Canadian Tire Corporation Delivers Strong Q1 Results
05/12/2016
Same store sales up in all core retail banners:
1.0% at Canadian Tire Retail
12.3% at Sport Chek
0.8% at Mark’s
Retail EBITDA increased by 8.8%
First quarter diluted earnings per share was $0.90, up 2.6%
TORONTO, May 12, 2016 /CNW/ – Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.A) today released first quarter results for the period ended April 2, 2016.
“Once again, our results demonstrate continued strong execution by all of our retail businesses with solid same store sales and impressive margin and expense management, even in a quarter with unseasonable weather,” said Michael Medline, President and CEO, Canadian Tire Corporation.
“We have also taken a meaningful step in driving our innovation agenda forward with the very successful launch of our new digital catalogue – the Canadian Tire WOW Guide – a great example of how we’re bridging the gap between the physical and digital worlds,” continued Medline.
CONSOLIDATED OVERVIEW
Consolidated retail sales increased $19.5 million or 0.8% in the first quarter including a 9.0% decline in Petroleum retail sales due to lower gas prices and gas volumes. Excluding Petroleum, consolidated retail sales were up 3.0% over the same period last year.
Excluding Petroleum, consolidated revenue increased $91.9 million, or 4.3% in the quarter, primarily due to higher shipments at Canadian Tire and increased sales at FGL Sports and Mark’s partially offset by decreased revenue at Financial Services. Consolidated revenue increased 1.8% over the same period last year.
Diluted EPS was $0.90 in the quarter, an increase of $0.02 per share, or 2.6%, over the first quarter of 2015.
RETAIL OVERVIEW
Retail segment revenue increased 5.2% excluding Petroleum in the quarter. Retail segment revenue increased 2.1% in Q1 compared to last year.
Retail margin rate excluding Petroleum increased 46 basis points primarily driven by productivity initiatives at Canadian Tire.
Income before income taxes in the Retail segment was $20.6 million, up $0.9 million, or 4.8% in the first quarter of 2016, over 2015.
Canadian Tire Retail saw retail sales increase 2.2% and same store sales up 1.0% in the quarter over Q1 2015.
FGL Sports’ retail sales were up 7.2% and same store sales were up 7.6% in the first quarter of 2016. Same store sales at Sport Chek were up 12.3%.
Mark’s retail sales grew 0.2% and same store sales increased 0.8% compared to Q1 2015.
CT REIT OVERVIEW
As disclosed in the Q1 2016 CT REIT release issued May 10, 2016, CT REIT completed in the quarter the acquisition from CTC of two existing Canadian Tire stores, one Canadian Tire anchored plaza and one intensification project for a total investment of $46.1 million. Subsequent to quarter end, CT REIT completed the previously announced sale and leaseback transaction with Sears Canada Inc., for its distribution centre in Calgary, AB and also completed the previously announced acquisition of land for the development of a Canadian Tire store and four vend-ins from CTC.
FINANCIAL SERVICES OVERVIEW
Income before income taxes decreased 7.1% in the first quarter to $93.6 million.
In Q1 2016, GAAR was down 0.6% over the prior year driven by a reduction in active accounts as well as Management’s conservative approach to new account acquisition taken in 2014 and early 2015, partially offset by increased average account balances.
Financial Services continues to expect that results in the second quarter of 2016 will be negatively impacted by Management’s decision in prior periods to adopt a more conservative approach to new account acquisition and due to increased investment in its in-store financing programs in the second quarter to reinvigorate GAAR growth and drive sales at Canadian Tire Retail.
CAPITAL EXPENDITURES
Operating capital expenditures were $86.5 million in the first quarter, down slightly from $89.7 in the prior year.
As previously disclosed in Q3 2015, operating capital expenditures for 2016 are expected to be in the range of $625 million and $650 million reflecting increased investments in the retail network expansion and continued investments in digital and technology initiatives.
Distribution capacity capital expenditures for 2016 are expected to be in the range of $150 million to $175 million.
QUARTERLY DIVIDEND
The Company has declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $0.575 per share payable on September 1, 2016 to shareholders of record as of July 31, 2016. The dividend is considered an “eligible dividend” for tax purposes.
SHARE REPURCHASE
On November 12, 2015, the Company announced its intention to repurchase a further $550.0 million of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of 2016. As at April 2, 2016 the Company had repurchased $220.0 million, leaving $330.0 million to be repurchased in fiscal 2016.
NORMAL COURSE ISSUER BID UPDATE
On February 18, 2016, the Toronto Stock Exchange accepted the Company’s notice of intention to make a normal course issuer bid to purchase up to 6.0 million Class A Non-Voting Shares between March 2, 2016 and March 1, 2017 (the “2016 NCIB”).
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 categories. 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, and FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere), which offers the best active wear brands. The 1,700 retail and gasoline outlets are supported and strengthened by our Financial Services division and the tens of thousands of people employed across the Company. For more information, visit Corp.CanadianTire.ca.
