Canadian Tire Corporation Reports Second Quarter 2024 Results

Consolidated comparable sales¹ were down 4.6%, as consumers continued to prioritize essential spending in Canadian Tire Retail (CTR)’s most discretionary quarter.

Diluted and Normalized Earnings Per Share¹ (EPS) were $3.56, compared to $1.76 and $3.08 on a normalized basis in Q2 2023.

Canadian Tire Corporation, Limited (“CTC” or the “Company”) released its second quarter results for the period ended June 29, 2024.

“We delivered well in the quarter, as top-line pressures were balanced by strong margin and cost control, improving our retail profitability,” said Greg Hicks, President and CEO, Canadian Tire Corporation. “In a quarter that traditionally skews heavily to discretionary purchases, consumers remained cautious and weather conditions compounded declines. Yet, Canadians continued to turn to our banners for new products, seasonal favourites, and innovative Triangle Rewards campaigns – with categories and regions of our business providing us positive signals.”

“Looking to the second half of the year, we are well positioned with the right assortment and inventory to meet the needs of Canadians and are confidently leveraging investments to strengthen our connection with customers, online and in stores.”

Second Quarter Highlights

• Consolidated comparable sales were down 4.6%. The consumer demand environment remained challenging, compounded by cold and wet weather, contributing to sales declines in all regions outside Atlantic Canada.
  • CTR comparable sales¹ were down 5.6%, compared to growth of 0.1% in Q2 2023. Automotive grew, offset by declines in other divisions.
  • SportChek comparable sales¹ were down 0.9%, helped by strong sales of footwear, while cycling and casual clothing experienced the most marked decline.
  • Mark’s comparable sales¹ were down 0.8%. Outerwear categories grew, while sales of men’s shorts and accessories and industrial wear were down compared to 2023.

• Loyalty sales outperformed non-loyalty sales, with record penetration rates at each banner. Innovative incremental Triangle promotions across CTC banners and the Company’s strong Petro-Canada partnership were competitive differentiators. These resulted in elevated loyalty traffic, engagement, and new customer acquisition, driving strong electronic Canadian Tire Money (eCTM) issuance and redemption.
• In-store net promoter score (NPS) was up for the fourth and thirteenth consecutive quarters, respectively, at SportChek and Mark’s; store investments and a focus on strong in-stock availability of key brands drove positive customer sentiment.
• Retail gross margin rate (excluding Petroleum)¹ remained strong, up 36 bps to 36.0%. Margin improvement at CTR and Helly Hansen offset higher promotional intensity. Favourable freight rates also contributed to the improvement.
• Consolidated income before income taxes (IBT) was $295.8 million, compared to $173.9 million and $281.8 million on a normalized basis¹ in the prior year:
  • Retail IBT was $170.1 million, up $84.5 million or $9.9 million on a normalized basis¹. Significant supply chain reductions and tighter cost control led to lower operating expenses, which more than offset lower Retail revenue and margin dollars.  
  • Financial Services IBT was $88.5 million, compared to $55.4 million or $88.7 million on a normalized basis¹ in the prior year. Higher revenue was offset by lower gross margin, with net impairment losses and funding costs trending higher, as expected. Gross Average Accounts Receivable¹ (GAAR) was up 3.2%, mainly due to higher average account balances¹, which were up 3.4%, while card spend and average accounts were down slightly.
• CTC continues to make solid progress on the key areas within its Better Connected strategy to enhance the customer experience and drive efficiencies, including:
  • Prioritizing the integration of in-store technology and improving access to assortment through the refresh, expansion, or replacement of approximately 20% of CTR stores since March 2022, including 18 in Q2 2024. CTC has also opened new Pro Hockey Life stores in four key Ontario hockey communities and seven new Mark’s stores across Ontario, Alberta, and British Columbia. 
  • Completing the supply chain rollout of goods-to-person automation at the Company’s Calgary and Montreal Distribution Centres by the end of Q3 2024.
  • Enhancing broadband connectivity at over 800 retail locations, or over half the Company’s retail store network, improving IT resiliency and security.  
  • Building traction with key Owned Brands such as MotoMaster, Vida by Paderno, Sherwood, and Forward with Design, to offset discretionary category headwinds and hold market share, while maintaining the gross margin differential relative to National Brands.  

