TORONTO, March 10, 2022 /CNW/ – Today at its Investor Day, Canadian Tire Corporation, Limited (CTC) (TSX: CTC) (TSX: CTC.A) is announcing a major $3.4 billion investment over four years to deliver an improved omnichannel customer experience. CTC’s strategic growth plan impacts multiple aspects of the business and builds upon the Company’s unparalleled brand trust and newly launched brand purpose: to Make Life in Canada Better. In conjunction with the event, the Company is announcing new long-term financial aspirations.
“Over the past two years, we have further strengthened our highly competitive, powerful market positioning and unrivalled understanding of the Canadian consumer. We are making strategic investments that will create better customer experiences, deeper customer connections, and drive long-term growth and value for our shareholders. Additionally, our investments in the communities we serve will create jobs and help drive local economies,” said Greg Hicks, President & Chief Executive Officer, Canadian Tire Corporation. “Through our strategy, we will continue to evolve from a collection of banners, brands and channels into one integrated Company – one in which all our assets render each other more valuable to create a truly differentiated customer experience.”
Long-Term Financial Aspirations*
Canadian Tire Corporation expects to achieve the following by 2025:
- Consolidated comparable sales growth1 (excluding Petroleum) of more than 4%, averaged annually
- Retail Return on Invested Capital (ROIC)2 of 15%+ compared to ROIC of 13.6% in 2021
- Diluted EPS of $26.00+, more than double 2019 diluted EPS of $12.58, (2021 diluted EPS of $18.38, and normalized3 $18.91)
“We have clearly laid out our strategic growth plan, and we firmly believe that investments targeting organic growth in the right places represent the best use of capital,” said Gregory Craig, Executive Vice President & Chief Financial Officer, Canadian Tire Corporation. “Our focus on investing in the business will be coupled with our balanced approach to dividends and share buybacks which positions us to continue to generate attractive returns to shareholders over the longer-term.”
| ______________________ |
| *For all footnoted references, please see section entitled “Notes regarding Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures”. |
Strategic Growth Plan
Growing differentiated and innovative Owned Brands portfolio by ~$2 billion
- Building on its Owned Brands portfolio, which represents $5.7 billion in retail sales1, CTC will grow its consolidated Owned Brand penetration1 from ~38% to more than 43% by scaling up existing Owned Brands and introducing new products designed to make life in Canada better
- Acceleration of new product launches with over 12,000 new Owned Brand products introduced by 2025 across all banners, developed with insights from CTC’s Tested for Life in Canada product testers program and customer panel, one of the largest retail customer panels in North America
- Helly Hansen is executing on its growth strategy and expects to triple its business in Canada since acquisition, and grow market share in the United States and other select international markets
- Partnering to build and enhance select National Brands across the retail portfolio, including Levi’s, Petco and Reebok
Investing ~$2.2 billion to create a connected omnichannel customer experience
- Expanding Triangle Rewards to drive customer engagement and fuel growth across banners
- Strengthening data-led personalized marketing capabilities with a world-class partnership network
- National rollout of Triangle Select – a new premium annual fee-based membership program – to deliver an enhanced value proposition across CTC banners
- Expanding CT Bank product offerings to include extension of existing Buy Now Pay Later (BNPL) product for financing member spend on travel and vacation expenses, and the introduction of Global Money Transfer on Triangle Mastercard with the ability to send money to over 100 countries around the world
- Driving loyalty sales as a percent of retail sales4 from 58% to greater than 63% – growing the Company’s wealth of first party data
- ~$1.2 billion of CTC’s investment will be allocated to improving the connection of digital and physical channels and driving an enhanced customer experience
