Canadian Tire Corporation Reports First Quarter 2024 Results

TORONTO, May 9, 2024 /CNW/ - Canadian Tire Corporation, Limited (TSX: CTC) (TSX: CTC.A) ("CTC" or "the Company") today released its first quarter results for the period ended March 30, 2024.

• Consolidated comparable sales1 were down 1.6%, compared to a 2.5% decrease in Q1 2023.
• Diluted and Normalized Earnings Per Share1 ("EPS") were $1.38, compared to diluted EPS of $0.13 and normalized EPS of $1.00 in the first quarter of 2023.

"Our operational resilience enabled us to navigate the ongoing macroeconomic environment and we're pleased with the performance of the business this quarter. Our Retail segment delivered solid results, underscored by product margin appreciation for the quarter, while also reducing inventory levels, and our Financial Services business continued to perform well, driving profitability in the quarter. We continue to leverage our investments in our assets and capabilities, manage costs, and adapt our assortment to meet the changing needs of our customers," said Greg Hicks, President and CEO of Canadian Tire Corporation.

"Through the increased issuance of Canadian Tire Money and successful launch of our Petro-Canada partnership, we are providing additional value to Canadians when they need it most and strengthening our connection with our customers," added Hicks.

• Consolidated comparable sales were down 1.6%. Traffic to retail stores was only slightly below last year, although consumer spending remained down in a challenging consumer demand environment. Strong in-stock positions and enhanced store experiences contributed to improved customer Net Promoter Score ("NPS") across our banners.
  • Canadian Tire Retail comparable sales1 were down 0.6%, compared to a decrease of 4.8% in Q1 2023. Essential categories were up 2%, led by Automotive. Discretionary categories were down overall but Seasonal and Gardening categories grew, driven by key brand introductions.
  • Mark's comparable sales1 were down 1.2%. Effective use of loyalty incentives contributed to traffic growth and growth in casual footwear and outerwear categories. These increases were offset by industrial and workwear declines.
  • SportChek comparable sales1 were down 6.5% as a result of softer demand in skiing, snowboarding and outerwear in the early part of Q1, partially offset by growth in team sports, hydration and footwear.
• Retail gross margin rate (excluding Petroleum)1, outperformed expectations, up 193 bps to 37.1%. Margin rate improvement reflected mix and favourable freight rates leading to product margin appreciation for the quarter. CTC's retail banners continued to offer customers an effective mix of Owned Brands and national brands, which also supported the increase.
• Consolidated Income Before Income Taxes ("IBT") was $121.8 million, up $55.2 million compared to Q1 2023. On a normalized basis1, IBT was down $12.5 million or 9.3%.
  • Retail IBT was $0.6 million, up $12.2 million on a normalized basis1 compared to a loss of $11.6 million in Q1 2023 when the Company incurred shipment delays related to the A.J. Billes Distribution Centre ("DC") fire and a one-time cost to exit a supply chain contract. Significant supply chain reductions and tighter cost control led to lower operating expenses, which offset lower Retail revenue and margin dollars.
  • Financial Services delivered IBT of $95.7 million. The 19.3% decrease against a strong 2023 result was primarily due to lower gross margin, with net impairment losses and funding costs trending higher, as expected. Cardholder engagement remained strong, with Gross Average Accounts Receivable1 ("GAAR") growth up 4.5% and account growth of 0.6%. Card spend contracted slightly, down 0.6%.
• Better Connected strategy investments in loyalty, supply chain, digital and stores are driving operating benefits as well as improving the omnichannel customer experience:
  • Investments in loyalty partnership capabilities resulted in the introduction of our Petro-Canada partnership at the end of Q1. This initiative has driven an increase in the issuance of Canadian Tire Money ("eCTM"), with the anticipated redemptions poised to generate incremental sales across our network of stores.
  • In its first full year of operations, the new Distribution Centre in the Greater Toronto Area is delivering beyond expected productivity improvements and managed 10% of CTC's total throughput.
  • Operating capital expenditures1 totalling $120.4 million in the quarter included the ongoing refresh of the CTR store network with 40+ stores expected to be refreshed during 2024 and the opening of two new format "Bigger, Bolder, Better" Mark's stores in Oakville, Ontario, and Grande Prairie, Alberta showcasing a broader assortment to customers in key markets.
  • Enabled a richer digital customer experience with the launch of "CeeTee", an artificial intelligence ("AI") shopping assistant designed to streamline the shopping journey around tire selection in CTR's automotive division, and the most recent output of the Company's work and investment in generative AI technology.