Consolidated Overview

• Revenue was $4,132.7 million, down 2.9% compared to $4,255.8 million in the same period last year; Revenue (excluding Petroleum)¹ was $3,581.8 million, a decrease of 3.4% compared to the prior year.
• Consolidated income before income taxes was $295.8 million, up $121.9 million compared to the prior year, due in part to the costs related to the A.J. Billes Distribution Centre fire and the GST/HST-related charge recorded in the prior year. On a normalized basis, consolidated income before income taxes was up $14.0 million.
• Diluted EPS was $3.56, compared to $1.76 or $3.08 on a normalized basis in the prior year.
• Refer to the Company’s Q2 2024 MD&A section 4.1.1 for information on normalizing items and additional details on events that have impacted the Company in the quarter.

Retail Segment Overview

• Retail sales¹ were $5,000.2 million, down 4.1%, compared to the second quarter of 2023. Retail sales (excluding Petroleum)¹ and consolidated comparable sales were down 4.7% and 4.6%, respectively.
• CTR retail sales¹ were down 5.5% and comparable sales were down 5.6% over the same period last year.
• SportChek retail sales¹ decreased 1.7% over the same period last year, and comparable sales were down 0.9%.
• Mark’s retail sales¹ decreased 0.9% over the same period last year, and comparable sales were down 0.8%.
• Helly Hansen revenue was up 1.2% compared to the same period in 2023.
• Retail revenue was $3,754.8 million, a decrease of $141.3 million, or 3.6%, compared to the prior year; Retail revenue (excluding Petroleum)¹ was down 4.3%.
• Retail gross margin was $1,208.8 million, down 3.4% compared to the second quarter of the prior year, and down 3.3% excluding Petroleum¹; Retail gross margin rate (excluding Petroleum) increased 36 bps to 36.0%.
• Retail IBT was $170.1 million in Q2 2024, compared to $85.6 million or $160.2 million on a normalized basis in the prior year.
• Retail Return on Invested Capital (ROIC)¹ calculated on a trailing twelve-month basis, was 8.5% at the end of the second quarter of 2024, compared to 11.2% at the end of the second quarter of 2023, due to the decrease in earnings over the prior period.
• Refer to the Company’s Q2 2024 MD&A sections 4.1.1 for information on normalizing items and additional details on events that have impacted the Retail segment in the quarter.

Financial Services Overview

• GAAR was up 3.2% relative to the prior year, mainly due to growth in average account balances, which were up 3.4%. Average active accounts were unchanged.  
• Financial Services gross margin was $178.9 million, essentially unchanged from the prior year; higher net impairment losses and funding costs were partially offset by strong revenue growth.
• Financial Services IBT was $88.5 million, up significantly compared to $55.4 million in the prior year, which included the impact of a $33.3 million GST/HST-related charge. On a normalized basis, IBT was down slightly.
• Refer to the Company’s Q2 2024 MD&A section 4.1.1 for information on normalizing items and section 4.3.1 and 4.3.2 for additional details on events that have impacted the Financial Services segment in the quarter.

CT REIT Overview

• Adjusted Funds from Operations¹ (AFFO) per unit was up 3.6% compared to Q2 2023; diluted net income per unit was down 8.0%.
• Announced one new investment totalling $45.2 million, which is expected to add approximately 141,000 square feet of incremental gross leasable area upon completion.
• The sale of a redundant property in Chilliwack, BC, resulted in a one-time gain of $12.8 million to CTC on consolidation.
• For further information, refer to the Q2 2024 CT REIT earnings release issued on August 1, 2024.

Capital Allocation

    Capital Expenditures

• Operating capital expenditures¹ were $128.1 million in the quarter, $10.3 million lower than Q2 2023.
• Total capital expenditures were $139.8 million, compared to $148.2 million in Q2 2023.

    Quarterly Dividend

• The Company declared dividends payable to holders of Class A Non-Voting Shares and Common Shares of $1.750 per share, payable on December 1, 2024, to shareholders of record as of October 31, 2024. The dividend is considered an “eligible dividend” for tax purposes.

    Share Repurchases

• On November 9, 2023, as part of its capital management plan, the Company announced its intention to repurchase up to $200 million of its Class A Non-Voting Shares during 2024, in excess of the amount required for anti-dilutive purposes, pursuant to the Company’s Normal Course Issuer Bid in 2024. No such repurchases occurred during the quarter.

For the full second quarter results, 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 Company’s close to 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:

Stephanie Nadalin – Media – stephanie.nadalin@cantire.com – (647) 271-7343

Source: Canadian Tire Corporation Limited