | ||||||
| Net income | $ | 154.9 | $ | 133.7 | 15.8% | $ | 227.9 | $ | 204.7 | 11.3% |
| Basic earnings per share | $ | 1.92 | $ | 1.64 | 16.5% | $ | 2.82 | $ | 2.51 | 12.0% |
| Diluted earnings per share | $ | 1.91 | $ | 1.63 | 16.5% | $ | 2.80 | $ | 2.50 | 12.0% |
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 8.3 of the Q2 2013 MD&A for further information. |
| 2 | Retail sales for the prior year have been restated. Refer to section 8.3 for more details. |
| 3 | Refer to sections 2.3 and 8.3 of the Q2 2013 MD&A for further information on retail sales. |
| 4 | Non-GAAP measure. Refer to non-GAAP measures in section 8.3 for more details. |
| Retail Segment financial results1 | |||||||||||||||
| (C$ in millions) | Q2 2013 | Q2 2012 | Change | YTD Q2 2013 | YTD Q2 2012 | Change | |||||||||
| Retail sales2,3 | $ | 3,557.5 | $ | 3,483.4 | 2.1% | $ | 5,993.0 | $ | 5,898.6 | 1.6% | |||||
| Retail return on invested capital (ROIC) | 7.34% | 7.88% | N/A | N/A | |||||||||||
| Revenue | $ | 2,749.6 | $ | 2,731.6 | 0.7% | $ | 4,966.5 | $ | 4,915.7 | 1.0% | |||||
| Gross margin | 758.2 | 727.6 | 4.2% | 1,357.7 | 1,318.6 | 3.0% | |||||||||
| Other income (expense) | (3.6) | (4.7) | (19.9)% | 3.9 | (2.7) | 243.9% | |||||||||
| Operating expenses (excluding depreciation & amortization) | 532.9 | 507.4 | 5.0% | 1,019.2 | 981.7 | 3.8% | |||||||||
| EBITDA4 | 221.8 | 215.5 | 2.9% | 342.5 | 334.2 | 2.5% | |||||||||
| Depreciation and amortization | 81.9 | 81.5 | 0.5% | 162.1 | 158.4 | 2.3% | |||||||||
| Net finance (income) costs | 18.0 | 18.7 | (3.2)% | 35.5 | 36.0 | (1.4)% | |||||||||
| Income before income taxes | 121.8 | 115.3 | 5.5% | 144.8 | 139.8 | 3.7% | |||||||||
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 8.3 of the Q2 2013 MD&A for further information. | |||||||||
| 2 | Retail sales for the prior year have been restated. Refer to section 8.3 for more details. | |||||||||
| 3 | Refer to sections 2.3 and 8.3 of the Q2 2013 MD&A for further information on retail sales. | |||||||||
| 4 | Non-GAAP measure. Refer to non-GAAP measures in section 8.3 for more details. | |||||||||
| Retail Segment - by banner1 | ||||||||||||||||
| (C$ in millions, except number of stores and gas bars) | Q2 2013 | Q2 2012 | Change | YTD Q2 2013 | YTD Q2 2012 | Change | ||||||||||
| CTR retail sales growth | 2.9% | 1.0% | 1.2% | 2.0% | ||||||||||||
| CTR same store sales growth | 2.0% | 0.4% | 0.3% | 1.5% | ||||||||||||
| CTR revenue3 | $ | 1,668.2 | $ | 1,651.3 | 1.0% | $ | 2,842.5 | $ | 2,836.1 | 0.2% | ||||||
| Number of CTR stores2 | 490 | 487 | 490 | 487 | ||||||||||||
| Number of PartSource stores | 87 | 87 | 87 | 87 | ||||||||||||
| Canadian Tire Petroleum retail sales growth | (2.3)% | 3.7% | 0.6% | 4.4% | ||||||||||||
| Canadian Tire Petroleum gasoline volume (litres) growth | (0.9)% | 3.3% | 0.8% | 0.8% | ||||||||||||
| Canadian Tire Petroleum revenue | $ | 511.4 | $ | 526.7 | (2.9)% | $ | 996.9 | $ | 996.4 | 0.1% | ||||||
| Canadian Tire Petroleum gross margin dollars | $ | 36.5 | $ | 38.0 | (3.9)% | $ | 69.6 | $ | 70.0 | (0.6)% | ||||||
| Number of gas bars | 300 | 291 | 300 | 291 | ||||||||||||
| FGL Sports retail sales growth | 1.4% | 3.3% | 3.4% | 4.8% | ||||||||||||
| FGL Sports same store sales growth | 7.2% | 4.6% | 5.0% | 5.7% | ||||||||||||
| FGL Sports revenue | $ | 337.4 | $ | 335.2 | 0.7% | $ | 704.8 | $ | 677.0 | 4.1% | ||||||
| Number of FGL Sports stores | 413 | 501 | 413 | 501 | ||||||||||||
| Mark's retail sales growth | 6.5% | 5.2% | 4.3% | 5.9% | ||||||||||||
| Mark's same store sales growth | 6.4% | 4.2% | 4.2% | 5.0% | ||||||||||||
| Mark's revenue | $ | 237.0 | $ | 222.4 | 6.6% | $ | 431.1 | $ | 413.9 | 4.2% | ||||||
| Number of Mark's stores2 | 385 | 386 | 385 | 386 | ||||||||||||
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 8.3 of the Q2 2013 MD&A for further information. |
| Financial Services segment financial results1 | ||||||||||||||||
| (C$ in millions) | Q2 2013 | Q2 2012 | Change | YTD Q2 2013 | YTD Q2 2012 | Change | ||||||||||
| Gross average accounts receivables (GAAR) | $ | 4,309.1 | $ | 4,044.2 | 6.6% | $ | 4,280.1 | $ | 4,029.2 | 6.2% | ||||||
| Net credit card write-off rate | 5.86% | 7.16% | n/a | n/a | ||||||||||||
| Return on receivables | 7.19% | 6.47% | n/a | n/a | ||||||||||||
| Revenue | $ | 254.2 | $ | 242.5 | 4.8% | $ | 504.2 | $ | 484.2 | 4.1% | ||||||
| Gross margin dollars | 158.3 | $ | 136.1 | 16.4% | $ | 298.1 | $ | 266.3 | 12.0% | |||||||
| Operating expenses | 67.5 | $ | 68.3 | (1.0)% | $ | 130.4 | 127.5 | 2.4% | ||||||||
| Income before income taxes | 91.0 | $ | 68.5 | 32.8% | $ | 168.3 | $ | 141.5 | 18.9% | |||||||
To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: http://files.newswire.ca/116/Q2_2013.pdf
FORWARD-LOOKING STATEMENTS
This document contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. Forward-looking statements are presented for the purposes of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of the Company's anticipated financial position, results of operation and operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