• Revenue was $3,524.9 million compared to $3,707.2 million in the same period last year, down 4.9% or 5.2% excluding Petroleum1.
• Consolidated IBT was $121.8 million, an increase of $55.2 million, compared to IBT of $66.6 million in Q1 2023 when the Company recorded $67.7 million of costs related to the DC fire. On a normalized basis, IBT was down 9.3%.
• Diluted EPS was $1.38 compared to $0.13 in the prior year. Normalized diluted EPS was $1.38, up $0.38.
• Refer to the Company's Q1 2024 MD&A section 4.1.1 for information on normalizing items and for additional details on events that have impacted the Company in the quarter.

RETAIL SEGMENT OVERVIEW

• Retail revenue was $3,136.6 million, a decrease of $201.3 million, or 6.0%, compared to the prior year; Retail revenue (excluding Petroleum)1 was down 6.6%, primarily due to lower shipments at CTR.
• Retail sales1 were $3,257.5 million, down 2.1%, compared to the first quarter of 2023. Retail sales (excluding Petroleum)1 and consolidated comparable sales were down 1.9% and 1.6%, respectively, in a challenging consumer demand environment.
• CTR retail sales1 were down 0.7% and comparable sales were down 0.6% over the same period last year.
• SportChek retail sales1 were down 7.5% over the same period last year, and comparable sales were down 6.5%.
• Mark's retail sales1 decreased 1.5% over the same period last year, and comparable sales were down 1.2%.
• Helly Hansen revenue was down 7.8% compared to the same period in 2023, mainly due to the timing and volume of sports wholesale orders and shipments; the direct-to-consumer eCommerce business continued to show strong momentum in North America.
• Retail gross margin was down 1.1% compared to the first quarter of 2023, or down 1.4% excluding Petroleum1. Retail gross margin rate (excluding Petroleum) increased 193 bps to 37.1%.
• Retail IBT was $0.6 million, compared to a Retail loss before income taxes of $79.3 million in the prior year, and up $12.2 million on a normalized basis.
• Retail Return on Invested Capital1 ("ROIC") calculated on a trailing twelve-month basis, was 8.4% at the end of the first quarter, compared to 11.3% at the end of the first quarter of 2023, due to the decrease in earnings over the prior period.
• Refer to the Company's Q1 2024 MD&A sections 4.1.1 and 4.2.1 for information on normalizing items and for additional details on events that have impacted the Company in the quarter.

• GAAR was up 4.5% relative to the prior year, due to increases in both active accounts and average account balance1, up 0.6% and 3.8% respectively, in the quarter.
• Financial Services gross margin was $189.9 million, a decrease of $21.4 million, or 10.2% compared to the prior year. As expected, higher net impairment losses and funding costs were partially offset by revenue growth of 5.2%.
• Financial Services IBT was $95.7 million, down $23.0 million, or 19.3% compared to the prior year.
• Refer to the Company's Q1 2024 MD&A sections 4.3.1 and 4.3.2 for additional details on events that have impacted the Company in the quarter.

• Net Operating Income1 ("NOI") and Adjusted Funds From Operations ("AFFO") per unit1 were up 5.6% and 4.8%, respectively, in Q1 2024.
• CT REIT announced a 3.0% distribution increase that will be effective with the July 2024 payment to unitholders.
• For further information, refer to the Q1 2024 CT REIT earnings release issued on May 6, 2024.

CAPITAL EXPENDITURES

• Operating capital expenditures were $120.4 million, compared to $106.7 million in Q1 2023.
• Total capital expenditures were $122.7 million, compared to $118.3 million in Q1 2023.

QUARTERLY DIVIDEND

• The Company declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $1.75 per share, payable on September 1, 2024, to shareholders of record as of July 31, 2024. The dividend is considered an "eligible dividend" for tax purposes.

