2. Forward Looking Information
This document contains forward-looking statements that reflect management’s current expectations related to matters such as future financial performance and operating results of the Company. Forward-looking statements are
provided for the purposes of providing information about Management’s current expectations and plans and allowing investors and others to get a better understanding of the Company’s financial position, results of operations and
operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.
All statements other than statements of historical facts included in this document may constitute forward-looking statements, including but not limited to, statements concerning Management’s current expectations relating to possible
or assumed future 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
statements 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 statements are 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 statements are made.
By their very nature, forward-looking statements require Management to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that the Company’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 Management’s beliefs, which may prove to be incorrect, include, but are not limited to, beliefs about the
effectiveness of certain performance measures, beliefs about current and future competitive conditions and the Company’s position in the competitive environment, beliefs about the Company’s core capabilities and beliefs regarding
the availability of sufficient liquidity to meet the Company’s contractual obligations. Although the Company believes that the forward-looking statements in this document are based on information, assumptions and beliefs that are
current, reasonable and complete, these statements are 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
statements. Some of the factors, many of which are beyond the Company’s 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 the Company to attract and retain high quality employees for all of its businesses, Dealers, Canadian Tire Petroleum retailers and Mark’s and FGL Sports 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 its financial products and services; (d)
the Company’s margins and sales and those of its competitors; (e) the changing consumer preferences toward eCommerce, online retailing and the introduction of new technologies; (f) risks and uncertainties relating to information
management, technology, cyber threats, property management and development, environmental liabilities, supply chain management, product safety, changes in law, regulation, competition, seasonality, weather patterns, commodity
prices and business disruption, the Company’s relationships with suppliers, manufacturers, partners and other third parties, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by
the Company and the cost of store network expansion and retrofits; (g) the Company’s capital structure, funding strategy, cost management programs and share price; and (h) the Company’s ability to obtain all necessary regulatory
approvals. Management cautions that the foregoing list of important 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 statements and are cautioned not to place undue reliance on such forward-looking statements.
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 sections 7.2.4 (Retail segment business risks), 7.3.2 (CT REIT segment
business risks), 7.4.3 (Financial Services segment business risks) and 12.0 (Enterprise risk management) and all subsections thereunder of the MD&A contained in the Company’s 2016 Report to Shareholders. Please also refer to section
2.10 (Risk Factors) of the Company’s Annual Information Form for fiscal 2016, as well as the Company’s other public filings, available on the SEDAR (System for Electronic Document Analysis and Retrieval) website at www.sedar.com and
at investors.canadiantire.ca
Forward-looking statements 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 statements, 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.
3. Executive Participants
Stephen Wetmore, President and CEO, Canadian Tire Corporation
Dean McCann, Chief Financial Officer and EVP
Allan MacDonald, President, Canadian Tire
Duncan Fulton, President, FGL Sports
Gregory Craig, President, Canadian Tire Financial Services
Rick White, President, Mark’s
4. Second Quarter Highlights
Strong second quarter results continue to demonstrate our operational strengths
– Consolidated revenue, excluding Petroleum, increased $34.0M, or 1.2%
– Retail EBITDA increased by 5.6%
– Second quarter diluted EPS was $2.81, up 14.1%
Second quarter same store sales
— Consolidated up 1.8%
— Canadian Tire up 1.4%
— Mark’s up 4.0%
— FGL Sports up 2.6% (up 1.1% at Sport Chek)
Solid second quarter performance at Financial Services
− Gross average credit card receivable growth of 6.7%
− Income before income taxes up 12.3%
5. Consolidated Financial Results
Second quarter earnings performance
reflects increased revenue and gross
margin dollars from the Retail and
Financial Services segments. This
increase was partially offset by higher
selling, general, and administrative
expenses, lower real estate gains
compared to 2016, and higher net
financing costs.
Diluted EPS also benefited from the
favourable impact of share
repurchases, which resulted in a lower
share base.
