Canadian Tire Corporation Reports Third Quarter 2024 Results; Announces Annual Dividend Increase for 15th Consecutive Year and Share Repurchase Intention
TORONTO, Nov. 7, 2024 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC) (TSX:CTC) (CTC or the Company) today released its third quarter results for the period ended September 28, 2024.
Consolidated comparable sales1 trend improved compared to Q2 2024; consolidated comparable sales were down 1.5% compared to Q3 2023.
Diluted and Normalized Earnings Per Share1 (EPS) were $3.59, compared to $(1.19) in Q3 2023, and up 21.3% from $2.96 on a normalized basis.
Annualized dividend increased from $7.00 to $7.10 per share, alongside an intention to repurchase up to $200.0 million of Class A Non-Voting Shares in 2025.
"We delivered strong retail profitability for the third consecutive quarter and sales trends improved," said Greg Hicks, President and CEO, Canadian Tire Corporation. "With customer spending still constrained, Canadians are seeking value and finding it through Triangle Rewards, where more loyalty members earned and redeemed with us at higher levels this quarter."
"We continue to control costs and manage margins carefully, in order to balance lingering consumer and economic headwinds. At the same time, the investments we have made over the last two years position us well, with better omnichannel experiences, higher customer satisfaction scores, and a positive reaction to new products as they hit our shelves."
THIRD-QUARTER HIGHLIGHTS
Consolidated comparable sales were down 1.5%; SportChek grew for the first quarter since Q2 2023, which partially offset declines at Canadian Tire Retail (CTR) and Mark's.
CTR comparable sales1 were down 2.2%, compared to Q3 2023. Customers continued to prioritize essential categories including Automotive, which continued to perform well against a strong quarter in Q3 2023, led by growth in automotive service.
SportChek comparable sales1 were up 2.9%, marking two consecutive quarters in which SportChek outperformed industry trends. Targeted promotional events and improved customer experience continued to be a focus and contributed to growth in athletic footwear and hockey categories.
Mark's comparable sales1 were down 2.3%, led by industrial wear declines, which were partially offset by growth in men's shorts and t-shirts. Children's wear was a top performer, as a result of the ongoing strategic rollout of the category to select Mark's stores.
Increased loyalty engagement saw active registered loyalty members up 4%; members took advantage of 1:1 offers, engaged in mass Triangle promotions, and scanned their loyalty cards more.
In-store Net Promoter Score (NPS) was up across the Company's banners, including CTR; store investments and a focus on strong in-stock availability of key brands continued to drive improvements in positive customer sentiment.
Improved retail profitability led to higher Consolidated Income Before Income taxes (IBT) at $299.3 million, an increase of $230.0 million and $33.0 million on a normalized basis1 compared to the prior year.
Retail IBT was $164.8 million, down $74.2 million and up $56.8 million on a normalized basis1. A strong retail gross margin rate1 combined with solid cost control offset a decline in retail revenue. IBT also benefited from higher other income, which equated to around $0.41 of impact at the EPS level, as a result of a property sale gain and insurance recoveries.
Financial Services IBT was $110.3 million in the quarter, a $15.4 million decrease from the prior year, as higher net write-offs and operating expenses were only partially offset by higher revenues, all while cardholder engagement remained strong. Gross Average Accounts Receivable1 (GAAR) was up 3.0%, mainly as a result of higher average account balances.
CTC continues to make solid progress on the key areas within its Better Connected strategy to enhance the customer experience and drive efficiencies, with almost $1.7 billion in capital invested since 2022. Accomplishments in the third quarter included:
A richer in-store and digital customer experience: Store investments are proceeding at pace, with four new Party City stores added in Q3, and 39 CTR store refresh projects expected to be completed by the end of 2024 (taking the total to 120 since 2022). By year end, more than 90% of Canadian Tire's 502 stores are expected to have deployed technology enhancements such as electronic shelf labels and lockers, and more than 60% of CTC's 1,400 retail locations will have enhanced broadband capabilities.
Improved supply chain productivity: Previously announced supply chain investments and consolidation are improving productivity and savings, including increased throughput as a result of goods-to-person automation, which is now fully operational at the Company's Calgary and Montreal Distribution Centres (DC). The last stage of planned supply chain investments will include the phased rollout of CTC's new transportation management system, and a new Vancouver DC set to open in 2025.
Continued margin accretion from Owned Brands successes: Continued strength in categories like automotive and hockey is contributing to margin accretion, with Owned Brand penetration1 relatively flat despite pressure in some discretionary categories. A pipeline of innovative and quality Owned Brand products are set to roll out during 2025.
CONSOLIDATED OVERVIEW
Revenue was $4,192.9 million, down 1.4% compared to $4,250.5 million in the same period last year; Revenue (excluding Petroleum)1 was $3,639.8 million, a decrease of 0.4% compared to the prior year.
Consolidated income before income taxes was $299.3 million, up $230.0 million, 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 $33.0 million.
Diluted EPS was $3.59, compared to $(1.19) or $2.96 on a normalized basis in the prior year.
Refer to the Company's Q3 2024 MD&A section 4.1 for information on normalizing items and additional details on events that have impacted the Company in the quarter.