- Rollout of its new store format “Concept Connect” to approximately 225 Canadian Tire stores
- Introduction of new large format “Remarkable Retail” stores which are over 100,000 square feet, opening in Ottawa and Welland in 2022, with Calgary targeted for 2025
- Improving speed and experience for same-day customer pick-up options, including text enabled Curbside Pickup and rollout of automated click & collect lockers
- Accelerating digitization to create “connected stores”, including further use of electronic shelf labels, digital appointment scheduling, digital wayfinding, and an enhanced in-store mobile app experience through redemption of eCTM, including loyalty offer swapping
- Driving inventory localization through market-specific, AI-generated store assortments
- Transforming online user experience across all banners with rollout of CTC’s One Digital Platform
Investing ~$675 million to strengthen supply chain fulfillment infrastructure and automation
- Adding 1.6 million sq ft of incremental warehouse space across the country:
- Opening of a 1.3 million square foot state-of-the-art eCommerce fulfillment facility in the Greater Toronto Area
- 322,000 sq ft expansion of Montreal distribution centre (DC)
- Implementation of innovative robotics automated system in Calgary, Brampton and Montreal DCs
- Continued expansion of capabilities in Western Canada, including development of Ashcroft Terminal
- Enhanced order fulfillment through a common single platform used by all CTC banners
Investing ~$500 million to modernize IT infrastructure and drive efficiency in how CTC operates
- Implementation of large-scale enterprise infrastructure in key areas of the business, including One Digital Platform, Transportation Management, and Human Capital Management
- Investment in a new Digital Core Banking platform
- Continued investment in data & analytics to power Triangle’s personalization efforts
As the Company prioritizes investments in its core retail businesses, operating capital expenditures5 will be in the range of $825 to $875 million in 2022, compared to the equivalent 2021 operating capital expenditures of $670 million. The Company’s growth strategy ensures that the balance sheet will continue to support returns to shareholders.
CTC is also maintaining its commitment to its operational efficiency program, after it achieved its targeted $200+ million in annualized savings ahead of its 2022 target. The Company continues to expect to deliver an additional $100 million in savings by the end of 2022. As CTC moves through the third year of the operational efficiency program, it is seeing more broad-based system transformation and efficiency initiatives that will enable it to continue to set the course for increased competitiveness in the future.
NOTES REGARDING NON-GAAP FINANCIAL MEASURES AND RATIOS AND SUPPLEMENTARY FINANCIAL MEASURES
This press release contains non-GAAP financial measures and ratios and supplementary financial measures. References below to the 2021 MD&A mean the Company’s Management’s Discussion and Analysis for the Fourth Quarter and Full Year ended January 1, 2022, which is available on SEDAR at www.sedar.com and is incorporated by reference herein. Non-GAAP measures and non-GAAP ratios have no standardized meanings under GAAP and may not be comparable to similar measures of other companies.
1. Comparable sales (excluding Petroleum); Owned Brands retail sales; Owned Brands penetration
These measures are supplementary financial measures. See Section 9.3 (Supplementary Financial Measures) of the 2021 MD&A for information on the composition of these measures.
2. Retail Return on Invested Capital (ROIC)
Retail ROIC is calculated as Retail return divided by the Retail average invested capital. Retail ROIC is a non-GAAP ratio, while Retail return and Retail average invested capital are non-GAAP financial measures. For information about these measures see section 9.2 of the 2021 MD&A. There are no differences in the composition of the forward-looking measures and their historical equivalents. The following table reconciles Retail return and Retail average invested capital to the respective GAAP measures for the year ended January 1, 2022:
