- Announces its intention to create a $3.5
billion real estate investment trust with initial public
offering later this year
- Appoints Allan MacDonald as new
head of Canadian Tire Retail
- Reports positive Q1 earnings with diluted earnings per share up
3.3%
TORONTO, May 9, 2013 /CNW/ - Canadian Tire Corporation,
Limited (TSX:CTC, TSX:CTC.a) is announcing its intention to create
a real estate investment trust (REIT) to surface the value of
billions of dollars of owned property, appointing a new leader for
Canadian Tire Retail and releasing overall positive Q1
earnings.
REAL ESTATE INVESTMENT TRUST
The Company today announced its intention to create a
high-quality REIT that would:
- Surface the value of Canadian Tire's real estate holdings
- Create a stand-alone vehicle for Canadian Tire's real estate
which will support continued real estate investment
- Provide Canadian Tire with increased financial flexibility to
pursue new opportunities to invest in and grow its business.
"We are executing a strategy that reinforces the strength of our
Company while pursuing new growth opportunities organically and
through acquisition," said Stephen
Wetmore, President and CEO, Canadian Tire Corporation.
"Today's announcement regarding a REIT would increase CTC's
financial flexibility, providing us with the ability to access
funds at an attractive cost of capital as we continue to invest in
and grow our business."
The proposed new REIT would acquire a majority of the Company's
owned real estate, including a geographically diverse portfolio of
approximately 250 properties comprised largely of Canadian Tire
Retail stores, Canadian Tire anchored retail developments and one
distribution centre; approximately 18 million square feet; and
approximately $3.5 billion of
estimated market value. Canadian Tire owned properties
currently comprise approximately 25 million square feet and are
located in all provinces and two territories. Canadian Tire
Retail stores that are being considered for replacement,
relocation, or further development would initially be retained by
the Company and not be part of the REIT.
CTC would retain a significant ownership interest of 80% to 90%
of the REIT with the remainder of the REIT's units offered to the
public via an initial public offering anticipated in the fall of
2013. The REIT would be designed to meet appropriate
standards for management, governance and financial structure and
with leases reflecting market rates and terms.
The REIT's financial statements would be consolidated with CTC's
financial statements and it is expected that there would be minimal
impact on consolidated net earnings, cash flow and debt
metrics.
The creation of the CTC REIT would have no impact on the
arrangements that exist between Canadian Tire and its Associate
Dealer network.
The ongoing ownership and management of real estate assets have
been and will continue to be an integral part of Canadian Tire
Retail's success and operational flexibility.
The Company confirmed that its creation of a REIT would be
subject to due diligence, favourable market conditions, regulatory
and third party approvals and approval by the Canadian Tire Board
of Directors.
ALLAN MACDONALD NAMED HEAD OF CANADIAN TIRE RETAIL
The Company also announced that its Senior Vice-President,
Automotive and Marketing, Allan
MacDonald will be the new Chief Operating Officer of
Canadian Tire Retail.
Mr. MacDonald joined CTC four years ago and has held senior
roles influencing all of CTR's areas of operations, including
Dealer relations, global sourcing, merchandising, supply chain,
marketing, digital strategy, store design and vendor
management.
"Allan has clearly demonstrated the skills and commitment to
lead Canadian Tire Retail as we enter a sustained period of
unprecedented change in our industry," said Wetmore.
Marco Marrone, CTR's current
Chief Operating Officer, has decided to leave the company following
a 27 year career. Mr. Marrone has advised the Company that he is
not able to make a longer-term commitment to his current role. With
the recent agreement between the Company and its Dealers to a new
Dealer contract, Mr. Marrone believes that the time is right for a
smooth transition of his role to Mr. MacDonald.
Mr. Marrone has been known for exceptional execution throughout
his career at Canadian Tire, including his successful leadership of
the Financial Services division, his role as Chief Financial
Officer for CTC and most recently as Chief Operating Officer at CTR
where he has successfully executed a number of key initiatives to
improve CTR.
Q1 EARNINGS
The Company today released first quarter results for the period
ended March 30, 2013, showing
positive sales, revenue and margin growth.
