Execution of Better Connected strategy drove
customer engagement and growth across banners in Q2
TORONTO, Aug. 11,
2022 /CNW/ - Canadian Tire Corporation, Limited (TSX:
CTC) (TSX: CTC.A) today released its second quarter results for the
period ended July 2, 2022.
- Consolidated Comparable sales (excluding Petroleum)1
grew 5.0%
- Loyalty sales as a percentage of retail sales1 on a
rolling 12-month basis was 59.0%
- Diluted Earnings Per Share (EPS) was $2.43; normalized diluted EPS1 was
$3.11
"Our strong comparable sales growth clearly demonstrated that
customer demand for CTC's unique multi-category product assortment
remained healthy in the second quarter," said Greg Hicks, President and CEO, Canadian Tire
Corporation.
"Our results reflect our continued ability to effectively
navigate a challenging and dynamic environment. Our retail team's
outstanding focus on inventory and margin management have enabled
us to continue to execute well and stay focused on the delivery of
our Better Connected strategy," continued Hicks. "Also,
receivables and new account acquisitions at Canadian Tire Bank
remained strong, in line with our expectations to drive long-term
growth," said Hicks.
SECOND QUARTER HIGHLIGHTS
- Consolidated retail sales1 were up 9.9% and
consolidated comparable sales (excluding Petroleum) were up 5.0%,
with growth benefiting from the breadth of our assortment and a
higher mix of in-store shopping compared to the second quarter of
2021 when COVID-19 restrictions remained in place
-
- Canadian Tire Retail (CTR) comparable sales1 grew
3.9%; performance in Automotive categories grew as customers
returned to driving, and customers shopped across a broader set of
categories, including in Living and Fixing, as they returned
in-store
- Mark's had its eighth consecutive quarter of exceptional
comparable sales growth1, up 20.9% on demand for
casualwear and industrial apparel
- Team sports was the leading driver of 4.1% comparable sales
growth1 at SportChek; the Q1 2022 introduction of
athleisure brand FWD (Forward with Design) also contributed to
strong sales growth
- eCommerce sales continue to run well above pre-pandemic
levels
- The Company made further progress in implementing the
enablers of its Better Connected strategy and enhancing the
customer experience
-
- Engaging Triangle members continued to be a focus across the
company's banners, resulting in loyalty sales as a % of retail
sales at 59.0% on a rolling twelve-month basis; credit and new
member acquisition was also strong, with approximately 594,000
joining the program in the quarter
- Owned brand sales1 remained strong at 37.6% of sales
in the quarter
- Investment in enhancing the customer experience at CTR saw 12
stores refreshed, expanded or replaced in Q2
- New digital and human capital platforms being rolled out, along
with distribution centre investments aimed at longer term
operational efficiency
- Shareholders continued to benefit from strong returns, a key
element of the Company's balanced capital allocation
strategy
-
- As at July 2, 2022, returns to
shareholders under the Company's existing $400 million share repurchase commitment reached
$326.9 million
- Dividends paid in the quarter were $73.1
million, up 10.6% on a per share basis compared to the prior
year
- Diluted Earnings Per Share (EPS) was $2.43; normalized diluted EPS was $3.11
-
- Normalizations included one-time costs related to the exit of
Helly Hansen operations in Russia,
and operational efficiency program costs, which in total
represented a $46.2 million impact to
income before income taxes, or around $0.68 at the EPS level
- Performance in the quarter also reflected:
-
- Strong Retail segment revenue and increased gross margin
dollars, partially offset by higher expenses including foreign
exchange, which resulted in Retail segment earnings below prior
year but which remain significantly above pre-pandemic levels on a
normalized basis
- Financial Services revenue growth, up 15.0% driven by growth in
receivables and growth in credit card sales, due to increased
customer activity and new account acquisition
- An increase in the incremental allowance for expected credit
loss ("ECL") in the Financial Services segment, which resulted in a
year-on-year variance to Q2 of 2021 of $57.6
million in income before income taxes or ($0.56) at the EPS level, due to the decrease in
the allowance last year
CONSOLIDATED OVERVIEW
- Retail sales were $5,363.8
million, up 9.9%, compared to the second quarter of 2021;
consolidated comparable sales (excluding Petroleum) increased
5.0%
- Revenue increased $485.5 million
to $4,404.0 million, up 12.4%;
Revenue (excluding Petroleum)1 increased 5.9% over the
same period last year
- Consolidated income before income taxes (IBT) was $238.1 million, down 33.4% compared to the second
quarter of 2021; and $284.3 million,
down 22.0%, on a normalized1 basis
- Normalized diluted EPS was $3.11,
compared to $3.72 in the prior year.
