- Same store sales up across all retail banners; Canadian Tire Retail up 2.0%, FGL Sports up 6.3%, Mark's up 4.3%
- Diluted EPS up 11.5% to $1.79 or 15.7% adjusted
- Retail segment earnings up 19.4%; Financial Services earnings up 8.5%
- Annual dividend increased 25% from $1.40 to $1.75 per share
- Stephen Wetmore, Chief Executive Officer, appoints Michael Medline as President of Canadian Tire Corporation
TORONTO, Nov. 7, 2013 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.a) today released third quarter results for the period ended September 28, 2013, reflecting strong earnings across the enterprise.
"Our financial performance highlighted a successful quarter and supports our decision to increase our dividend by 25% and to raise our dividend payout ratio," said Stephen Wetmore, Chief Executive Officer, Canadian Tire Corporation. "We look forward to serving our customers as we head into our biggest quarter of the year."
The Company delivered retail sales growth of 3.1% with positive contributions from all retail banners. Consolidated revenue increased 4.5%.
Consolidated net income grew 10.7% compared to Q3 2012 due in part to strong margin performance across the Retail and Financial Services segments. Diluted earnings per share increased to $1.79, up 11.5% over Q3 2012 and increased 15.7% after normalizing for the one-time costs associated with the formation of CT Real Estate Investment Trust (CT REIT) and the impact of the FGL Sports banner rationalization in Q3 2012.
"This has been a particularly strong quarter for our Retail businesses. Performances in our Sports and Apparel businesses continue to show strength and I'm encouraged by the continued sales momentum in our Automotive business," continued Wetmore.
Appointment of President, Canadian Tire Corporation
Canadian Tire also announced today the appointment of Michael Medline as President of Canadian Tire Corporation.
"I am very pleased to announce Michael's expanded role with our company," said Mr. Wetmore. "Michael's knowledge of our company, and his exceptional performance as President of FGL Sports and Mark's, uniquely qualify him to take on these additional responsibilities."
Mr. Medline will take over operational responsibilities for Canadian Tire Corporation, including overseeing all of the company's business units (Canadian Tire, FGL Sports, Mark's and Canadian Tire Financial Services), reporting to Chief Executive Officer, Stephen Wetmore.
Most recently the President of FGL Sports and Mark's, Mr. Medline's 13 year career with CTC has included overseeing a revamped strategy for the automotive business, leading the company's corporate services group as Chief Corporate Officer and serving as a director on the Board of Canadian Tire Bank. In addition, Mr. Medline has led all of the company's acquisitions and integration efforts in the last 11 years, including Mark's, FGL Sports and Pro Hockey Life.
| Consolidated financial results1 | |||||||||||
| (C$ in millions, except per share amounts) | Q3 2013 | Q3 2012 | Change | YTD Q3 2013 | YTD Q3 2012 | Change | |||||
| Retail sales | $ | 3,261.6 | $ | 3,162.5 | 3.1% | $ | 9,244.2 | $ | 9,050.2 | 2.1% | |
| Revenue | 2,956.0 | 2,829.8 | 4.5% | 8,456.9 | 8,260.5 | 2.4% | |||||
| Net income | 145.5 | 131.4 | 10.7% | 373.4 | 336.1 | 11.1% | |||||
| Basic earnings per share | 1.81 | 1.61 | 12.3% | 4.62 | 4.13 | 12.0% | |||||
| Diluted earnings per share | 1.79 | 1.61 | 11.5% | 4.60 | 4.11 | 11.9% | |||||
| 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 9.3 in the Company's Q3 2013 MD&A for further information. |
Retail
Sales at the Canadian Tire retail banner increased 2.8% and same store sales increased 2.0% in the quarter driven by strong performances in automotive, seasonal and kitchen categories. Sales in the automotive category were higher in light auto parts and auto maintenance as well as in hard parts due to increases in labour service. Positive customer acceptance of Living and Pro Shop merchandising and assortments contributed to strong sales in the quarter.