All statements other than statements of historical facts included in this document may constitute forward-looking information, including but not limited to, statements concerning management's expectations relating to possible or assumed future prospects and results, our strategic goals and priorities, our actions and the results of those actions and the economic and business outlook for us. Often but not always, forward-looking information can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made.
By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's assumptions may not be correct and that the Company's expectations and plans will not be achieved. Without limiting the generality of the foregoing or the following, there can be no assurance that the Company ultimately will create a REIT or, if such a REIT is created, the final particulars thereof, including without limitation, the number, value or location of the properties that would be proposed to be transferred to the REIT, the size of the retained interest in the REIT that the Company would hold initially or in the future, and the other arrangements that would be proposed or exist as between the Company and the REIT. The Company's determination to create a REIT is subject to a number of risks and uncertainties, including without limitation, those attendant with due diligence, favourable market conditions, regulatory and third party approvals, as well as the further approval by the Canadian Tire Board of Directors. Although the Company announced its intention to seek a financial partner for its credit card assets and related funding liabilities of its Financial Services business, there is no assurance that the Company will find such a partner or that if it does, the timing, terms and conditions or impact, financially or otherwise, on the Company from such an arrangement, or whether any such arrangement or relationship would be acceptable to the Canadian Tire Board of Directors. Statements regarding reduced risk from such an arrangement are not assurances regarding the results of such an arrangement but represent management's goals in seeking a partner. Although the Company believes that the forward-looking information in this document is based on information and assumptions which are current, reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information for a variety of reasons. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - include (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of Canadian Tire to attract and retain quality employees, Dealers, Canadian Tire Petroleum agents and PartSource, Mark's Work Wearhouse and FGL Sports store operators and franchisees, as well as our financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at our stores or acquire our financial products and services; (d) our margins and sales and those of our competitors; (e) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business disruption, our relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by Canadian Tire and the cost of store network expansion and retrofits and (f) our capital structure, funding strategy, cost management programs and share price. We caution that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect our results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information.
For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the "Risk Factors" section of our Annual Information Form for fiscal 2012 and to sections 7.5.1.2 (Retail Segment Business Risks), 7.5.2.2 (Financial Services Segment Business Risks) and 11.0 (Enterprise Risk Management) and all subsections there under of our 2012 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.
Statements that include forward-looking information do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Company's business. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring after such statements are made.
The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. 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 12:00 p.m. ET on August 8, 2013. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at http://investors.canadiantire.ca, and will be available through replay at this website for 12 months.
ABOUT CANADIAN TIRE
Canadian Tire Corporation, Limited (TSX:CTC.a) (TSX:CTC) is a Family of Companies that includes Canadian Tire Retail, Partsource, Gas+, FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, S3 and Atmosphere), Mark's, Canadian Tire Financial Services, and Canadian Tire Jumpstart Charities. With nearly 1,700 retail and gasoline outlets from coast-to-coast, our primary retail business categories - Automotive, Living, Fixing, Playing and Apparel - are supported and strengthened by our Financial Services division. More than 85,000 people are employed across the Canadian Tire enterprise, which was founded in 1922 and remains one of Canada's most recognized and trusted brands. Canadian Tire Retail, Sport Chek and Sports Experts are proud to be Premier National Partners of the Canadian Olympic Team. For more information, visit Corp.CanadianTire.ca
PDF available at: http://stream1.newswire.ca/media/2013/08/08/20130808_C4702_DOC_EN_29682.pdf
SOURCE: CANADIAN TIRE CORPORATION, LIMITED
Media: Amy Cole, 416-544-7655, [email protected]
Investors: Lisa Greatrix, 416-480-8725, [email protected]
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