| (C$ in millions) | 2021 | 2020 | ||
| Income before income taxes | $ | 1,701.9 | $ | 1,172.1 |
| Less: | ||||
| Financial Services income before income taxes | 432.4 | 327.3 | ||
| CT REIT income before income taxes | 456.9 | $ | 183.3 | |
| Eliminations and adjustments | (363.1) | (76.8) | ||
| Retail income before income taxes | $ | 1,175.7 | $ | 738.3 |
| Add normalizing items: | ||||
| Operational Efficiency program | 40.9 | 56.7 | ||
| Retail normalized income before income taxes | $ | 1,216.6 | $ | 795.0 |
| Less: | ||||
| Retail intercompany adjustments1 | 196.5 | 192.8 | ||
| Add: | ||||
| Retail interest expense2 | 251.8 | 283.4 | ||
| Retail depreciation of right-of-use assets | 541.5 | 520.0 | ||
| Retail effective tax rate | 27.1 % | 28.3 % | ||
| Add: Retail taxes | (491.4) | (397.7) | ||
| Retail return | $ | 1,322.0 | $ | 1,007.9 |
| Average total assets | $ | 21,364.1 | 19,983.4 | |
| Less: | ||||
| Average Financial Services assets | 7,653.0 | 7,000.0 | ||
| Average CT REIT assets | 6,343.1 | 6,124.4 | ||
| Average Eliminations and adjustments | (8,970.1) | (8,814.0) | ||
| Average Retail assets | $ | 16,338.1 | 15,673.0 | |
| Less: | ||||
| Average Retail intercompany adjustments1 | 3,421.2 | 3,389.0 | ||
| Average Retail trade payables and accrued liabilities3 | 2,519.8 | 2,347.1 | ||
| Average Franchise Trust assets | 507.6 | 576.6 | ||
| Average Retail excess cash | 167.4 | 14.0 | ||
| Average Retail invested capital | $ | 9,722.1 | $ | 9,346.3 |
| Retail ROIC | 13.6 % | 10.8 % |
| 1 Intercompany adjustments include intercompany income received from CT REIT which is included in the Retail segment, and intercompany investments made by the Retail segment in CT REIT and CTFS. 2 Excludes Franchise Trust. 3 Trade payables and accrued liabilities include trade and other payables, short-term derivative liabilities, short-term provisions and income tax payables. |
3. Normalized Diluted Earnings per Share (EPS)
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 9.2 of the 2021 MD&A. There are no differences in the composition of the forward-looking measures and their historical equivalents. The following table is a reconciliation of normalized net income attributable to shareholders of the Company to the respective GAAP measures for the year ended January 1, 2022:
| (C$ in millions) | 2021 | 2020 | 2019 | |||
| Net income | $ | 1,260.7 | $ | 862.6 | $ | 894.8 |
| Net income attributable to shareholders | 1,127.6 | 751.8 | 778.4 | |||
| Add normalizing items: | ||||||
| Operational Efficiency program | 30.1 | 42.3 | 25.1 | |||
| Party City: | ||||||
| Acquisition-related costs | — | — | 1.6 | |||
| Fair value adjustment for inventories acquired | — | — | 1.8 | |||
| Normalized net income | $ | 1,290.8 | $ | 904.9 | $ | 923.3 |
| Normalized net income attributable to shareholders | $ | 1,157.7 | $ | 794.1 | $ | 806.9 |
| Normalized diluted EPS | $ | 18.91 | $ | 13.00 | $ | 13.04 |
4. Loyalty sales as a % of retail sales
Loyalty sales is a supplementary financial measure calculated by dividing sales attributable to Triangle members by Retail sales.
5. Operating Capital Expenditures
Operating capital expenditures is a non-GAAP financial measure. For more information about this measure, see section 9.2 of the 2021 MD&A. There are no differences in the composition of the forward-looking measures and their historical equivalents. The following table reconciles Total additions from the Investing activities reported in the Consolidated Statement of Cash Flows to Operating capital expenditures for the year ended January 1, 2022:
| (C$ in millions) | 2021 | 2020 | ||
| Total additions1 | $ | 778.8 | $ | 436.5 |
| Add: Accrued additions | 25.1 | 17.3 | ||
| Less: | ||||
| Business combinations, intellectual properties and tenant allowances | — | 1.4 | ||
| CT REIT acquisitions and developments excluding vend-ins from CTC | 134.1 | 141.4 | ||
| Operating capital expenditures | $ | 669.8 | $ | 311.0 |
| 1 This line appears on the Consolidated Statement of Cash Flows under Investing activities |
FORWARD-LOOKING INFORMATION
This document contains forward-looking information that reflects Management’s current expectations relating to matters such as future financial performance and operating results of the Company.