1 – Key operating performance measure. Refer to section 9.3.1 in the Q2 2017 MD&A for additional information.
2 – Not meaningful.
(C$ in millions, except where noted) Q2 2017 Q2 2016 Change
YTD
Q2 2017
YTD
Q2 2016 Change
Retail sales
1
$ 4,103.1 $ 3,983.3 3.0 % $ 6,680.3 $ 6,465.5 3.3 %
Revenue $ 3,413.5 $ 3,352.2 1.8 % $ 6,167.0 $ 5,911.6 4.3 %
Gross margin dollars
Gross margin as a % of revenue
$ 1,151.0
33.7%
$ 1,110.2
33.1%
3.7 %
60 bps
$ 2,123.9
34.4%
$ 2,024.2
34.2%
4.9 %
20 bps
Other expense (income) $ 0.5 $ (4.7) (110.4)% $ 0.5 $ (7.8) (106.0)%
Selling, general and administrative expenses 831.9 824.3 0.9 % 1,631.0 1,601.7 1.8 %
Net finance costs 26.2 22.8 14.7 % 51.0 43.7 16.7 %
Income before income taxes $ 292.4 $ 267.8 9.2 % $ 441.4 $ 386.6 14.2 %
Income taxes 75.4 68.8 9.6 % 116.5 102.0 14.2 %
Effective tax rate 25.8% 25.7% 26.4% 26.4%
Net income $ 217.0 $ 199.0 9.0 % $ 324.9 $ 284.6 14.2 %
Net income attributable to:
$ 195.2 $ 179.4 8.8 % $ 282.7 $ 245.9 14.9 %Shareholders of Canadian Tire Corporation
Non-controlling interests 21.8 19.6 11.7 % 42.2 38.7 9.2 %
$ 217.0 $ 199.0 9.0 % $ 324.9 $ 284.6 14.2 %
Basic EPS $ 2.82 $ 2.47 14.2 % $ 4.05 $ 3.36 20.5 %
Diluted EPS $ 2.81 $ 2.46 14.1 % $ 4.04 $ 3.35 20.4 %
Weighted average number of Common and
Class A Non-Voting Shares outstanding:
Basic
Diluted
69,336,491
69,536,003
72,785,088
72,978,883
NM
2
NM
2
69,814,985
70,015,219
73,179,346
73,363,370
NM
2
NM
2
6. (C$ in millions) Q2 2017 Q2 2016 Change
YTD
Q2 2017
YTD
Q2 2016 Change
Retail sales
1
$ 4,103.1 $ 3,983.3 3.0 % $ 6,680.3 $ 6,465.5 3.3 %
Revenue $ 3,091.8 $ 3,043.8 1.6 % $ 5,537.3 $ 5,297.9 4.5 %
Gross margin dollars $ 927.3 $ 900.4 3.0 % $ 1,687.9 $ 1,615.8 4.5 %
Gross margin as a % of revenue 30.0% 29.6% 41 bps 30.5% 30.5% (2) bps
Other (income) $ (31.0) $ (32.8) (5.7)% $ (61.9) $ (63.1) (1.9)%
Selling, general and administrative expenses 781.8 771.2 1.4 % 1,536.5 1,508.9 1.8 %
Net finance (income) (7.1) (11.1) (36.5)% (14.7) (23.7) (38.0)%
Income before income taxes $ 183.6 $ 173.1 6.1 % $ 228.0 $ 193.7 17.7 %
Retail Segment Results
1 – Retail sales is a key operating performance measure. Refer to section 9.3.1 in the Q2 2017 MD&A for additional information.
Higher income before income taxes is attributable to solid gross margin growth across the Retail segment banners, which
is partially offset by increased selling, general, and administrative expenses, higher real estate gains in 2016, and a
decline in net finance income.
7. CT REIT Segment Results
Higher income before income taxes is primarily due to properties acquired during 2017 and 2016 and an increase
of $6.4 million in the fair market value gain over the prior year.