Q2 Diluted EPS was $2.43 per share,
compared to $3.64 in the prior
year
- Retail Return on Invested Capital (ROIC)1 calculated
on a trailing twelve-month basis, remained strong at 13.5% at the
end of the second quarter, compared to 14.1% at the end of the
second quarter of 2021
- Refer to the Company's Q2 2022 Management Discussion and
Analysis (MD&A) section 4.1.1 for information on normalizing
items and for additional details on events that have impacted the
Company in the quarter
RETAIL SEGMENT OVERVIEW
- Retail revenue was $4,067.2
million, an increase of $444.0
million, or 12.3%, compared to the prior year. Excluding
Petroleum, Retail revenue1 increased 5.1%
- Retail sales (excluding Petroleum)1 were up
4.6%
- CTR retail sales1 increased 3.8% in the quarter, and
comparable sales were up 3.9% over the same period last year
- SportChek retail sales1 increased 0.6% in the
quarter, and comparable sales were up 4.1% over the same period
last year
- Mark's retail sales1 increased 21.1% in the quarter,
and comparable sales were up 20.9% over the same period last
year
- Helly Hansen revenue was up 38.9% compared to the same period
in 2021
- Retail Gross margin for the second quarter was up 5.9%, or 4.9%
excluding Petroleum1
- IBT was $123.8 million, including
the impact of costs related to the exit of Helly Hansen operations
in Russia, compared to
$208.6 million in the prior year.
Normalized income before income taxes was $170.0 million, due to higher expenses, including
foreign exchange costs, offsetting strong revenue growth and
increased gross margin dollars.
- Refer to the Company's Q2 2022 MD&A section 4.1.1 for
information on normalizing items and to sections 4.2.1 and 4.2.2
for additional details on events that have impacted the Company in
the quarter
FINANCIAL SERVICES OVERVIEW
- Gross average accounts receivable ("GAAR")1 was up
14.6% relative to prior year and average active accounts were up
7.6%, as customer activity increased and investments drove new card
acquisition
- Credit card sales growth1 was 25.4% in the
quarter
- Gross margin was $187.9 million,
a decrease of $25.2 million, or 11.8
percent compared to the prior year, mainly due to higher write-offs
and net impairment losses, attributable to the increase in ECL
allowance for loans receivable, compared to a reduction in the
allowance in the prior year, which offset revenue growth of
15.0%
- Income before income taxes was $90.0
million, down $35.3 million
compared to the prior year, due mainly to the impact of the
year-on-year change in incremental allowance on the credit card
portfolio
- Risk levels remain below historic levels
- Refer to the Company's Q2 2022 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 two new investments, which will require an
estimated total investment of $30
million to complete and which will add approximately 149,000
square feet of incremental gross leasable area to the portfolio,
and completed $111 million of
previously announced investments
- CT REIT delivered 2.5% growth in Adjusted Funds From Operations
(AFFO) per unit1 on a diluted basis in the second
quarter
- Distributions per unit were $0.212, up 5.7% compared to the second quarter of
2021
- For further information, refer to the Q2 2022 CT REIT earnings release issued August 8, 2022
CAPITAL ALLOCATION
CAPITAL EXPENDITURES
- Operating capital expenditures1 were $168.8 million in the quarter, compared to
$160.0 million in the second quarter
of 2021
- Total capital expenditures were $188.2
million, compared to $184.6
million in the second quarter of 2021
QUARTERLY DIVIDEND
- The Company has declared dividends payable to holders of Class
A Non-Voting Shares and Common Shares at a rate of $1.625 per share payable on December 1, 2022 to shareholders of record as of
October 31, 2022. The dividend is
considered an "eligible dividend" for tax purposes.
SHARE PURCHASES
- On November 11, 2021, the Company
announced its intention to purchase up to $400 million of its Class A Non-Voting Shares, in
excess of the amount required for anti-dilutive purposes, by the
end of fiscal 2022. As at July 2,
2022, the Company had purchased $326.9 million (~82%) under the existing
$400 million program.
(1) NON-GAAP FINANCIAL MEASURES AND RATIOS AND
SUPPLEMENTARY FINANCIAL MEASURES
This press release contains non-GAAP financial measures and
ratios and supplementary financial measures. References below to
the Q2 2022 MD&A mean the Company's Management's Discussion and
Analysis for the Second Quarter 2022 for the 26 weeks ended
July 2, 2022, which is available on
SEDAR at www.sedar.com and is incorporated by reference
herein. Non-GAAP measures and non-GAAP ratios have no standardized
meanings under GAAP and may not be comparable to similar measures
of other companies.