Consolidated revenue increased 1.7% or $40.3 million to $2.5
billion in the quarter as a result of strong performance at
FGL Sports and sales growth at Petroleum, Financial Services and
Mark's. Consolidated net income increased to $73.0 million and diluted earnings per share rose
to $0.90, an increase of 3.3% over Q1
2012. Consolidated retail sales increased 0.8% or $20.4 million to $2.4
billion in the quarter.
"Following a strong 2012, we had a very encouraging start to the
year with the successful execution of key initiatives across all of
our banners, including reaching an agreement on the significant
terms of our contracts with our Canadian Tire Associate Dealers,"
said Wetmore.
"We had a great start for the first 70 days of the quarter but
that shifted dramatically in the last two weeks as a result of last
March's early spring temperatures combined with this March's cold,
wintry weather. That said, the first quarter is our smallest
for the retail segment. Financial Services is the major
contributor to our first quarter earnings and it continued its
strong performance in 2013."
Consolidated financial results |
|
|
|
|
|
(C$ in millions, except per share
amounts) |
|
Q1 2013 |
|
Q1 2012 |
Change |
Retail sales |
$ |
2,435.5 |
$ |
2,415.1 |
0.8% |
Revenue |
|
|
2,479.8 |
|
2,439.5 |
1.7% |
Net income |
|
73.0 |
|
71.0 |
2.9% |
Basic earnings per share |
|
0.90 |
|
0.87 |
3.3% |
Diluted earnings per share |
|
0.90 |
|
0.87 |
3.3% |
|
|
|
|
|
|
|
RETAIL SEGMENT OVERVIEW
Retail segment revenue increased 1.5% or $32.8 million to $2.2
billion in the quarter due to strong performance at FGL
Sports and sales growth at Petroleum and Mark's.
Retail segment income before income taxes of $23.0 million was down 5.8% or $1.5 million compared to the prior year largely
due to the timing of marketing and advertising expenses and higher
depreciation and occupancy costs from additional stores in the
network compared to the prior year. Excluding depreciation
and net finance costs, Retail EBITDA increased 1.8% in the quarter
resulting from improved revenue and strong margin management across
the businesses.
Consolidated retail sales were $2.4
billion, representing a 0.8% increase compared to the same
period last year, primarily as a result of strong sales at FGL
Sports and increased sales at Petroleum and Mark's, which were
partly offset by a sales decline at CTR.
CTR had positive sales in January and February but experienced a
sharp drop in the last two weeks of March, resulting in a 1.6%
sales decline and 2.4% decrease in same store sales for the
quarter. Canadian Tire stores saw sales increases in key
categories offset by declines in seasonal, gardening and outdoor
living. While sales were lower compared to the previous year, gross
margin rates were higher due to active management of the sales and
margin mix.
Automotive started the quarter with solid sales of light
automotive parts and in maintenance categories such as batteries,
battery accessories and wipers. The strong performance at the
beginning of the quarter was off-set by cooler March temperatures
which impacted sales of automotive cleaning products and delayed
both spring automotive maintenance and switching over to all-season
tires.
Petroleum retail sales increased 3.7% primarily due to increased
convenience store sales and gas volumes related to the opening of
10 new sites, including two additional 400/401 series highway
sites, and due to higher gasoline prices compared to the previous
year.
FGL Sports had a very good start to the year with retail sales
growth of 5.6% over the same period in 2012. Same store sales
grew by 8.8%, partly due to the planned closure of non-strategic
banners such as Sport Mart and Athletes World. Adjusting for store
closures, corporate same store sales still grew by a strong 3.1%,
notwithstanding the impact of March weather. The core corporate
banner, Sport Chek, experienced strong sales in apparel and
equipment, particularly in winter-related categories such as
hockey, ski and snowboard.
At Mark's, retail sales were up 1.6% and same store sales
increased by 1.5% driven by growth in women's casual wear and
industrial apparel and accessories sales, particularly in the
Greater Toronto region of
Ontario. Sales gains were partly
offset by lower footwear and men's wear sales due to fewer
clearance sales compared to 2012 and cooler March weather.
