Canadian Tire Corporation, Limited reported net
earnings of $291.5 million for the year, an increase of 20.8 percent compared
to $241.2 million in 2003. Excluding non-operating gains and losses, net
earnings were $267.5 million, a 17.4 percent increase compared to
$227.7 million in 2003.
Basic earnings per share were $3.60, an increase of 20.2 percent compared
to $2.99 per share recorded last year. Excluding non-operating gains and
losses, earnings per share increased 16.9 percent to $3.30 compared to $2.83
“We finished the year with a strong fourth quarter. Even with one less
week in the retail calendar compared to last year, Canadian Tire Retail and
Mark’s Work Wearhouse increased both total and comparable store sales in the
fourth quarter supported by robust holiday sales. Three of our divisions –
Canadian Tire Financial Services, Canadian Tire Retail and Mark’s Work
Wearhouse – posted strong pre-tax earnings, while Petroleum benefited from
slightly better margins and tightly controlled expenses resulting in an
improved earnings contribution relative to the first three quarters of the
year,” said Wayne C. Sales, president and CEO, Canadian Tire Corporation,
“Our 2004 results reflect our success in continuously improving our
operating performance, as well as our demonstrated ability to execute our
strategic plan and leverage the investments we’ve made in our business over
the past several years. As we move into our next phase of growth, guided by a
new strategic plan, we are confident that the foundation we have built in
recent years will enable us to further leverage our core strengths and sustain
earnings growth for our shareholders,” added Mr. Sales.
Net earnings for the fourth quarter were $100.4 million, rising
16.6 percent compared to $86.0 million in 2003. Excluding non-operating gains
and losses, net earnings for the quarter were $89.2 million, an increase of
16.2 percent compared to $76.8 million recorded last year. Basic earnings per
share for the quarter were $1.24, rising 16.0 percent compared to $1.06
recorded in the same period last year. Excluding non-operating gains and
losses, earnings per share rose 15.5 percent to $1.10 compared to $0.95 in
CTR continued its strong performance for both the quarter and the year.
Sales accelerated in the fourth quarter, led by strong holiday sales across
the home, leisure and auto categories. The Christmas dÃÂÃÂ©cor, toys, gift items,
tools, car care and car accessories lines in particular experienced healthy
sales. For the year, retail sales increased 4.4 percent to $6.52 billion from
$6.25 billion the year prior. Fourth quarter retail sales reached
$1.93 billion, a 3.7 percent increase compared to $1.86 billion for the same
period last year. Comparable store sales grew by 1.8 percent for the year and
1.1 percent for the quarter.
Fiscal 2004 consisted of a 52-week year and 13-week fourth quarter
compared to fiscal 2003, which was a 53-week year with a 14-week quarter. On
an adjusted basis, to compare 2004 results evenly against 2003, CTR’s retail
sales increased by 6.0 percent for the year and 9.3 percent for the quarter,
while comparable store sales were up 3.4 percent for the year and 6.5 percent
for the quarter.
CTR’s promotional program, coupled with strong margins, contributed
significantly to earnings performance, with pre-tax earnings increasing by
54.6 percent to $78.0 million in the fourth quarter from $50.4 million in the
same period a year ago. For the year, pre-tax earnings improved by
34.1 percent, to $271.9 million compared to $202.6 million in 2003.
CTR expanded its successful Concept 20/20 store format in 2004 and at
year-end had a total of 19 new and six retrofitted Concept 20/20 stores. As a
result of the positive performance and customer response to the Concept 20/20
format, most of the 20 stores CTR plans to open in 2005 will be in this
format. Additionally, CTR plans to retrofit 15 existing new-format stores in
2005 to the Concept 20/20 format.
PartSource’s total retail and commercial sales increased year-over-year,
while comparable store sales declined slightly, consistent with softness in
the North American auto parts sector. PartSource’s overall sales growth
benefited from a focus on operational execution and penetration of the Greater
Toronto Area market during the year adding seven new stores. PartSource opened
a total of eight new stores in 2004 and plans to open approximately 10 stores
In the fourth quarter, Petroleum saw a slight reduction in gas price
volatility, which resulted in improved gross margin. Petroleum continued to
advance its strategy of growing non-gasoline sales and managing marketing and
loyalty expenses while protecting market share which helped the division
overcome the earnings impact of slightly reduced volumes and led to a pre-tax
earnings contribution of $2.5 million in the fourth quarter.
The growth in non-gasoline sales led to a 14.2 percent improvement in
convenience store sales in the fourth quarter and a 21.6 percent increase for
the year. Car wash sales increased marginally in the fourth quarter and
20.5 percent overall for the year.
In 2004, Petroleum opened eight new gas bars, two of which were
replacement sites, and 11 car washes and also re-branded 21 competitor sites.
Re-branded sites continue to meet our high expectations.
Petroleum’s successful re-branding strategy is expected to present
further opportunities in 2005 to expand the division’s network of gas bars and
car washes. Petroleum expects to open approximately five new gas bars and car
washes in 2005 – including two pilot sites for its new format gasoline and
convenience offering that will open in the first quarter – and further
re-brand 15 to 20 sites.
Mark’s continued to significantly outpace the rate of market growth with
total system retail sales increasing to $657.4 million, a 17.8 percent
increase compared to $558.3 million a year ago. In addition, comparable store
sales increased by 13.4 percent over last year.