RETAIL SEGMENT OVERVIEW
Retail sales1 were $4,539.5 million, down 2.2%, compared to the third quarter of 2023. Retail sales (excluding Petroleum)1 and consolidated comparable sales were down 1.4% and 1.5%, respectively.
CTR retail sales1 were down 2.0% and comparable sales were down 2.2% over the same period last year.
SportChek retail sales1 increased 2.0% over the same period last year, and comparable sales were up 2.9%.
Mark's retail sales1 decreased 2.0% over the same period last year, and comparable sales were down 2.3%.
Helly Hansen revenue was down 6.0% compared to the same period in 2023, mainly due to a shift in the timing of shipments to wholesale customers.
Retail revenue was $3,797.8 million, a decrease of $69.5 million, or 1.8%, compared to the prior year; Retail revenue (excluding Petroleum)1 was down 0.8%.
Retail gross margin was $1,214.8 million, up 0.6% compared to the third quarter of the prior year, and up 1.0% excluding Petroleum1; Retail gross margin rate (excluding Petroleum) increased 62 bps to 35.7%.
Retail IBT was $164.8 million in Q3 2024, compared to $239.0 million or $108.0 million on a normalized basis in the prior year.
Retail Return on Invested Capital (ROIC),1 calculated on a trailing twelve-month basis, was 8.8% at the end of the third quarter of 2024, compared to 11.1% at the end of the third quarter of 2023, due to the decrease in earnings over the prior period.
Refer to the Company's Q3 2024 MD&A sections 4.2.1 for information on normalizing items and additional details on events that have impacted the Retail segment in the quarter.
FINANCIAL SERVICES OVERVIEW
Financial Services segment Income before income taxes was $110.3 million in the quarter, a $15.4 million decrease from the prior year, as higher net write-offs and operating expenses were only partially offset by higher revenues, all while cardholder engagement remained strong.
GAAR was up 3.0% relative to the prior year, driven by growth in average account balances, which were up 3.4%.
Refer to the Company's Q3 2024 MD&A 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
Diluted Adjusted Funds from Operations1 (AFFO) per unit was up 2.3% compared to Q3 2023; diluted net income per unit was $0.339, compared to $0.048 in Q3 2023.
Announced three new investments totalling $85 million, which are expected to add approximately 283,000 square feet of incremental gross leasable area upon completion.
For further information, refer to the Q3 2024 CT REIT earnings release issued on November 5, 2024.
CAPITAL ALLOCATION
CAPITAL EXPENDITURES
Total capital expenditures were $195.1 million in the quarter, compared to $176.4 million in Q3 2023 and $457.6 million on a year-to-date basis.
Operating capital expenditures1 were $127.1 million in the quarter, compared to $155.1 million in Q3 2023. Full year 2024 operating capital expenditures are expected to be in the Company's previously disclosed range of $475 million to $525 million.
2025 operating capital expenditures are expected to be in the range of $525 million to $575 million.
QUARTERLY DIVIDEND
The Company increased its annual dividend for the 15th consecutive year, to $7.10 per Common Voting and Class A Non-Voting Share (share), an increase of approximately 1.4% over last year. On November 6, 2024, the Company's Board of Directors declared dividends of $1.775 per share payable on March 1, 2025, to shareholders of record as of January 31, 2025. The dividend is considered an "eligible dividend" for tax purposes.
SHARE REPURCHASES
On November 6, 2024, the Company announced its intention to repurchase up to $200 million of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, in 2025.
Repurchases of Class A Non-Voting Shares will be made under the Company's existing Normal Course Issuer Bid (NCIB), which expires on March 1, 2025, and thereafter under a renewed NCIB, subject to regulatory approvals.
1) NON-GAAP FINANCIAL MEASURES AND RATIOS AND SUPPLEMENTARY FINANCIAL MEASURES
This press release contains non-GAAP financial measures and ratios, and supplementary financial measures. References below to the Q3 2024 MD&A mean the Company's Management's Discussion and Analysis for the Third Quarter ended September 28, 2024, which is available on SEDAR+ at http://www.sedarplus.ca and is incorporated by reference herein. Non-GAAP measures and non-GAAP ratios have no standardized meanings under GAAP and may not be comparable to similar measures of other companies.
A) Non-GAAP Financial Measures and Ratios
Normalized Diluted Earnings per Share
Normalized diluted EPS, a non-GAAP ratio, is calculated by dividing Normalized Net Income Attributable to Shareholders, a non-GAAP financial measure, by total diluted shares of the Company. For information about these measures, see section 9.1 of the Company's Q3 2024 MD&A.
The following table is a reconciliation of normalized net income attributable to shareholders of the Company to the respective GAAP measures:
YTD
YTD
(C$ in millions)
Q3 2024
Q3 2023
Q3 2024
Q3 2023
Net income
$ 220.7
$ (27.8)
$ 540.2
$ 141.9
Net income attributable to shareholders
200.6
(66.4)
476.2
40.8
Add normalizing items:
DC fire expense (recovery)
$ ,
$ (96.4)
$ ,
$ 8.4
GST/HST-related charge1
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