FINANCIAL SERVICES OVERVIEW
Financial Services was a very strong performer in the first
quarter. Revenue increased 3.4% to $250 million and income before income taxes of
$77.3 million increased 5.8% compared
to the prior year due to higher credit card charges on higher
credit card receivables balances.
Financial Services gross margin rate increased
203 basis points in the quarter compared to the prior year
primarily due to higher revenue from increased credit charges and
favourable net write-offs.
Financial Services operating expenses increased
6.2% in the quarter compared to the prior year due to marketing
expenses related to growing receivable balances.
CAPITAL EXPENDITURES
Capital expenditures for the first quarter were $62.0 million compared to prior year spending of
$64.1 million.
QUARTERLY DIVIDEND
Canadian Tire Corporation has declared a quarterly dividend of
35 cents per share on each Common and
Class A Non-Voting share. The dividend is payable September 1, 2013 to Common and Class A
non-voting shareholders of record as of July
31, 2013. The dividend is considered an "eligible dividend"
for tax purposes.
NORMAL COURSE ISSUER BID
During the first quarter of 2013, the Company purchased 215,900
Class A Non-Voting Shares under its normal course issuer bid
program. This includes 196,100 shares which were purchased in
addition to shares purchased for anti-dilutive purposes.
Please refer to Management's Discussion and Analysis for further
detail and information on the following charts.
Consolidated financial results |
|
|
|
|
|
(C$ in millions, except per share
amounts) |
|
Q1 2013 |
|
Q1 2012 |
Change |
Retail sales |
$ |
2,435.5 |
$ |
2,415.1 |
0.8% |
|
|
|
|
|
|
|
Revenue |
|
|
2,479.8 |
|
2,439.5 |
1.7% |
Gross margin |
|
766.7 |
|
749.0 |
2.4% |
Other income |
|
7.7 |
|
3.9 |
99.3% |
Operating expenses |
|
645.4 |
|
625.8 |
3.1% |
EBITDA |
|
|
211.7 |
|
206.4 |
2.5% |
Depreciation and amortization |
|
82.7 |
|
79.3 |
4.2% |
Net finance (income) costs |
|
28.7 |
|
29.6 |
(3.2)% |
Income before income taxes |
|
100.3 |
|
97.5 |
2.9% |
Effective tax rate |
|
27.3% |
|
27.3% |
|
Net income |
|
73.0 |
|
71.0 |
2.9% |
|
|
|
|
|
|
|
Basic earnings per share |
|
0.90 |
|
0.87 |
3.3% |
Diluted earnings per share |
|
0.90 |
|
0.87 |
3.3% |
|
|
|
|
|
|
|
Retail segment financial results |
|
|
|
|
|
|
|
(C$ in millions) |
|
|
|
Q1 2013 |
|
Q1 2012 |
Change |
Retail sales |
|
|
$ |
2,435.5 |
$ |
2,415.1 |
0.8% |
Retail return on invested capital (ROIC) |
|
|
|
7.35% |
|
7.75% |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
$ |
2,216.9 |
$ |
2,184.1 |
1.5% |
Gross margin |
|
|
|
599.5 |
|
591.0 |
1.5% |
Other income |
|
|
|
7.5 |
|
2.0 |
288.9% |
Operating expenses |
|
|
|
566.5 |
|
551.2 |
2.8% |
EBITDA |
|
|
|
|
120.7 |
|
118.7 |
1.8% |
Depreciation and amortization |
|
|
|
80.2 |
|
76.9 |
4.2% |
Net finance (income) costs |
|
|
|
17.5 |
|
17.3 |
1.9% |
Income before income taxes |
|
|
|
23.0 |
|
24.5 |
(5.8)% |
|
Retail Segment - by banner |
|
|
|
|
|
(C$ in millions, except number of stores and gas
bars) |
|
Q1 2013 |
|
Q1 2012 |
Change |
CTR retail sales growth |
|
(1.6)% |
|
3.8% |
|
CTR same store sales growth |
|
(2.4)% |
|
3.3% |
|
CTR revenue |
$ |
1,174.3 |
$ |
1,184.8 |
(0.9)% |
Number of CTR stores |
|
490 |
|
488 |
|
Number of PartSource stores |
|
87 |
|
87 |
|
|
|
|
|
|
|
|
Canadian Tire Petroleum retail sales growth |
|
3.7% |
|
5.2% |
|
Canadian Tire Petroleum gasoline volume (litres)
growth |
2.7% |
|
(1.9)% |
|
Canadian Tire Petroleum revenue |
$ |
485.5 |
$ |
469.7 |
3.4% |