For the fourth quarter, Mark’s pre-tax earnings contribution was
$30.9 million, a 14.2 percent increase over the comparable period in 2003.
Mark’s performance was characterized by strong, balanced sales growth across
all regions and most categories, with particularly strong category
performances in ladies casual wear, casual outerwear, casual footwear and
Moving seasonal items to market earlier in the season, improved in-stock
positions, advancement of the Clothes That Work(TM) marketing program and
innovative products were other significant factors in Mark’s success for the
year and the quarter. Results were also aided by the increased frequency of
Mark’s flyer program in the second half of the year and cross-promotions with
other Canadian Tire business units.
Mark’s continued to aggressively expand its network through the opening
of 21 new stores and 19 retrofitted stores in 2004. Among the new stores are
six combination CTR-Mark’s stores which allow Mark’s the opportunity to
present its offering in communities that might not otherwise support a Mark’s
presence. In 2005, Mark’s plans to open up to 21 new stores and complete more
than 25 store retrofits.
For the year, Financial Services posted pre-tax earnings of
$148.5 million, a 27.9 percent increase compared to $116.2 million last year.
For the quarter, moderate earnings growth of 6.9 percent compared to 2003
reflects a planned increase in marketing investments to acquire new credit
card accounts. Excluding securitization gains, fourth quarter pre-tax earnings
increased 9.9 percent to $32.3 million from $29.4 million in the same period
Earnings and receivables growth reflect the increase in credit card
balances resulting from the conversion of retail cards to the Options(R)
MasterCard(R) and other efforts to build average balances. With the retail
card conversion program now complete, marketing programs will be directed at
increasing average balances on Options Mastercard accounts to the industry
averages. In 2004, the Financial Services’ credit card portfolio average
balance was $1,436 compared to an industry average of approximately $1,900 for
Credit card write-offs for the fourth quarter and the total year were
similar to prior year levels and remain within the targeted rate of 5 to
6 percent of managed receivables.
Beginning in the first quarter of 2005, Financial Services will be
expanding the personal (term) loans program, which was successfully test-
marketed in 2004.
At this time of year, Canadian Tire has historically provided, on a
voluntary basis, an earnings per share forecast for the current fiscal year
based on Management’s best estimates and in keeping with the Company’s
commitment to full and open disclosure. Given substantial changes to the legal
and regulatory landscape, Management and the Board of Directors believe it
prudent to fully analyze the potential value and risks of continuing the
practice of providing earnings guidance. Management expects to advise
shareholders on the future provision of earnings guidance in early 2005. The
Company, however, remains firmly committed to – and will continue to measure
progress against – the Strategic Plan metrics adopted for the 2001 – 2005 plan
period as follows:
Note: With the exception of comparable store sales and after-tax return
on invested capital, plan goals and performance for the metrics are expressed
in terms of a compound annual growth rate (CAGR). The comparable store sales
metric represents sales growth at CTR only. EBITDA – earnings before interest,
income taxes, depreciation and amortization – does not have a standardized
meaning under Canadian generally accepted accounting principles. The Company,
however, considers EBITDA to be an effective measure of each business’s
contribution to the Company on an operational basis, before allocating the
cost of income taxes and capital investments. EBITDA is also commonly regarded
as an indirect measure of operating cash flow, a significant indicator of the
success of any business.
The Company has planned consolidated capital expenditures of $380 million
for 2005. This level of capital expenditures reflects continued investment in
approximately 95 revenue-generating projects across Canadian Tire’s business
and supporting infrastructure initiatives, including completion of the
CustomerLink initiative, expansion of the Calgary Distribution Centre and a
new call centre to support the growth of Financial Services.
DIVIDEND POLICY AND QUARTERLY PAYMENT
On December 9, 2004 the Board of Directors declared a dividend of $0.125
per share on each Common and Class A Non-Voting share. The dividend is payable
on March 1, 2005 to shareholders of record on January 31, 2005.
Today, Canadian Tire confirmed that its Board of Directors has approved a
dividend increase. The total annualized dividend payment will rise from $0.50
per share to $0.58 per share, an increase of 16 percent. This change is
consistent with the Company’s dividend policy which is to maintain dividend
payments equal to approximately 15 to 20 percent of the prior year’s
normalized basic net earnings per share, after giving consideration to the
period end cash position, future cash flow requirements and investment
opportunities. Declaration of the increased dividend is expected in March,
2005 for payment on June 1, 2005.
The Company has entered the final year of its 2001-2005 Strategic Plan
and has just completed a comprehensive review of its business plans and
strategies for the outlook period of 2005 – 2009. Canadian Tire will
communicate its 2005-2009 Strategic Plan in early 2005.
Canadian Tire Corporation, Limited (TSX: CTR.NV, CTR), Canada’s most-
shopped general merchandise retailer, operates more than 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 457
stores operated by Associate Dealers across Canada offers 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 47 stores designed to
meet the needs of 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 253 gas bars and 58 car washes. Mark’s Work Wearhouse is one of the
country’s leading apparel retailers operating 333 stores in Canada. Under the
Clothes that Work(TM) banner, Mark’s sells apparel and footwear in work, work-
related, casual and active-wear categories, as well as health-care and
business-to-business apparel. www.marks.com offers Canadians the opportunity
to shop online. Canadian Tire Financial Services manages more than 3.8 million
Options MasterCard accounts and markets related financial products and
services for retail and petroleum 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.