SHARE REPURCHASES

• On November 9, 2023, the Company announced its intention to repurchase up to $200 million of its Class A Non-Voting Shares ("the Shares"), in excess of the amount required for anti-dilutive purposes, during 2024 as part of its capital management plan (the "2024 Share Repurchase Intention"). To date, the Company has not repurchased any Shares in fulfillment of its 2024 Share Repurchase Intention.

NORMAL COURSE ISSUER BID AND AUTOMATIC SECURITIES PURCHASE PLAN

• On February 15, 2024, the TSX accepted the Company's notice of intention to make a normal course issuer bid to purchase up to 4.9 million Shares between March 2, 2024 and March 1, 2025 (the "2024-25 NCIB"). Also on February 15, 2024, the TSX accepted the Company's new automatic securities purchase plan which expires on March 1, 2025 and which allows a designated broker to purchase Shares under the 2024-25 NCIB during the Company's blackout periods.

This press release contains non-GAAP financial measures and ratios and supplementary financial measures. References below to the Q1 2024 MD&A mean the Company's Management's Discussion and Analysis for the First Quarter ended March 30, 2024, which is available on SEDAR+ at 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.

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 Q1 2024 MD&A.

The following table is a reconciliation of normalized net income attributable to shareholders of the Company to the respective GAAP measures:

Consolidated Normalized Income Before Income Taxes and Retail Normalized (Loss) Income before Income Taxes are non-GAAP financial measures. For information about these measures, see section 9.1 of the Company's Q1 2024 MD&A.

The following table reconciles Consolidated Normalized Income Before Income Taxes to Income Before Income Taxes:

The following table reconciles Retail Normalized Income Before Income Taxes to Income Before Income Taxes:

NOI is defined as Property revenue less Property expense adjusted further for straight-line rent. This measure is most directly comparable to Revenue, a GAAP measure reported in the consolidated financial statements. Management believes that NOI is a useful key indicator of performance as it represents a measure of property operations over which Management has control. NOI is also a key input in determining the value of the portfolio. NOI should not be considered as an alternative to Property revenue or Net income and Comprehensive income, both of which are determined in accordance with GAAP.

The following table shows the relationship of NOI to GAAP Revenue and Property expense in CT REIT's Consolidated Statements of Income and Comprehensive Income:

Funds from Operations ("FFO") is a non-GAAP financial measure of operating performance used by the real estate industry, particularly by publicly-traded entities that own and operate income-producing properties. This measure is most directly comparable to Net income and Comprehensive income, GAAP measures reported in the consolidated financial statements. FFO should not be considered as an alternative to Net income or Cash flow provided by operating activities determined in accordance with IFRS. CT REIT calculates its FFO in accordance with Real Property Association of Canada's publication "REALPAC Funds From Operations & Adjusted Funds From Operations for IFRS" ("REALPAC FFO & AFFO"). The use of FFO, together with the required IFRS presentations, have been included for the purpose of improving the understanding of the operating results of CT REIT.

Management believes that FFO is a useful measure of operating performance that, when compared period over period, reflects the impact on operations of trends in occupancy levels, rental rates, operating costs and property taxes, acquisition activities and interest costs, and provides a perspective of the financial performance that is not immediately apparent from Net income determined in accordance with IFRS.

FFO adds back items to Net income that do not arise from operating activities, such as fair-value adjustments. FFO, however, still includes non-cash revenues relating to accounting for straight-line rent and makes no deduction for the recurring capital expenditures necessary to sustain the existing earnings stream.

AFFO is a non-GAAP financial measure of recurring economic earnings used in the real estate industry to assess an entity's distribution capacity. This measure is most directly comparable to Net income and Comprehensive income, GAAP measures reported in the consolidated financial statements. AFFO should not be considered as an alternative to Net income or Cash flows provided by operating activities determined in accordance with IFRS. CT REIT calculates its AFFO in accordance with REALPAC's FFO and AFFO.

CT REIT calculates AFFO by adjusting FFO for non-cash income and expense items such as amortization of straight-line rents. FFO is also adjusted as a reserve for maintaining productive capacity required for sustaining property infrastructure and revenue from real estate properties and direct leasing costs. As property capital expenditures do not occur evenly during the fiscal year or from year to year, the capital expenditure reserve in the AFFO calculation, which is used as an input in assessing the REIT's distribution payout ratio, is intended to reflect an average annual spending level. The reserve is primarily based on average expenditures determined by building condition reports prepared by independent consultants.