Specific forward-looking information included in this document includes, but is not limited to, information with respect to:
- The Company’s financial aspirations, including average annual consolidated comparable sales growth (excluding Petroleum), Retail ROIC and Diluted EPS;
- Owned Brands portfolio, including Owned Brands sales growth and penetration as well as the launch of new Owned Brand products;
- The Company’s capital expenditure intentions, including with respect to the connected omni-channel customer experience, supply chain fulfillment infrastructure and automation, and modernizing IT infrastructure;
- Loyalty sales as a percentage of retail sales;
- Helly Hansen sales and market share; and
- The Company’s operational efficiency program.
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. Certain other information, other than historical information, may also constitute forward-looking information, including, but not limited to, information concerning Management’s current expectations relating to possible or assumed prospects and results, the Company’s strategic goals and priorities, its actions and the results of those actions, and the economic and business outlook for the Company. Often, but not always, forward-looking information can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “believe”, “estimate”, “plan”, “can”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “aspire”, “foresee”, “continue”, “ongoing” or the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analyses, beliefs 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 information is disclosed.
By its very nature, forward-looking information requires management to make assumptions and is subject to inherent risk factors and uncertainties, which give rise to the possibility that management’s assumptions, estimates, analyses, beliefs and opinions may not be correct and that the Company’s expectations and plans will not be achieved. Examples of material assumptions and management’s beliefs, which may prove to be incorrect, include, but are not limited to, the duration and impact of COVID-19 on the Company’s operations, liquidity, financial condition, or results, future economic conditions and related impacts on inflation, consumer spending, interest rates, and foreign exchange rates, current and future competitive conditions and the Company’s position in the competitive environment, anticipated cost savings and operating efficiencies as well as anticipated benefits from strategic and other initiatives, and the availability of sufficient liquidity. Although the Company believes that the forward-looking information in this document 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. Some of the risk factors, many of which are beyond the Company’s control and the effects of which can be difficult to predict, but may cause actual results to differ from the results expressed by the forward-looking information, include: (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of the Company to attract and retain high-quality executives and employees for all of its businesses, Dealers, Petroleum retailers, and Mark’s and SportChek franchisees, as well as the Company’s financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at its stores or acquire the Company’s owned brands or its financial products and services; (d) the Company’s margins and sales and those of its competitors; (e) the changing consumer preferences and expectations relating to eCommerce, online retailing and the introduction of new technologies; (f) the possible effects on the Company’s business from international conflicts, political conditions, and other developments, including changes relating to or affecting economic or trade matters as well as the outbreak of contagions or pandemic diseases; (g) risks and uncertainties relating to information management, technology, cyber threats, property management and development, environmental liabilities, supply-chain management, product safety, competition, seasonality, weather patterns, climate change, commodity prices and business continuity; (h) the Company’s relationships with its Dealers, franchisees, suppliers, manufacturers, partners and other third parties; (i) changes in laws, rules, regulations and policies applicable to the Company’s business; (j) the risk of damage to the Company’s reputation and brand; (k) the cost of store network expansion and retrofits; (l) the Company’s capital structure, funding strategy, cost management program and share price; (m) the Company’s ability to obtain all necessary regulatory approvals; (n) the Company’s ability to complete any proposed acquisition; and (o) the Company’s ability to realize the anticipated benefits or synergies from its acquisitions and investments.