(A) Non-GAAP Financial Measures and
Ratios
Normalized Diluted Earnings per Share (EPS)
Normalized diluted EPS, a non-GAAP ratio, is calculated by
dividing Normalized Net Income Attributable to Shareholders, a
non-GAAP financial measure, by total diluted shares of the Company.
For information about these measures, see section 9.1 of the
Company's Q2 2022 MD&A.
The following table is a reconciliation of normalized net income
attributable to shareholders of the Company to the respective GAAP
measures:
|
|
|
YTD
|
YTD
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
Q2
2022
|
Q2 2021
|
Net income
|
$
177.6
|
$ 259.1
|
$
395.2
|
$ 445.5
|
Net income attributable
to shareholders
|
145.2
|
223.6
|
327.3
|
375.4
|
Add normalizing
items:
|
|
|
|
|
Operational Efficiency
program
|
$
7.2
|
$
5.0
|
$
8.7
|
$
11.4
|
Helly Hansen Russia
exit
|
33.4
|
—
|
33.4
|
—
|
Normalized net
income
|
$
218.2
|
$ 264.1
|
$
437.3
|
$ 456.9
|
Normalized net
income attributable to shareholders
|
$
185.8
|
$ 228.6
|
$
369.4
|
$ 386.8
|
Normalized diluted
EPS
|
$
3.11
|
$
3.72
|
$
6.16
|
$
6.29
|
Consolidated Normalized Income Before Income Taxes and Retail
Normalized Income Before Income Taxes
Consolidated Normalized Income Before Income Taxes and Retail
Normalized Income before Income Taxes are non-GAAP financial
measures. For information about these measures, see section
9.1 of the Company's Q2 2022 MD&A.
The following table reconciles Consolidated Normalized Income
Before Income Taxes to Income Before Income Taxes:
|
|
|
YTD
|
YTD
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
Q2
2022
|
Q2 2021
|
Income before income
taxes
|
$
238.1
|
$ 357.5
|
$
533.0
|
$ 612.0
|
Add normalizing
items:
|
|
|
|
|
Operational Efficiency
program
|
9.7
|
6.8
|
11.8
|
15.5
|
Helly Hansen Russia
exit
|
36.5
|
—
|
36.5
|
—
|
Normalized income
before income taxes
|
$
284.3
|
$ 364.3
|
$
581.3
|
$ 627.5
|
The following table reconciles Retail Normalized Income Before
Income Taxes to Retail Income Before Income Taxes:
|
|
|
YTD
|
YTD
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
Q2
2022
|
Q2 2021
|
Income before income
taxes
|
$
238.1
|
$ 357.5
|
$
533.0
|
$ 612.0
|
Less: Other operating
segments
|
114.3
|
148.9
|
260.4
|
300.9
|
Retail income before
income taxes
|
$
123.8
|
$ 208.6
|
$
272.6
|
$ 311.1
|
Add normalizing
items:
|
|
|
|
|
Operational Efficiency
program
|
9.7
|
6.8
|
11.8
|
15.5
|
Helly Hansen Russia
exit
|
36.5
|
—
|
36.5
|
—
|
Retail normalized
income before income taxes
|
$
170.0
|
$ 215.4
|
$
320.9
|
$ 326.6
|
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
Q2 2022 MD&A.
|
Rolling 12 months
ended
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
|
Income before income
taxes
|
$
1,622.8
|
$
1,772.9
|
|
Less: Other operating
segments
|
485.6
|
557.8
|
|
Retail income before
income taxes
|
$
1,137.2
|
$
1,215.1
|
|
Add normalizing
items:
|
|
|
|
Operational Efficiency
program
|
37.1
|
58.4
|
|
Helly Hansen Russia
exit
|
36.5
|
—
|
|
Retail normalized
income before income taxes
|
$
1,210.8
|
$
1,273.5
|
|
Less:
|
|
|
|
Retail intercompany
adjustments1
|
199.6
|
192.5
|
|
Add:
|
|
|
|
Retail interest
expense2
|
241.0
|
262.7
|
|
Retail depreciation of
right-of-use assets
|
562.6
|
528.4
|
|
Retail effective tax
rate
|
26.5 %
|
28.6 %
|
|
Add: Retail
taxes
|
(480.7)
|
(534.6)
|
|
Retail
return
|
$
1,334.1
|
$
1,337.5
|
|
|
|
|
|
Average total
assets
|
$
21,470.6
|
$ 20,610.7
|
|
Less: Average assets in
other operating segments
|
4,822.1
|
4,681.3
|
|
Average Retail
assets
|
$
16,648.5
|
$ 15,929.4
|
|
Less:
|
|
|
|
Average Retail
intercompany adjustments1
|
3,481.0
|
3,405.2
|
|
Average Retail trade
payables and accrued liabilities3
|
2,712.7
|
2,461.7
|
|
Average Franchise Trust
assets
|
456.1
|
542.4
|
|
Average Retail excess
cash
|
114.4
|
67.1
|
|
Average Retail
invested capital
|
$
9,884.3
|
$
9,453.0
|
|
Retail
ROIC
|
13.5 %
|
14.1 %
|
|
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.