FGL Sports' retail sales increased 4.2% over the prior year reflecting the acquisition of Pro Hockey Life Sporting Goods Inc. and despite the net closure of over 50 stores related to the banner rationalization initiative that was completed in Q1 2013. Same store sales increased 6.3% largely reflecting continued strength at Sport Chek, which saw same store sales increase by 9.1% as a result of strong sales in equipment, apparel and footwear.
At Mark's, retail sales grew 4.7% and same store sales increased 4.3%, reflecting strong sales across all categories, particularly in industrial apparel and accessories and industrial footwear.
Petroleum retail sales increased 3.1% due primarily to higher gas prices over the same period in 2012, and the addition of seven incremental sites which contributed to higher gas volumes.
Consolidated gross margin increased $70.1 million or 8.2%. Consolidated gross margin rate increased 108 basis points reflecting strong margin performance across the retail banners including a shift in sales to higher-margin products in key categories at Canadian Tire and stronger sell-through of regularly priced merchandise at Mark's. Strong margin performance at Financial Services was primarily related to higher interest revenue and a lower write-off rate.
Retail segment income before income taxes of $126.1 million was up $20.5 million or 19.4% compared to the previous year.
Financial Services
Financial Services results reflect another quarter of strong year-over-year performance. Revenue increased 5.0% over the prior year due to increased interest income generated on higher credit card receivables. Income before income taxes increased 8.5% in the quarter due to credit card receivables growth and favourable funding costs, partly offset by operating expenses related to account acquisition.
Capital Expenditures
Capital expenditures, while in line with the Company's 2013 plan, increased $141.5 million year-over-year due primarily to the purchase of land for potential future distribution capacity and increased capital spending on real estate projects and digital initiatives announced earlier in the year.
CT Real Estate Investment Trust Update
Subsequent to the end of the quarter, CT REIT completed its initial public offering of 30,302,500 trust units for $303.0 million which included the exercise of a $39.5 million over-allotment option. CT REIT commenced trading on the Toronto Stock Exchange on October 23, 2013 under the symbol "CRT.UN."
Quarterly Dividend
The Company announced earlier today that it has modified its dividend policy for 2014 to pay 25% to 30% of prior year normalized basic net earnings per share, after giving consideration to the period end cash position and future cash flow requirements. In addition, the Company also announced that it has declared a 25% increase in the quarterly dividend, to $0.4375 per share, on each Common and Class A Non-Voting share. The dividend is payable on March 1, 2014 to Common and Class A shareholders of record as of January 31, 2014. The dividend is considered an "eligible dividend" for tax purposes.
Dividends declared on Common and Class A Non-Voting shares in the third quarter of 2013 of $0.35 per share are payable on December 1, 2013 to shareholders of record as of October 31, 2013.
The Company's third quarter report will be available on the Investor Relations section of the Company's website at corp.canadiantire.ca and will be filed with the System for Electronic Disclosure and Retrieval (SEDAR) and available at www.sedar.com.
In order to more closely align the timing of the filing of documents with the announcement of results, the Company expects to report fourth quarter and audited 2013 full-year results and file the associated disclosure documents on SEDAR (including annual Financial Statements and Management's Discussion and Analysis) on Thursday, February 13, 2014. Timing of the disclosure will be confirmed via a media advisory in January 2014.
Please refer to Management's Discussion and Analysis for further detail and information on the following charts.