(C$ in millions) Q2 2017 Q2 2016 Change
YTD
Q2 2017
YTD
Q2 2016 Change
Property revenue $ 111.6 $ 101.5 10.0 % $ 222.7 $ 200.0 11.4%
Property expense 25.7 24.2 6.4 % 51.9 47.7 8.8%
General and administrative expense 2.4 2.5 (2.8)% 6.1 5.9 4.7%
Net finance costs 23.8 22.7 4.9 % 47.6 45.0 5.7%
Fair value (gain) adjustment (14.6) (8.2) 78.9 % (32.5) (20.1) 61.8%
Income before income taxes $ 74.3 $ 60.3 23.1 % $ 149.6 $ 121.5 23.1%
8. Financial Services Segment Results
Higher income before income taxes is primarily due to an increase in revenues year over year and decreased selling,
general and administrative expenses.
GAAR increased 6.7 percent driven by increased average account balances and a higher number of average active
accounts compared to the prior year. The continued increase in the average number of active accounts reflects positive
results from the Company’s initiatives to stimulate receivables growth and the continued focus on integration initiatives
with the Retail businesses.
(C$ in millions) Q2 2017 Q2 2016 Change
YTD
Q2 2017
YTD
Q2 2016 Change
Revenue $ 288.3 $ 277.8 3.8 % $ 569.3 $ 559.3 1.8 %
Gross margin dollars 176.3 166.4 6.0 % 348.5 328.5 6.1 %
Gross margin (% of revenue) 61.2% 59.9% 126 bps 61.2% 58.7% 248 bps
Other expense (income) 0.1 (0.1) (128.8)% — (0.2) (86.7)%
Selling, general and administrative expenses 75.1 76.5 (1.8)% 149.9 145.4 3.1 %
Net finance (income) (0.1) (0.1) 8.4 % (0.2) (0.4) (42.6)%
Income before income taxes $ 101.2 $ 90.1 12.3 % $ 198.8 $ 183.7 8.2 %
9. Appendix
Consolidated Adjusted EBITDA1 and Retail EBITDA1
Consolidated
Adjusted EBITDA
1
(C$ in millions) Q2 2017 Q2 2016
YTD Q2
2017
YTD Q2
2016
Adjusted EBITDA1
$ 433.2 $ 404.9 $ 717.6 $ 652.5
Change in fair value of redeemable financial instrument - - - -
EBITDA $ 433.2 $ 404.9 $ 717.6 $ 652.5
Less:
Depreciation and amortization2
114.6 114.3 225.2 222.2
Net finance costs 26.2 22.8 51.0 43.7
Income before income taxes $ 292.4 $ 267.8 $ 441.4 $ 386.6
Income taxes 75.4 68.8 116.5 102.0
Effective tax rate 25.8% 25.7% 26.4% 26.4%
Net income $ 217.0 $ 199.0 324.9 284.6
Net income attributable to Non-controlling interests 21.8 19.6 42.2 38.7
Net income attributable to shareholders of Canadian Tire Corporation $ 195.2 $ 179.4 $ 282.7 $ 245.9
Retail Segment EBITDA
1
(C$ in millions) Q2 2017 Q2 2016
YTD Q2
2017
YTD Q2
2016
EBITDA1
$ 270.4 $ 256.1 $ 396.9 $ 352.9
Less:
Depreciation and amortization2
93.9 94.1 183.6 182.9
Net finance (income) (7.1) (11.1) (14.7) (23.7)
Income before income taxes $ 183.6 $ 173.1 $ 228.0 $ 193.7
1–Key operating performance measure. Refer to section 9.3.2 in the MD&A for additional information.
2 –Includes $1.6 million million reported in cost of producing revenue in the quarter (2016 - $1.9 million) and $3.3 million million for Q2 YTD 2017 (2016 - $3.9 million).
11. Questions
and Answers
For more information
http://investors.canadiantire.ca
lisa.greatrix@cantire.com or (416) 480-8725
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