Canadian Tire Petroleum gross margin dollars |
$ |
33.1 |
$ |
32.0 |
3.4% |
Number of gas bars |
|
299 |
|
289 |
|
|
|
|
|
|
|
|
FGL Sports retail sales growth |
|
5.6% |
|
6.4% |
|
FGL Sports same store sales growth |
|
8.8% |
|
7.3% |
|
FGL Sports revenue |
$ |
367.4 |
$ |
341.8 |
7.5% |
Number of FGL Sports stores |
|
406 |
|
506 |
|
|
|
|
|
|
|
|
Mark's retail sales growth |
|
1.6% |
|
6.7% |
|
Mark's same store sales growth |
|
1.5% |
|
5.8% |
|
Mark's revenue |
$ |
194.1 |
$ |
191.5 |
1.4% |
Number of Mark's stores |
|
386 |
|
385 |
|
|
|
|
|
|
|
|
Financial Services segment
financial results |
|
|
|
|
|
(C$ in millions) |
|
Q1 2013 |
|
Q1 2012 |
Change |
Gross average accounts receivables
(GAAR) |
$ |
4,251.1 |
$ |
4,014.1 |
5.9% |
Net credit card write-off rate |
|
6.17% |
|
7.28% |
|
Return on receivables |
|
6.77% |
|
5.98% |
|
|
|
|
|
|
|
Revenue |
$ |
250.0 |
$ |
241.7 |
3.4% |
Gross margin dollars |
|
139.8 |
|
130.2 |
7.3% |
Operating expenses |
|
62.9 |
|
59.2 |
6.2% |
Income before income taxes |
|
77.3 |
|
73.0 |
5.8% |
|
|
To view a PDF version of Canadian Tire Corporation's full
quarterly earnings report please see:
http://files.newswire.ca/116/CanadianTire0509.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 presented for the
purposes of providing information about management's current
expectations and plans and allowing investors and others to get a
better understanding of the Company's anticipated financial
position, results of operation and operating
environment. Readers are cautioned that such information may
not be appropriate for other purposes.
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. Without limiting the
generality of the foregoing or the following, there can be no
assurance that the Company ultimately will create a REIT or, if
such a REIT is created, the final particulars thereof, including
without limitation, the number, value or location of the properties
that would be proposed to be transferred to the REIT, the size of
the retained interest in the REIT that the Company would hold
initially or in the future, and the other arrangements that would
be proposed or exist as between the Company and the REIT. The
Company's determination to create a REIT is subject to a number of
risks and uncertainties, including without limitation, those
attendant with due diligence, favourable market conditions,
regulatory and third party approvals, as well as the further
approval by the Canadian Tire Board of Directors. 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 2012 and to sections 7.5.1.2
(Retail Segment Business Risks), 7.5.2.2 (Financial Services
Segment Business Risks) and 11.0 (Enterprise Risk Management) and
all subsections there under of our 2012 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
12:00 p.m. ET on May 9, 2013. 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 a
Family of Companies that includes Canadian Tire Retail, Partsource,
Gas+, FGL Sports (Sport Chek, Hockey Experts, Sports Experts,
National Sports, S3 and Atmosphere), Mark's, Canadian Tire
Financial Services, and Canadian Tire Jumpstart Charities.
With more than 1,700 retail and gasoline outlets from
coast-to-coast, our primary retail business categories -
Automotive, Living, Fixing, Playing and Apparel - are supported and
strengthened by our Financial Services division. 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.
For more information, visit Corp.CanadianTire.ca.
SOURCE CANADIAN TIRE CORPORATION, LIMITED
PDF available at:
http://stream1.newswire.ca/media/2013/05/09/20130509_C5147_DOC_EN_26563.pdf