Consolidated financial results1
| (C$ in millions, except per share amounts) | Q3 2013 | Q3 2012 | Change | YTD Q3 2013 | YTD Q3 2012 | Change | ||||
| Retail sales2,3 | $ | 3,261.6 | $ | 3,162.5 | 3.1% | $ | 9,244.2 | $ | 9,050.2 | 2.1% |
| Revenue | $ | 2,956.0 | $ | 2,829.8 | 4.5% | $ | 8,456.9 | $ | 8,260.5 | 2.4% |
| Gross margin | $ | 929.1 | $ | 859.0 | 8.2% | $ | 2,639.8 | $ | 2,503.5 | 5.4% |
| Other (expense) income | (0.8) | 0.8 | (206.4)% | 3.2 | 0.5 | 591.4% | ||||
| Operating expenses (excluding depreciation & amortization) | 609.0 | 564.7 | 7.8% | 1,788.3 | 1,703.3 | 5.0% | ||||
| EBITDA4 | $ | 319.3 | $ | 295.1 | 8.2% | $ | 854.7 | $ | 800.7 | 6.8% |
| Depreciation and amortization | 88.1 | 84.1 | 4.8% | 255.6 | 247.3 | 3.4% | ||||
| Net finance costs | 25.1 | 31.7 | (21.0)% | 79.9 | 92.8 | (13.9)% | ||||
| Income before income taxes | $ | 206.1 | $ | 179.3 | 14.9% | $ | 519.2 | $ | 460.6 | 12.7% |
| Effective tax rate | 29.4% | 26.7% | 28.1% | 27.0% | ||||||
| Net income | $ | 145.5 | $ | 131.4 | 10.7% | $ | 373.4 | $ | 336.1 | 11.1% |
| Basic earnings per share | $ | 1.81 | $ | 1.61 | 12.3% | $ | 4.62 | $ | 4.13 | 12.0% |
| Diluted earnings per share | $ | 1.79 | $ | 1.61 | 11.5% | $ | 4.60 | $ | 4.11 | 11.9% |
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 9.3 of the Q3 2013 MD&A for further information. |
| 2 | Retail sales for the prior year have been restated. Refer to section 9.3 of the Q3 2013 MD&A for further information. |
| 3 | Refer to sections 2.3 and 9.3 of the Q3 2013 MD&A for further information on retail sales. |
| 4 | Non-GAAP measure. Refer to non-GAAP measures in section 9.3 of the Q3 2013 MD&A for further information. |
Retail Segment financial results1
| (C$ in millions) | Q3 2013 | Q3 2012 | Change | YTD Q3 2013 | YTD Q3 2012 | Change | ||||
| Retail sales2,3 | $ | 3,261.6 | $ | 3,162.5 | 3.1% | $ | 9,244.2 | $ | 9,050.2 | 2.1% |
| Retail return on invested capital (ROIC) | 7.48% | 7.59% | N/A | N/A | ||||||
| Revenue | $ | 2,676.6 | $ | 2,564.4 | 4.4% | $ | 7,643.1 | $ | 7,480.1 | 2.2% |
| Gross margin | $ | 749.3 | $ | 689.8 | 8.6% | $ | 2,107.0 | $ | 2,008.4 | 4.9% |
| Other (expense) income | (0.8) | 0.7 | (238.9)% | 3.1 | (2.0) | 245.3% | ||||
| Operating expenses (excluding depreciation & amortization) | 520.0 | 484.9 | 7.2% | 1,539.2 | 1,466.6 | 5.0% | ||||
| EBITDA4 | $ | 228.5 | $ | 205.6 | 11.1% | $ | 570.9 | $ | 539.8 | 5.8% |
| Depreciation and amortization | 85.6 | 81.6 | 4.9% | 247.7 | 240.0 | 3.2% | ||||
| Net finance (income) costs | 16.8 | 18.4 | (9.6)% | 52.3 | 54.4 | (4.2)% | ||||
| Income before income taxes | $ | 126.1 | $ | 105.6 | 19.4% | $ | 270.9 | $ | 245.4 | 10.4% |
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 9.3 of the Q3 2013 MD&A for further information. |
| 2 | Retail sales for the prior year have been restated. Refer to section 9.3 of the Q3 2013 MD&A for further information. |
| 3 | Refer to sections 2.3 and 9.3 of the Q3 2013 MD&A for further information on retail sales. |
| 4 | Non-GAAP measure. Refer to non-GAAP measures in section 9.3 of the Q3 2013 MD&A for further information. |
Retail Segment - by banner1