Management believes that AFFO is a useful measure of operating performance similar to FFO as described, adjusted for the impact of non-cash income and expense items.

FFO per unit and AFFO per unit are calculated by dividing FFO or AFFO by the weighted average number of units outstanding on a diluted basis. Management believes that these measures are useful to investors to assess the effect of this measure as it relates to their holdings.

The following table reconciles GAAP Income before income taxes to FFO and further reconciles FFO to AFFO:

Retail Return on Invested Capital ("ROIC") is calculated as Retail return divided by the Retail invested capital. Retail return is defined as trailing annual Retail after-tax earnings excluding interest expense, lease related depreciation expense, inter-segment earnings, and any normalizing items. Retail invested capital is defined as Retail segment total assets, less Retail segment trade payables and accrued liabilities and inter-segment balances based on an average of the trailing four quarters. Retail return and Retail invested capital are non-GAAP financial measures. For more information about these measures, see section 9.1 of the Company's Q1 2024 MD&A.

Operating capital expenditures is a non-GAAP financial measure. For more information about this measure, see section 9.1 of the Company's Q1 2024 MD&A.

The following table reconciles total additions from the Investing activities reported in the Consolidated Statement of Cash Flows to Operating capital expenditures:

Supplementary Financial Measures and Ratios
The measures below are supplementary financial measures. See Section 9.2 (Supplementary Financial Measures) of the Company's Q1 2024 MD&A for information on the composition of these measures.

• Consolidated retail sales
• Consolidated comparable sales
• Revenue (excluding Petroleum)
• Retail revenue (excluding Petroleum)
• Retail sales and retail sales (excluding Petroleum)
• Canadian Tire Retail comparable and retail sales
• SportChek comparable and retail sales
• Mark's comparable and retail sales
• Retail gross margin (excluding Petroleum)
• Retail gross margin rate (excluding Petroleum)
• Gross Average Accounts Receivables ("GAAR")
• Average account balance

To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: https://mma.prnewswire.com/media/2408479/CANADIAN_TIRE_CORPORATION__LIMITED___INVESTOR_RELATIONS_Canadian.pdf

This press release contains information that may constitute forward-looking information within the meaning of applicable securities laws. Forward-looking information provides insights regarding Management's current expectations and plans and allows investors and others to better understand the Company's anticipated financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other purposes. Although the Company believes that the forward-looking information in this press release is based on information, assumptions and beliefs that are current, reasonable, and complete, such information is necessarily subject to a number of business, economic, competitive and other risk factors that could cause actual results to differ materially from Management's expectations and plans as set forth in such forward-looking information. The Company cannot provide assurance that any financial or operational performance, plans, or aspirations forecast will actually be achieved or, if achieved, will result in an increase in the Company's share price. For information on the material risk factors and uncertainties and the material factors and assumptions applied in preparing the forward-looking information that could cause the Company's actual results to differ materially from predictions, forecasts, projections, expectations or conclusions, refer to section 13.0 (Forward-Looking Information and Other Investor Communications) of our Management's Discussion and Analysis for the Company's Q1 2024 MD&A as well as CTC's other public filings, available at http://www.sedarplus.ca and at https://investors.canadiantire.ca. 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, 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, company performance, and related matters at 8:00 a.m. ET on May 9, 2024. 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.

ANNUAL GENERAL MEETING
The Company will hold its Annual General Meeting of Shareholders on Thursday, May 9, 2024 at 10:00 a.m. ET. Guests can attend the meeting in person, watch a live webcast of the meeting, or listen to the meeting via teleconference. See ctcagm.com for further details.

ABOUT CANADIAN TIRE CORPORATION
Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: CTC) (or "CTC"), is a group of companies 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 and Atmosphere, which offer the best active wear brands. The Company's close to 1,700 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 technical outdoor brand based in Oslo, Norway. For more information, visit Corp.CanadianTire.ca.

FOR MORE INFORMATION

Media: Stephanie Nadalin, (647) 271-7343, stephanie.nadalin@cantire.com
Investors: Karen Keyes, (647) 518-4461, karen.keyes@cantire.com

SOURCE CANADIAN TIRE CORPORATION, LIMITED - INVESTOR RELATIONS

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