The following table sets out additional risks and assumptions applicable to the forward-looking information described below:
| Average Annual Consolidated Comparable Sales Growth (excluding Petroleum) of 4+ percent over the 4-year period |
| Material assumptions:Each individual business unit contributes positively to Consolidated Comparable Sales GrowthIncremental sales growth generated from real estate investmentsPositive sales contribution from the continued focus and strategic investment in retail categories, assortment architecture and the omnichannel experienceContinued engagement by customers in the Triangle Rewards program and personalized 1:1 offerings |
| Material risks:Decline in economic growth, consumer confidence, household spending and other market disruptionsThe occurrence of widespread economic restrictions, construction limitations or supply chain delays due to, among other events, a global pandemic resurgencePricing pressure driven by growing competition from new and existing market playersAccelerated disruption from eCommerce competitorsSignificant change in the retail landscape |
| Diluted EPS of $26.00+ by 2025 |
| Material assumptions:Realization of the Consolidated Comparable Sales Growth aspirationNo major changes to retail gross margin ratesMaintain SG&A discipline by institutionalizing Operational Efficiency (OE) programPositive contribution to earnings by the Financial Services segment from growth of first use accounts, and gross average accounts receivable (GAAR)No major changes to the Company’s financial leverage and capital allocation approach |
| Material risks:Risks associated with the Consolidated Comparable Sales Growth aspiration described aboveLower or lesser contribution from operational efficiency initiativesIncreased costs related to global sourcing impacting the Company’s ability to manage operating and/or supply chain costsAdverse economic or regulatory conditions which negatively impact GAAR growth and increases volatility of the impairment allowance for credit card receivablesShort-term effects on EPS from unexpected changes to the Company’s capital-allocation initiativesNegative impacts due to unfavourable commodity prices, interest rates, and foreign exchange fluctuations |
| Retail ROIC of 15+ percent by 2025 |
| Material assumptions:Realization of Consolidated Comparable Sales Growth and Diluted EPS aspirationsPrudent management of working capital and the Company’s capital allocation prioritiesContinued successful investments in businesses to achieve organic growth and in projects and initiatives which yield improved asset productivity |
| Material risks:Lower than anticipated earnings growth (refer to risks associated with the Diluted EPS Growth aspiration described above)Unfavourable interest rates impacting the Company’s asset value for new and renewed leases |
| Capital Expenditure Intentions: Expect to spend $3.4B over the next 4 years (2022-25) |
| Material assumptions:No material changes in the Company’s strategic and capital allocation prioritiesNo material changes to the Company’s earning prospects and financial leverageNo significant changes to the retail landscape or regulatory environmentContinued availability of skilled talent and source materials to execute on the capital investment agendaContinued successful investments in businesses to achieve organic growth and in projects and initiatives which yield improved asset productivity |
| Material risks:The occurrence of widespread economic restrictions, construction limitations, or supply chain delays due to, among other events, a global pandemic resurgenceShortages of raw materials and/or skilled labour required to execute capital investment plansHigher than expected cost inflation for materials, equipment, and labour required to execute capital investment plansOrganizational capacity to execute capital agenda |
| $100M in additional OE program run rate savings for a total of $300M+ by end of 2022 |
| Material assumptions:Realization of the forecasted benefits from both executed and new OE InitiativesOperational teams continue to be disciplined in maintaining savings from already executed initiatives |
| Material Risks:Lower or lesser contribution from both executed and new OE initiativesOrganizational capacity to execute OE initiatives |
For more information on the material risk factors and uncertainties that could cause the Company’s actual results to differ materially from predictions, forecasts, projections, expectations or conclusions, refer to section 10.0 entitled “Key Risks and Risk Management” and all subsections thereunder in the Company’s MD&A for the fourth quarter and full year ended January 1, 2022. For more information, also refer to the Company’s other public filings, available on SEDAR at http://www.sedar.com and at http://corp.canadiantire.ca.
The Company cautions that the foregoing list of important risk factors and assumptions is not exhaustive and other factors could also adversely affect the Company’s 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. The forward-looking information contained herein is based on certain factors and assumptions as of the date hereof and does not take into account the effect that transactions or non-recurring or other special items announced or occurring after the information has been disclosed have on the Company’s business. 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.
Webcast Details
CTC’s Investor Day, including question and answer session, can be accessed on March 10, 2022, starting at 9:30 a.m. ET by registering online. A replay of the event will be available at investors.corp.cantire.com.
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, Intersport and Atmosphere, which offer the best active wear brands. The more than 1,740 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 global brand in sportswear and workwear based in Oslo, Norway. For more information, visit Corp.CanadianTire.ca.
For more information
Media: Jane Shaw, (416) 480-8581, jane.shaw@cantire.com
Investors: Karen Keyes, (647) 518-4461, karen.keyes@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED
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