|
CT REIT Adjusted Funds from Operations (AFFO) per
unit
AFFO per unit is a non-GAAP ratio that is calculated by dividing
AFFO by the weighted average number of units outstanding on a
diluted basis. AFFO is a non-GAAP financial measure. For more
information about these measures, see section 9.1 of the Company's
Q2 2022 MD&A.
The following table reconciles Income before Income Taxes to
AFFO:
|
|
|
YTD
|
YTD
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
Q2
2022
|
Q2 2021
|
Income before income
taxes
|
$
238.1
|
$ 357.5
|
$
533.0
|
$ 612.0
|
Less: Other operating
segments
|
158.3
|
178.9
|
360.1
|
358.8
|
CT REIT income before
income taxes
|
$
79.8
|
$ 178.6
|
$
172.9
|
$ 253.2
|
Add:
|
|
|
|
|
CT REIT fair value
(gain) adjustment
|
(6.0)
|
(106.5)
|
(28.1)
|
(110.8)
|
CT REIT deferred
taxes
|
—
|
(0.1)
|
0.6
|
0.5
|
CT REIT lease
principal payments on right-of-use assets
|
(0.1)
|
(0.4)
|
(0.3)
|
(0.6)
|
CT REIT fair value of
equity awards
|
(0.5)
|
0.1
|
(0.3)
|
0.4
|
CT REIT internal
leasing expense
|
0.2
|
0.2
|
0.4
|
0.4
|
CT REIT funds from
operations
|
$
73.4
|
$
71.9
|
$
145.2
|
$ 143.1
|
Less:
|
|
|
|
|
CT REIT properties
straight-line rent adjustment
|
0.5
|
1.5
|
0.9
|
3.2
|
CT REIT capital
expenditure reserve
|
6.3
|
6.2
|
12.6
|
12.4
|
CT REIT adjusted funds
from operations
|
$
66.6
|
$
64.2
|
$
131.7
|
$ 127.5
|
Operating Capital Expenditures
Operating capital expenditures is a non-GAAP financial measure.
For more information about this measure, see section 9.2 of the
Company's Q2 2022 MD&A.
The following table reconciles total additions from the
Investing activities reported in the Consolidated Statement of Cash
Flows to Operating capital expenditures:
|
YTD
|
YTD
|
(C$ in
millions)
|
Q2
2022
|
Q2 2021
|
Total
additions1
|
$
280.6
|
$ 275.7
|
Add: Accrued
additions
|
61.9
|
(1.8)
|
Less:
|
|
|
CT REIT acquisitions
and developments excluding vend-ins from CTC
|
31.7
|
28.1
|
Operating capital
expenditures
|
$
310.8
|
$ 245.8
|
1 This 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 Q2 2022 MD&A for
information on the composition of these measures.
- Consolidated retail sales
- Consolidated Comparable sales (excluding Petroleum)
- Revenue (excluding Petroleum)
- Retail revenue (excluding Petroleum)
- Retail sales and retail sales (excluding Petroleum)
- CTR comparable and retail sales
- Owned Brands sales
- SportChek comparable and retail sales
- Mark's comparable and retail sales
- Retail Gross Margin (excluding Petroleum)
- Gross Average Accounts Receivables (GAAR)
- Credit card sales growth
- Loyalty sales as a percentage of retail sales
To view a PDF version of Canadian Tire Corporation's full
quarterly earnings report please see:
https://mma.prnewswire.com/media/1876296/Q2_2022_Combined_MDA_and_Financial_Statements__Final_Release_ID_b9e307418011.pdf
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, 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 CTC's actual results to differ from current
expectations, refer to section 10.0 (Key Risks and Risk Management)
of the Company's Q2 2022 MD&A 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 11, 2022. 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 more than 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: Jane Shaw, (416)
480-8581, jane.shaw@cantire.com
Investors: Karen Keyes, (647)
518-4461, karen.keyes@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED