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 Growth
- Incremental sales
growth generated from real estate investments
- Positive sales
contribution from the continued focus and strategic investment in
retail categories, assortment architecture and the omnichannel
experience
- Continued
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
disruptions
- The occurrence of
widespread economic restrictions, construction limitations or
supply chain delays due to, among other events, a global pandemic
resurgence
- Pricing pressure
driven by growing competition from new and existing market
players
- Accelerated
disruption from eCommerce competitors
- Significant change
in the retail landscape
|
Diluted EPS of
$26.00+ by 2025
|
Material
assumptions:
- Realization of the
Consolidated Comparable Sales Growth aspiration
- No major changes to
retail gross margin rates
- Maintain SG&A
discipline by institutionalizing Operational Efficiency (OE)
program
- Positive
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
above
- Lower or lesser
contribution from operational efficiency initiatives
- Increased costs
related to global sourcing impacting the Company's ability to
manage operating and/or supply chain costs
- Adverse economic or
regulatory conditions which negatively impact GAAR growth and
increases volatility of the impairment allowance for credit card
receivables
- Short-term effects
on EPS from unexpected changes to the Company's capital-allocation
initiatives
- Negative 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
aspirations
- Prudent management
of working capital and the Company's capital allocation
priorities
- Continued
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
priorities
- No material changes
to the Company's earning prospects and financial
leverage
- No significant
changes to the retail landscape or regulatory
environment
- Continued
availability of skilled talent and source materials to execute on
the capital investment agenda
- Continued
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
resurgence
- Shortages of raw
materials and/or skilled labour required to execute capital
investment plans
- Higher than
expected cost inflation for materials, equipment, and labour
required to execute capital investment plans
- Organizational
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
Initiatives
- Operational teams
continue to be disciplined in maintaining savings from already
executed initiatives
|
Material
Risks:
- Lower or lesser
contribution from both executed and new OE initiatives
- Organizational
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