Canadian Tire Announces Third Quarter 2012 Results

  • Dividend increase of 16.7%
  • Consolidated retail sales up 8.0%; consolidated revenue up 4.6%
  • Consolidated net income up 3.5% excluding the effect of tax and acquisition benefits in prior year.

TORONTO, Nov. 8, 2012 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC) (TSX:CTC.a) today released third quarter results for the period ended September 29, 2012, and announced a 16.7% increase in the quarterly dividend.

Consolidated sales were up 8.0% and consolidated revenue increased 4.6% to approximately $2.8 billion in the quarter as a result of the inclusion of FGL Sports revenue for 13 weeks compared to six weeks in Q3 2011 and revenue growth at Mark's, Petroleum and Financial Services. Consolidated net income declined 3.7% compared to the prior year.  Included in net income in the third quarter of 2011 were net benefits related to the acquisition of FGL Sports, reduced income tax expense and interest income received related to resolution of tax matters.  Excluding these items, net income increased 3.5% in Q3 2012.

"Overall, the business performed well in the quarter. The quality of our earnings reflects the strength of our core categories and efforts to manage the sales and margin mix," said Stephen Wetmore, President and CEO, Canadian Tire Corporation. "While revenue declined due to slower shipments of winter products to our dealer network, I am pleased with the performance of Canadian Tire Retail and our progress on key initiatives. We also continued to realize expected synergies at FGL Sports and advanced our growth strategy and banner rationalization efforts."

                                 
Consolidated financial results                                
(C$ in millions except per share amounts)   Q3 2012   Q3 2011   Change   YTD Q3 2012   YTD Q3 2011   Change
Retail sales   $ 3,171.9   $ 2,938.1   8.0%   $ 9,072.0   $ 7,941.2   14.2%
Revenue     2,829.8     2,704.9   4.6%     8,260.5     7,252.0   13.9%
Net income     131.4     136.5   (3.7)%     336.1     300.7   11.8%
Basic earnings per share     1.61     1.68   (3.7)%     4.13     3.69   11.8%
Diluted earnings per share     1.61     1.67   (3.8)%     4.11     3.68   11.8%

 

Retail

Retail sales at Canadian Tire Retail (CTR) increased 0.3% and same store sales declined by 0.2% in the quarter. Canadian Tire saw strong growth in key categories such as backyard living, outdoor recreation and kitchen as a result of increased marketing efforts and new assortments. The increase was partially offset by decreases in categories that were de-emphasized such as electronics, home décor and household cleaning. Continued softness in the automotive market contributed to a decline in auto service and related parts sales in the quarter.

FGL Sports' retail sales increased 4.2% and same store sales increased 4.4% over the comparable period in the prior year due to strong sales in apparel, equipment and footwear. As well, the business has moved quickly to reduce the number of non-strategic banners as announced in its recent growth strategy.

At Mark's, retail sales grew 2.0% and same store sales increased 1.7% due to growth in women's wear and industrial footwear sales, particularly in Western Canada.  Sales gains were modest in the quarter due to less promotional activity in July and August, and slower sales of fall seasonal items in September due to the extended warm weather across the country.

Petroleum retail sales increased 2.4% primarily due to strong convenience store sales and increased gas volume.

Revenue in the retail segment increased 4.9% in the quarter primarily due to the inclusion of FGL Sports for 13 weeks compared to six weeks in Q3 2011, increases in Petroleum and Mark's, partly offset by a decrease in CTR revenue across all categories.

Retail segment income before income taxes of $105.6 million was flat compared to the prior year. The third quarter of 2012 included FGL Sports results for 13 weeks compared to six weeks in Q3 2011 and reflected revenue growth at Mark's and Petroleum, which were offset by revenue declines at CTR.

Financial Services

Financial Services was a strong contributor to the Company's earnings in the third quarter. Financial Services' revenue increased 2.0% in the quarter and income before income taxes increased 14.8% in the quarter compared to the prior year. The earnings increase was due to increased revenue related to credit card receivables growth, improved portfolio aging and write-off performance, and lower operating expenses compared to the prior year.

Capital Expenditures

Capital expenditures in the third quarter were $68.1 million compared to $120.2 million in the prior year. The decrease was largely due to reduced spending on projects such as Automotive Infrastructure, which was substantially completed prior to 2012, and the timing of real estate expenses compared to last year.

Quarterly Dividend

Canadian Tire Corporation has declared a 16.7% increase in the quarterly dividend, to 35 cents per share, on each Common and Class A Non-Voting share. The dividend is payable March 1, 2013 to Common and Class A shareholders of record as of January 31, 2013. The dividend is considered an "eligible dividend" for tax purposes.

Dividends declared on Common and Class A Non-Voting shares in the third quarter of 2012 of $0.30 per share are payable on December 1, 2012, to shareholders of record as of October 31, 2012.

The Company's third quarter report will be available in the Investor Centre section of the Company's website at corp.canadiantire.ca and will be filed with SEDAR and available at sedar.com.

In order to more closely align the timing of the filing of documents with the announcement of results, the Company expects to report fourth quarter and audited 2012 full-year results and file the associated disclosure documents on SEDAR (including annual Financial Statements and Management's Discussion and Analysis) on Thursday, February 21, 2013. Timing of the disclosure will be confirmed via a media advisory in January 2013.

Please refer to Management's Discussion and Analysis for further detail and information on the following charts.

                                 
Consolidated financial results                                
(C$ in millions except per share amounts)   Q3 2012   Q3 2011   Change   YTD Q3 2012   YTD Q3 2011   Change
Retail sales   $ 3,171.9   $ 2,938.1   8.0%   $ 9,072.0   $ 7,941.2   14.2%
Revenue       2,829.8     2,704.9   4.6%     8,260.5     7,252.0   13.9%
Gross margin     859.0     780.6   10.0%     2,503.5     2,121.9   18.0%
Other income     0.8     10.2   (92.4)%     0.5     12.6   (96.4)%
Operating expenses      648.8     588.7   10.2%     1,950.6     1,636.2   19.2%
EBITDA       295.1     277.9   6.3%     800.7     707.8   13.1%
Depreciation and amortization     84.1     75.8   10.9%     247.3     209.5   18.0%
Net finance costs     31.7     32.1   (1.0)%     92.8     99.3   (6.5)%
Income before income taxes     179.3     170.0   5.5%     460.6     399.0   15.4%
Effective Tax rate     26.7%     19.7%         27.0%     24.6%    
Net income     131.4     136.5   (3.7)%     336.1     300.7   11.8%
                                   
Basic earnings per share     1.61     1.68   (3.7)%     4.13     3.69   11.8%
Diluted earnings per share     1.61     1.67   (3.8)%     4.11     3.68   11.8%
                         

 

                                 
Retail segment financial results                                
(C$ in millions)     Q3 2012     Q3 2011   Change   YTD Q3 2012   YTD Q3 2011   Change
Retail sales   $ 3,171.9   $ 2,938.1   8.0%   $ 9,072.0   $ 7,941.2   14.2%
Revenue        2,564.4     2,443.8   4.9%     7,480.1     6,488.6   15.3%
Gross margin      689.8     617.5   11.7%     2,008.4     1,662.8   20.8%
Other (expense) income     0.7     10.3   (94.1)%     (2.0)     12.9   (116.1)%
Operating expenses     566.5     505.3   12.0%     1,706.6     1,386.9   23.0%
EBITDA       205.6     195.5   5.2%     539.8     490.3   10.1%
Depreciation and amortization     81.6     73.0   11.8%     240.0     201.5   19.1%
Net finance costs     18.4     16.7   10.4%     54.4     53.2   2.4%
Income before income taxes     105.6     105.8   (0.1)%     245.4     235.6   4.1%
                           

 

Retail Segment - by banner                            
(C$ in millions, except number of stores and gas bars)   Q3 2012 Q3 2011   Change   YTD Q3 2012   YTD Q3 2011   Change
CTR retail sales growth1     0.3%     3.2%         1.4%     1.8%    
CTR same store sales growth1     (0.2)%     2.3%         0.9%     0.8%    
CTR revenue3   $ 1,395.4   $ 1,496.1   (6.7)%   $ 4,231.5   $ 4,197.9   0.8%
Number of CTR stores2     487     486         487     486    
                                 
Canadian Tire Petroleum retail sales growth     2.4%     27.4%         3.7%     22.2%    
Canadian Tire Petroleum gasoline volume (litres) growth     1.1%     4.5%         0.9%     3.4%    
Canadian Tire Petroleum revenue   $ 543.4   $ 534.5   1.7%   $ 1,539.8   $ 1,490.3   3.3%
Canadian Tire Petroleum gross margin   $ 39.8   $ 38.6   3.3%   $ 109.8   $ 110.8   (0.8)%
Number of gas bars     293     291         293     291    
                                 
FGL Sports retail sales growth4     4.2%     6.6%         4.7%     n/a    
FGL Sports same store sales growth4     4.4%     7.3%         5.8%     n/a    
FGL Sports revenue   $ 429.1   $ 219.5   95.5%   $ 1,106.1   $ 219.5   403.9%
Number of FGL Sports stores     490     528         490     528    
                                 
Mark's retail sales growth     2.0%     1.9%         4.6%     2.9%    
Mark's same store sales growth     1.7%     1.5%         3.8%     2.7%    
Mark's revenue   $ 200.2   $ 197.3   1.5%   $ 614.1   $ 591.5   3.8%
Number of Mark's stores2     387     385         387     385    
                               

 

                                 
Financial Services segment financial results                                
(C$ in millions)   Q3 2012   Q3 2011   Change   YTD Q3 2012   YTD Q3 2011   Change
Total gross average receivables   $ 4,116.1   $ 4,061.1   1.4%   $ 4,058.2   $ 4,026.7   0.8%
Revenue     249.7     245.0   2.0%     733.9     716.9   2.4%
Gross margin     137.9     129.2   6.9%     404.2     359.8   12.4%
Operating expenses     64.7     65.4   (0.8)%     192.2     197.6   (2.7)%
Income before income taxes     73.7     64.2   14.8%     215.2     163.4   31.7%
                                 

 

To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: http://files.newswire.ca/116/Q3_2012_English_CTC.pdf

FORWARD-LOOKING STATEMENTS

This document contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. Forward-looking statements are 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 financial position, results of operation and operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.

All statements other than statements of historical facts included in this document may constitute forward-looking information, including but not limited to, statements concerning management's expectations relating to possible or assumed future prospects and results, our strategic goals and priorities, our actions and the results of those actions and the economic and business outlook for us. Often but not always, forward-looking information can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made.

By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's assumptions may not be correct and that the Company's expectations and plans will not be achieved. Although the Company believes that the forward-looking information in this document is based on information and assumptions which are current, reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information for a variety of reasons. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - include (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of Canadian Tire to attract and retain quality employees, Dealers, Canadian Tire Petroleum agents and PartSource, Mark's Work Wearhouse and FGL Sports store operators and franchisees, as well as our financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at our stores or acquire our financial products and services; (d) our margins and sales and those of our competitors; (e) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, regulation, competition, seasonality, commodity price and business disruption, our relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by Canadian Tire and the cost of store network expansion and retrofits and (f) our capital structure, funding strategy, cost management programs and share price. We caution that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect our results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information.

For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the "Risk Factors" section of our Annual Information Form for fiscal 2011 and our 2011 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.

Statements that include forward-looking information do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Company's business. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring after such statements are made.

The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. The Company 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, unless 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 4:30 p.m. ET on November 8, 2012. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at http://investors.canadiantire.ca, and will be available through replay at this website for 12 months.

ABOUT CANADIAN TIRE

Canadian Tire Corporation, Limited (TSX:CTC) (TSX:CTC.a) is one of Canada's most-shopped general retailers and the country's largest sporting goods retailer, with more than 1,700 retail and gasoline outlets from coast-to-coast. Our primary retail business categories - Automotive, Living, Fixing, Sports, Playing and Apparel - are supported and strengthened by our Financial Services division, which offers such products and services as Canadian Tire home services, credit cards, retail deposits, in-store financing, product warranties, and insurance. Nearly 68,000 people are employed across the Canadian Tire enterprise, which was founded in 1922 and remains one of Canada's most recognized and trusted brands.

 

 

 

PDF available at: http://stream1.newswire.ca/media/2012/11/08/20121108_C6120_DOC_EN_20331.pdf

SOURCE: CANADIAN TIRE CORPORATION, LIMITED

For further information:

Media: Amy Cole, 416-544-7655, amy.cole@cantire.com
Investors: Angela McMonagle, 416-480-8225, angela.mcmonagle@cantire.com