| (C$ in millions, except number of stores and gas bars) | Q3 2013 | Q3 2012 | Change | YTD Q3 2013 | YTD Q3 2012 | Change | ||||
| CTR retail sales growth | 2.8% | 0.3% | 1.8% | 1.4% | ||||||
| CTR same store sales growth | 2.0% | (0.2)% | 0.9% | 0.9% | ||||||
| CTR revenue | $ | 1,479.6 | $ | 1,395.4 | 6.0% | $ | 4,322.1 | $ | 4,231.5 | 2.1% |
| Number of CTR stores | 491 | 487 | 491 | 487 | ||||||
| Number of PartSource stores | 88 | 87 | 88 | 87 | ||||||
| Canadian Tire Petroleum retail sales growth | 3.1% | 2.4% | 1.5% | 3.7% | ||||||
| Canadian Tire Petroleum gasoline volume (litres) growth | 0.6% | 1.1% | 0.7% | 0.9% | ||||||
| Canadian Tire Petroleum revenue | $ | 558.3 | $ | 543.4 | 2.7% | $ | 1,555.2 | $ | 1,539.8 | 1.0% |
| Canadian Tire Petroleum gross margin dollars | $ | 40.8 | $ | 39.8 | 2.4% | $ | 110.4 | $ | 109.8 | 0.5% |
| Number of gas bars | 300 | 293 | 300 | 293 | ||||||
| FGL Sports retail sales growth | 4.2% | 4.3% | 3.7% | 4.7% | ||||||
| FGL Sports same store sales growth | 6.3% | 4.0% | 5.5% | 4.9% | ||||||
| FGL Sports revenue | $ | 432.8 | $ | 429.1 | 0.8% | $ | 1,137.6 | $ | 1,106.1 | 2.8% |
| Number of FGL Sports stores | 415 | 471 | 415 | 471 | ||||||
| Mark's retail sales growth | 4.7% | 0.9% | 4.4% | 4.2% | ||||||
| Mark's same store sales growth | 4.3% | 1.7% | 4.2% | 3.8% | ||||||
| Mark's revenue | $ | 210.4 | $ | 200.2 | 5.1% | $ | 641.5 | $ | 614.1 | 4.5% |
| Number of Mark's stores | 386 | 387 | 386 | 387 |
| 1 | For financial definitions refer to the Glossary of Terms on pages 124-127 of the 2012 Annual Report and section 9.3 of the Q3 2013 MD&A for further information. |
Financial Services segment financial results1
| (C$ in millions) | Q3 2013 | Q3 2012 | Change | YTD Q3 2013 | YTD Q3 2012 | Change | ||||
| Gross average accounts receivables (GAAR) | $ | 4,429.7 | $ | 4,116.1 | 7.6% | $ | 4,330.0 | $ | 4,058.2 | 6.7% |
| Net credit card write-off rate | 5.74% | 6.92% | n/a | n/a | ||||||
| Return on receivables | 7.21% | 6.68% | n/a | n/a | ||||||
| Revenue | $ | 262.1 | $ | 249.7 | 5.0% | $ | 766.3 | $ | 733.9 | 4.4% |
| Gross margin dollars | 151.9 | 137.9 | 10.0% | 450.0 | 404.2 | 11.3% | ||||
| Operating expenses | 72.8 | 64.7 | 12.2% | 203.2 | 192.2 | 5.7% | ||||
| Income before income taxes | $ | 80.0 | $ | 73.7 | 8.5% | $ | 248.3 | $ | 215.2 | 15.3% |
| 1 | Refer to section 4.2 and 4.4.2 of the Q3 2013 MD&A for further information. |
To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: http://files.newswire.ca/116/Q3MDAwithFinancials.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.
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 November 7, 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, Intersport, Pro Hockey Life and Atmosphere), Mark's and Canadian Tire Financial Services. 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 and CT REIT. Over 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. For more information, visit Corp.CanadianTire.ca.
PDF available at: http://stream1.newswire.ca/media/2013/11/07/20131107_C5063_DOC_EN_33074.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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