Canadian Tire Corporation, Limited reported first
quarter net earnings of $35.2 million, an increase of 10.9 percent compared to
$31.8 million in 2003. Excluding non-operating gains and losses, net earnings
were $35.0 million, an increase of 13.9 percent compared to $30.8 million last
Basic earnings per share were up 9.6 percent in the first quarter to
$0.44 compared to $0.40 the previous year. Excluding non-operating gains and
losses, earnings per share increased 12.6 percent to $0.43 compared to $0.38
for the same period last year.
“Canadian Tire’s sales and earnings have been growing steadily since the
implementation of our Strategic Plan in 2001. Our results in the first quarter
continue to build upon that performance,” said Wayne C. Sales, president and
CEO. “Our combined retail network once again demonstrated our unique customer
offerings and competitive position, by posting strong total and comparable
store sales this quarter.”
“Our retail divisions leveraged top-line growth and healthy margins to
create strong earnings during the quarter. Financial Services continued to
execute its strategies, growing receivables by more than 25 percent through
card acquisitions and increases in average balances. Petroleum results were
adversely affected in the quarter due to uncharacteristically small margins
resulting from pump prices being unable to keep up with extremely high
wholesale gasoline prices.”
Continued growth across CTR’s core merchandise categories contributed to
a 5.0 percent retail sales improvement this quarter and a 3.1 percent
comparable store sales increase. Sales were particularly strong in the
sporting goods, hardware and lawn and garden categories. CTR results also
benefited from increases in customer count and average transaction per
Sales growth and margin improvement more than offset planned increases in
supply chain costs during the implementation of the CustomerLink project and
its depreciation, resulting in strong earnings gains. Results also benefited
from increased shipments to Associate Dealers in anticipation of strong
consumer demand during the spring season.
CTR plans a total of 21 store openings in 2004, of which 11 will be the
Concept 20/20 format. The first Concept 20/20 stores opened in the fall of
2003 and while still early, sales in these stores during the first quarter of
2004 continued to average more than 30 percent higher than typical new-format
stores. CTR also plans to retrofit five to seven existing new-format stores to
test the Concept 20/20 merchandising format this year.
PartSource made strong year-over-year sales gains with significant
increases in total and comparable store sales in the first quarter of 2004
compared to last year. Customer count and average transactions both increased
during the quarter. PartSource now has 40 stores with the latest store opening
in April in the Ottawa market. PartSource plans to open eight stores in 2004.
Petroleum increased gasoline sales volume during the quarter, and
significantly increased non-gasoline sales. Car wash sales rose 33.8 percent,
convenience sales climbed 22.2 percent and propane sales rose 58.4 percent.
The high cost of wholesale gasoline was not reflected in retail prices at
the pump, negatively effecting Petroleum’s earnings this past quarter. The
significant increase in non-gasoline sales helped somewhat to mitigate the
effect of lower margins, resulting in a small profit for the quarter.
Petroleum plans to expand its network through a program of building
incremental new sites and re-branding competitor sites. Petroleum opened a net
of three gas bars and rebranded eight competitor sites, bringing Petroleum’s
total network to 243 sites. A new agreement was signed during the quarter with
Shell Canada to convert ten sites to the Canadian Tire Petroleum offering.
During the quarter Petroleum also opened five car washes and three convenience
Mark’s experienced excellent sales growth during the quarter, with
double-digit total retail sales increases. Comparable store sales climbed
7.0 percent for the quarter, led by sales of casual footwear, industrial
footwear, accessories and men’s casual pants.
2004 is the first full year of comparable year-over-year performance
since Mark’s was acquired by Canadian Tire in February, 2002. Mark’s recorded
its best results in a first quarter ever. Typically Mark’s experiences
significant operating losses in the first quarter which are offset by earnings
in the last half of the year due to much higher sales. Significant improvement
in the first quarter of 2004 resulted from higher retail sales and comparable
store sales strength in most parts of the country and in key product
categories as well as from expense management.
Conversion of Work World stores to the Mark’s Work Wearhouse format
continued during the first quarter, with the conversion of an additional four
stores. Ninety stores have now been converted. Stores converted with at least
one full month but not more than 12 months of operations averaged sales
increases of approximately 24 percent during the past quarter.
Growth in the number of Options(R) MasterCard(R) accounts and average
balances contributed to strong receivables growth in Financial Services during
An expected reduction in yield rates related to the conversion to lower
rate MasterCards was offset by higher receivables, improvements in the
operating expense ratio and a slight improvement in the overall write-off
rates compared to the same quarter last year. While the bankruptcy component
of Financial Services’ write-offs continued to trend higher during the
quarter, in line with industry trends and divisional targets, the overall
write-off rates improved during the quarter compared to the same period last
year. Aging of the Financial Services portfolio, a leading indicator of future
write-off rates, also improved compared to last year.
Excluding gains on the sale of credit charge receivables, Financial
Services increased its earnings by 22.6 percent compared to the same period
Canadian Tire confirms its earnings forecast in the range of $3.35 to
$3.45 per share. Based on current indicators, the Company believes that
performance in its retail and financial services businesses will offset any
potential impact of gasoline prices at the pump not keeping pace with high
wholesale gasoline costs throughout the year. Included in this forecast are
$0.13 to $0.16 per share from non-operating gains and losses arising from the
sale of surplus property and equipment and from the sales of credit charge
The Company’s plan for consolidated capital expenditures remains at
$300 million for 2004. This level of capital expenditures reflects continued
investment in more than 100 revenue-generating projects across Canadian Tire’s
businesses together with the costs to complete key infrastructure projects.
Canadian Tire Corporation, Limited (TSX: CTR.a, CTR) operates nearly
1,100 stores, gas bars and car washes in an inter-related network of
businesses engaged in retail, financial services and petroleum. Canadian Tire
Retail, with 453 stores operated by Associate Dealers across Canada, is one of
the country’s most-shopped retailers, offering a unique mix of products and
services through three specialty categories in which the organization is the
market leader – Automotive, Sports and Leisure, and Home Products.
www.canadiantire.ca offers Canadians the opportunity to shop online.
PartSource is an automotive parts specialty chain with 40 stores designed to
meet the needs of major purchasers of automotive parts – professional
automotive installers and serious do-it-yourselfers. Canadian Tire Petroleum
is one of the country’s largest and most productive independent retailers of
gasoline, operating 243 gas bars and 52 car washes. Mark’s Work Wearhouse is a
specialty retail organization that operates 322 stores in Canada, selling work
and work-related apparel and footwear. www.marks.com offers Canadians the
opportunity to shop online. Canadian Tire Financial Services manages related
financial products and services for retail and petroleum customers, and also
markets other value-added products to our customers. More than 45,000
Canadians work across Canadian Tire’s organization from coast-to-coast in the
enterprise’s retail, financial services, and petroleum businesses.