Strong retail fundamentals and eCommerce
growth underlie performance in the
quarter
Company well-positioned to compete for the
long-term
TORONTO, May 7, 2020 /CNW/ - Canadian Tire Corporation,
Limited (TSX:CTC, TSX: CTC.A) today released its first quarter
results for the period ended March 28,
2020.
"A company's true values take over at a time like this. For CTC,
this means being there for Canadians no matter what challenges they
face. For close to a century, we have risen to the challenge of an
ever-changing retail landscape and this time will be no different.
We are a resilient Company, built on a unique business model,
supported by a strong Associate Dealer network, a multi-category
assortment, our iconic Triangle Loyalty program and a proven
Financial Services business," said Greg
Hicks, President and CEO, Canadian Tire Corporation. "I am
incredibly proud of how quickly we adapted and all that we have
accomplished over the past several weeks, including the
contributions of our Associate Dealers and our brave frontline
workers."
"To date we have seen a quantum leap in our eCommerce
performance across all of our banners and we have accelerated our
planned investments in our digital capabilities to meet our
customers' increased desire to shop online. I am very
encouraged by early results in the second quarter, and I am
confident that we will continue to successfully operate in this new
normal and excel over the long-term," continued Hicks.
HIGHLIGHTS
- CTC remains focused on the safety of its customers and
employees, demonstrating operational strength, resiliency and
agility while navigating the COVID-19 crisis:
-
- Implemented significant safety measures, including installing
plexiglass cashier shields and floor decals, enhancing store
cleaning procedures, reducing hours at Canadian Tire stores,
introducing Curbside Pick Up and closing non-essential banners
- Introduced a special support payment for frontline workers
- Launched $5 million COVID-19
Response Fund to support frontline healthcare and community workers
with essential products and PPE
- Associate Dealers donated over 300,000 masks, 200,000 pairs of
gloves, and 20,000 litres of hand sanitizer to local hospitals,
nursing homes, and community organizations in need
- Despite the unprecedented impacts of COVID-19 on consumer
activity, Canadian Tire Retail delivered 0.7% comparable store
sales against an exceptional Q1 in 2019. This marks the
24th consecutive quarter of positive comparable sales
growth
-
- Prior to the pandemic, consolidated comparable sales were
tracking at 1.3% against prior year
- In the quarter, consolidated comparable store sales across CTC
were relatively flat at (0.3%) against a record performance of 6.1%
in Q1 2019
- In the quarter, diluted earnings per share (EPS) were
negatively impacted by the significant effect of the pandemic on
the global economy
-
- Diluted EPS were $(0.22),
normalized diluted EPS were $(0.13)
compared to $1.12 in the prior
year
- Performance in the quarter was impacted by the following
factors:
-
- Decrease in revenue at SportChek, Mark's and Helly Hansen
banners due to store closures
- A $44.9 million or $0.43 EPS incremental increase in the allowance
for loans receivable; comprised of $30
million to reflect the shift in macroeconomic environment
and $14.9 million resulting from the
increased probability of card holder default
- A $41.8 million or $0.44 EPS net expense due to the significant
decline in CTC's share price over the course of the first quarter,
resulting in a mark-to-market adjustment on the Company's equity
hedges related to share-based compensation awards
- A $7.1 million or $0.09 EPS non-operational foreign exchange loss
at Helly Hansen due to the significant drop in the Norwegian
Krone
- Canadian Tire has taken aggressive action to ensure a strong
cash position and financial flexibility, including:
-
- Leveraging our Canadian banks and our high standing in capital
markets to secure an additional $650
million credit facility from four Canadian Financial
Institutions, in addition to the existing funding channels
available to CTC and its related entities
- Pausing the repurchase of shares
- Implementing a plan to prudently manage working capital and
operating costs across the enterprise
- Deferring certain 2020 planned capital expenditures in all
categories of projects, while maintaining our investment in key
strategic initiatives such as eCommerce
- CTC dramatically accelerated its digital and eCommerce
efforts across all banners in response to rapidly shifting customer
behaviour
-
- eCommerce sales grew 44% in the quarter, led by close to 80%
growth at CTR
- Implemented Curbside Pick Up nationally in all CTR stores,
resulting in the majority of Click & Collect orders designated
as Curbside Pick Up
- eCommerce daily average order volumes at CTR grew from
5k pre-COVID-19, to over 80k in April as website stability measures were
implemented
CONSOLIDATED OVERVIEW
- Consolidated retail sales decreased $75.7 million or 2.7% in the first quarter.
Excluding Petroleum, consolidated retail sales were down 2.3% over
the same period last year.
- Consolidated revenue decreased $46.1
million, or 1.6%. Excluding Petroleum, consolidated revenue
decreased $24.9 million, or 1.0% in
the quarter.
- Diluted EPS were $(0.22),
normalized diluted EPS were $(0.13)
compared to $1.12 in the prior year
negatively impacted by the significant effect of the pandemic on
the global economy.
- The Company remains committed to its Operational Efficiency
program and the previous stated $200
million target in annualized saving by 2022.
- Refer to the MD&A section 5.1.1 for information on
normalizing items and to section 3.0 for information on
'Significant Events that Impacted the Company this Quarter'.
RETAIL OVERVIEW
- The following financial results reflect Q1 2020 performance
compared to Q1 2019:
-
- Retail segment revenue decreased 2.4%. Excluding Petroleum,
retail segment revenue decreased 1.8%.
- Canadian Tire retail sales increased 2.2% and comparable sales
were up 0.7%.
- SportChek's retail sales decreased 13.1% and comparable sales
decreased 1.8%.
- Mark's retail sales were down 15.3% and comparable sales
decreased 4.5%.
- Helly Hansen revenue in the quarter was $121.5 million, a decrease of 7.3%. On a constant
currency basis, Helly Hansen revenue grew 0.6%
- Normalized income before income taxes decreased $78.6 million negatively impacted by the
significant effect of the pandemic on the global economy.
- Refer to the MD&A section 5.1.1 for information on
normalizing items and to section 3.0 for information on
'Significant Events that Impacted the Company this Quarter'.
CT REIT OVERVIEW
- As disclosed in the Q1 2020 CT
REIT earnings release on May 4, 2020,
CT REIT completed investments totalling $42.6 million and 96.5% of tenants fulfilled
their May 1, 2020 rent
obligations.
FINANCIAL SERVICES OVERVIEW
- In Q1 2020 revenue increased $13.1
million or 4% over the prior year due to higher credit
charges resulting from growth of 4.2% in gross average credit card
receivables (GAAR) over the prior year.
- Gross margin dollars declined 22.2% over the prior year
primarily due to the $44.9 million
increase in the allowance for loans receivable recorded in the
quarter.
- Income before income taxes decreased 37.6% in the first quarter
to $70.2 million.
- Financial Services continues to maintain a level of liquidity
well in excess of required regulatory minimums.
- Refer to the MD&A section 3.0 for information on
'Significant Events that Impacted the Company this Quarter'.
FINANCIAL ASPIRATIONS
- As previously disclosed, the Company's Financial Aspirations
covered a three-year period ending in 2020. While the Company
remains committed to delivering long-term sustainable growth, there
is considerable uncertainty regarding the duration and severity of
COVID-19 and its impact on the economy, consumer demand and the
Company's operations. As a result, Management is withdrawing its
previously disclosed three-year (2018-2020) financial
aspirations.
CAPITAL EXPENDITURES
- Operating capital expenditures were $69.1 million in the first quarter, down from
$79.8 million in the first quarter of
2019.
- Total capital expenditures increased $7.4 million in Q1 2020, to $114 million.
QUARTERLY DIVIDEND
- The Company has declared dividends payable to holders of Class
A Non-Voting Shares and Common Shares at a rate of $1.1375 per share payable on September 1, 2020 to shareholders of record as of
July 31, 2020. The dividend is
considered an "eligible dividend" for tax purposes.
SHARE REPURCHASE
- On November 7, 2019, the Company
announced its intention to repurchase a further $350 million of its Class A Non-Voting Shares, in
excess of the amount required for anti-dilutive purposes, by the
end of fiscal 2020. As at March 28, 2020, $107.8 million of such shares had been
repurchased. Such purchases were paused after March 13, 2020.
NORMAL COURSE ISSUER BID
- On February 14, 2020, the Toronto
Stock Exchange accepted the Company's notice of intention to make a
normal course issuer bid to purchase up to 5.5 million Class A
Non-Voting Shares between March 2,
2020 and March 1, 2021.
To view a PDF version of Canadian Tire Corporation's full
quarterly earnings report please see:
https://mma.prnewswire.com/media/1165089/CANADIAN_TIRE_CORPORATION__LIMITED_Canadian_Tire_Corporation_Rep.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, including as a result of the
outbreak of COVID-19, 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 the CTC's
actual results to differ from current expectations, refer to
section 2.8 (Risk Factors) of our Annual Information Form for
fiscal 2019 and to section 10 (Key Risks and Risk Management) of
our Management's Discussion and Analysis for the quarter ended
March 28, 2020, 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 May 7, 2020. 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 family of businesses 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, National Sports,
Intersport and Atmosphere, which offer the best active wear brands.
The more than 1,740 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 global brand in
sportswear and workwear 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: Lisa Greatrix,
(416) 480-8725, lisa.greatrix@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED