Canadian Tire Announces Third Quarter Results and Increases Quarterly Dividend

* Consolidated retail sales up 16%; basic earnings per share up 36%
* Quarterly dividend increased 9%
* Acquisition of The Forzani Group Ltd. (FGL Sports) completed

TORONTO, Nov. 10, 2011 /CNW/ - Canadian Tire Corporation, Limited (TSX: CTC) (TSX: CTC.a) today released third quarter results for the period ended October 1, 2011, and announced an increase in the quarterly dividend.

Consolidated revenues rose 19.4% as a result of a strong 16.3% increase in retail sales. Consolidated net income rose 35.9% to $136.5 million from $100.5 million in the prior year and basic earnings per share rose to $1.68 from $1.23.  Included in this quarter's results were the positive impacts from the inclusion of Forzani and a lower tax rate.

"I'm pleased with the positive results in the quarter.  Customers responded to our offerings, we managed our expenses effectively and continued to execute our strategies.  The strong cash flow from our operations and our underlying confidence in our business has resulted in an increase to the quarterly dividend," said Stephen Wetmore, President and CEO of Canadian Tire Corporation.

"As we look ahead, I'm optimistic about the execution of our strategies to strengthen our business for the future," continued Wetmore.  "One of these strategies was the acquisition of FGL Sports - a major addition to our Company as we seek to become Canada's ultimate authority in sports.  The transition at FGL Sports is progressing very well and is meeting our expectations - both in top line sales and realizing synergies."


Consolidated financial results
 
 

 
   
 

 
   
 
   
 

 
   
 

 
   
 

($ in millions except per share amounts)
 
 

Q3 2011
   
 

Q3 2010
   
Change
   
YTD 2011    
YTD 2010    
Change
Retail sales   $ 2,921.0     $ 2,512.1     16.3%     $ 7,888.9     $ 7,264.2     8.6%
Revenue     2,704.9       2,266.1     19.4%       7,252.0       6,624.8     9.5%
EBITDA     277.9       245.6     13.1%       707.8       711.4     (0.5)%
Net income     136.5       100.5     35.9%       300.7       274.9     9.4%
Basic earnings per share     1.68       1.23     36.1%       3.69       3.37     9.6%
Diluted earnings per share     1.67       1.23     36.2%       3.68       3.35     9.6%

 

RETAIL

The Company's quarterly results include FGL Sports for the first time, commencing August 19, 2011. Consolidated retail sales rose 16.3% to $2.9 billion compared to the same period last year with the inclusion of FGL Sports sales of $218.4 million. Excluding FGL Sports, consolidated retail sales and revenues remain strong, up 7.6% and 11.0%, respectively.

Retail sales at CTR stores increased 3.2% (same store 2.3%) over the prior year driven by sales increases across all key categories.  Consumer traffic increased as a result of new product offerings and strong marketing programs.  Living and Playing category revenues were particularly strong in the quarter primarily driven by kitchen, outdoor recreational activities and cycling product lines.  The Automotive category continued its growth trajectory in the quarter which saw the launch of an e-commerce site for tires.

Canadian Tire Gas (Petroleum) saw a 27.4% increase over the prior year, driven by a significant increase in fuel prices over the prior year and a 4.5% increase in volume.

Retail sales at Mark's increased 2.8% (same store 2.7%) over the prior year, driven by its core strength in the industrial wear category.  In casual wear, summer clearance sales were strong, although the late arrival of colder weather this fall compared to last year affected sales in September.  In the quarter, Mark's progressed with its important store conversion program - a real estate and rebranding project which has been launched in three markets, including 14 stores in Calgary.

Compared to the same period last year, FGL Sports had retail sales growth of 6.6% and same store sales growth of 7.3%.  Sales were strong across corporate and franchise stores and all corporate banners saw positive growth with Sport Chek and Sports Experts performing well in hard goods, apparel and footwear.

Retail segment net income before taxes increased 25.6% due to higher sales, lower finance costs and the impact of FGL Sports.

FINANCIAL SERVICES

Financial Services continues to be a strong contributor to CTC earnings and to the value proposition for Canadian Tire's customers.  CTFS revenue increased 0.5% in the quarter to $243.1 million compared to $241.9 million in the prior year.  As previously disclosed, Auto Club services revenue was included in Financial Services in 2010 and is now reported in Retail. Adjusting for this change, revenue in Financial Services increased 2.7% due primarily to higher interest income on credit card receivables.

Financial Services income before taxes increased $9.9 million or 18.3% over the prior year due to the increased revenue, a reduction in loan loss allowance as a result of improved portfolio aging, declining insolvency and unemployment rates, and continued management of operating expenses compared to the prior year.

The rolling 12-month net write-off rate on the credit card loan portfolio was 7.33%, down from 7.72% in Q3 2010.  The rolling 12-month return on receivables was 5.10%, up from 5.02% in Q3 2010.

CAPITAL EXPENDITURES

Capital expenditures for the third quarter 2011 were $120.2 million compared to Q3 2010 spending of $95.5 million.  The increase was driven primarily due to the timing of expenditures and total 2011 expenditures are expected to be in line with previous estimates, excluding FGL Sports.

QUARTERLY DIVIDEND

Canadian Tire Corporation has declared a quarterly dividend of 30 cents per share on each Common and Class A Non-Voting share, up from 27.5 cents per share. The dividend is payable on March 1, 2012 to Common and Class A shareholders of record as of January 31. 2012. The dividend is considered an "eligible dividend" for tax purposes.

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


Consolidated financial results
 
 

 
   
 

 
   
 
   
 

 
   
 

 
   
 

($ in millions except per share amounts)
 
 

Q3 2011
   
 

Q3 2010
   
Change
   
YTD 2011    
YTD 2010    
Change
Retail sales   $ 2,921.0     $ 2,512.1     16.3%     $ 7,888.9     $ 7,264.2     8.6%
Revenue     2,704.9       2,266.1     19.4%       7,252.0       6,624.8     9.5%
Gross margin     780.6       698.3     11.8%       2,121.9       2,016.9     5.2%
Operating expenses     588.7       521.3     12.9%       1,636.2       1,509.1     8.4%
EBITDA     277.9       245.6     13.1%       707.8       711.4     (0.5)%
Depreciation and amortization     75.8       69.5     9.2%       209.5       203.6     2.9%
Net finance costs     32.1       37.6     (14.9)%       99.3       116.8     (15.0)%
Net income     136.5       100.5     35.9%       300.7       274.9     9.4%
Basic earnings per share     1.68    
1.23     36.1%       3.69       3.37     9.6%
Diluted earnings per share     1.67       1.23     36.2%       3.68       3.35     9.6%
                                           
Retail Segment financial results            
                           

($ in millions)
 
 

Q3 2011
   
 

Q3 2010
   
Change
   
YTD 2011    
YTD 2010    
Change
Retail sales   $ 2,921.0     $ 2,512.1     16.3%     $ 7,888.9     $ 7,264.2     8.6%
Revenue     2,443.8       2,004.8     21.9%       6,488.6       5,853.0     10.9%
Gross margin     617.5       538.3     14.7%       1,662.8       1,548.9     7.4%
Operating expenses     505.3       431.2     17.2%       1,386.9       1,251.0     10.9%
EBITDA     195.5       173.2     12.8%       490.3       496.7     (1.3)%
Depreciation and amortization     73.0       66.8     9.4%       201.5       197.2     2.1%
Net finance costs     16.7       22.2     (25.1)%       53.2       67.8     (21.6)%
Income before income taxes     105.8       84.2     25.6%       235.6       231.7     1.7%

 


FGL Sports - sales metrics
   
 
   
 
   
 
   
 
      Aug 21, 2011     Aug 22, 2010     Aug 21, 2011     Aug 22, 2010
      to Oct 1, 2011     to Oct 2, 2010     to Oct 1, 2011     to Oct 2, 2010
FGL Sports retail sales growth     6.6%     n/a     6.6%     n/a
FGL Sports same store sales growth     7.3%     n/a     7.3%     n/a
Number of FGL Sports stores     528     n/a     528     n/a
                         

Retail Segment - by banner
   
 
   
 
   
 
   
 
      Q3 2011     Q3 2010     YTD 2011     YTD 2010
CTR retail sales growth     3.2%     2.0%     1.7%     1.8%
CTR same store sales growth     2.3%     1.4%     0.8%     1.1%
Number of CTR stores     486     482     486     482
                         
Mark's retail sales growth     2.8%     4.5%     3.0%     4.9%
Mark's same store sales growth     2.7%     2.4%     2.9%     2.2%
Number of Mark's stores     385     383     385     383
                         
Canadian Tire Gas gasoline volume (litres) growth     4.5%     2.7%     3.4%     0.4%
Number of gas bars     291     283     291     283

 

                                           

Financial Services' financial results
 
 

 
   
 

 
   
 
   
 

 
   
 

 
   
 

($ in millions)
 
 

Q3 2011
   
 

Q3 2010
   
Change
   
YTD 2011    
YTD 2010    
Change
Total gross average receivables   $ 4,061.1     $ 4,049.3     0.3%     $ 4,026.7     $ 4,042.2     (0.4)%
Revenue     243.1       241.9     0.5%       711.7       715.9     (0.6)%
Gross margin     145.1       140.6     3.1%       407.4       412.1     (1.1)%
Operating expenses     65.4       70.7     (7.5)%       197.6       202.2     (2.3)%
EBITDA     82.4       72.4     13.9%       217.5       214.7     1.4%
Depreciation and amortization     2.8       2.7     4.5%       8.0       6.4     26.7%
Net finance costs     15.4       15.4     (0.2)%       46.1       49.0     (5.9)%
Income before income taxes     64.2       54.3     18.3%       163.4       159.3     2.6%
                                           

To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: http://files.newswire.ca/116/Q32011IRCTC.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, 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 2010 and our 2010 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. EST on November 10, 2011. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at http://corp.canadiantire.ca/EN/investors, and will be available through replay at this website for 12 months.

ABOUT CANADIAN TIRE

Canadian Tire Corporation, Limited (TSX: CTC.a) (TSX: CTC) 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 with caption: "Q3 2011 Interim Report CTC". PDF available at: http://stream1.newswire.ca/media/2011/11/10/20111110_C4422_DOC_EN_6449.pdf

SOURCE CANADIAN TIRE CORPORATION, LIMITED

For further information:

Media: Rob Nicol, 416-480-8414 robert.nicol@cantire.com

Investors: Angela McMonagle, 416-480-8225 angela.mcmonagle@cantire.com


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