Canadian Tire Corporation, Limited reported second quarter net earnings of $103.3 million, an increase of
12.0 percent compared to $92.2 million in the second quarter of 2005.
Excluding non-operating gains and losses, net earnings were $100.6
increase of 18.6 percent compared to $84.8 million last year.
Basic earnings per share were $1.27, an increase of 12.2 percent
to $1.13 for the previous year. Excluding non-operating gains and losses,
adjusted basic earnings per share increased 18.9 percent to $1.23
$1.04 for the same period last year.
“Our earnings performance this quarter reflects sales momentum in
our businesses. Customer response to key initiatives such as the new Concept
20/20 stores, the expansion of women’s wear at Mark’s and the new Gas
Advantage MasterCard continues to be strong. Our team is diligently
our business strategy and is making progress on leveraging our brand across
our inter-related network of businesses,” said Tom Gauld, president and CEO.
(1) Same store sales include sales from stores that have been open for
more than 53 weeks, including stores that have been expanded by
than 25 percent in the last year.
(2) Net shipments are the total value of merchandise shipped to
Tire and PartSource stores, and through our online web store, less
discounts and net of returns, recorded at the wholesale price
to Associate Dealers and PartSource franchisees. The year-over-year
percentage change for net shipments have been adjusted for
as required by the CICA.
CTR’s second quarter retail sales grew to $2.06 billion from
$1.96 billion, an increase of 5.3 percent from the year prior. Same store
sales increased 3.3 percent, with the largest contributors to sales
being the auto custom, backyard living and lawn and garden categories. As
expected, same store sales for the quarter at the stores in the process of
being converted to the Concept 20/20 format, were negatively impacted by
construction and merchandising activity. Excluding stores under conversion,
same store sales would have increased 3.8 percent in the quarter.
CTR’s second quarter pre-tax earnings of $97.9 million increased
6.2 percent compared to $92.2 million a year ago. After adjusting for
on disposals of property and equipment, pre-tax earnings increased 8.6
during the quarter to $96.6 million from $88.9 million in the previous
Excluding the gain on disposals of property and equipment and a $3.7 million
net impact, year-over-year, related to a note repayment associated with a
real-estate limited partnership (in which the Company was a general
CTR’s adjusted pre-tax earnings would have been $97.2 million compared to
$85.8 million, a 13.3 percent increase.
During the quarter, CTR opened two new stores and retrofitted 34
In addition, the Company announced that construction of a 1.5 million square
foot distribution centre in Coteau-du-Lac, Quebec, on the outskirts of
Montreal, will begin in the Fall of 2006 to support Canadian Tire Retail’s
continued growth in Eastern Canada.
PartSource recorded double-digit sales growth in the second quarter on
the continued strength of commercial sales and the cumulative effect of
store openings and acquisitions. PartSource opened one new store during the
quarter bringing the total network to 59 locations.
High gasoline prices in the quarter had the effect of suppressing
gasoline sales volumes, resulting in a marginal increase to 418.0 million
litres from 411.6 million litres a year ago. Non-gasoline sales
by a 14.0 percent rise in convenience store sales.
The growth in gasoline and non-gasoline sales was insufficient to
continued tight gasoline margins and planned higher operating costs
with the expansion of the Petroleum network. As a result, Petroleum posted a
loss of $1.2 million during the quarter as compared to a 2005 pre-tax
contribution of $0.1 million in the second quarter. Adjusted earnings also
declined during the quarter with Petroleum reporting a loss of $1.0
compared to a profit of $0.2 million one year ago.
Petroleum closed two gas bars and two convenience stores during the
quarter. The division will open a new Q convenience store and gas bar in
Mississauga, Ontario at the end of August 2006.
Among its strategic initiatives, Petroleum continues to focus on
greater customer loyalty and driving sales and earnings across the
Petroleum plays a key role in driving business to CTR through the
Canadian Tire ‘Money'(TM) to customers purchasing gas who then redeem it at
CTR stores. Financial Services also benefits from its association with
Petroleum through significant receivables on all Canadian Tire MasterCards,
including the Gas Advantage Card. CTR customers who have a Canadian Tire
MasterCard and fill up at Petroleum are the Company’s most loyal and
Financial Services’ total managed portfolio of loans receivable was
$3.4 billion at the end of the second quarter, a 10.6 percent increase over
the $3.1 billion portfolio at the end of the comparable 2005 period. The
expansion of the total managed portfolio is attributed to continued
the number of accounts carrying a balance and a 10.1 percent increase in the
average account balance to $1,829 at the end of the second quarter of 2006
from $1,661 in 2005. Portfolio growth also benefited from the successful
rollout of the new Gas Advantage card in Ontario and expansion of the
Financial Services’ pre-tax earnings of $44.5 million increased
2.7 percent from the $43.4 million recorded in the second quarter of 2005,
reflecting higher revenue and an improvement in the operating expense ratio.
Adjusting for an $11.9 million securitization variance year-over-year and a
gain of $6.9 million for the redemption of MasterCard shares, earnings
income taxes increased 17.8 percent to $41.2 million from $35.0 million for
the comparable 2005 period. Financial Services earned the MasterCard shares
based on its historical credit card performance and was entitled to the
redemption payment when MasterCard became a public company in the second
quarter of 2006.
Net write-off rates were 5.95 percent, remaining within the targeted
range of five to six percent on a rolling 12-month basis.
Financial Services’ retail banking initiative remains on schedule
division expects to pilot new banking products and services to select
during the last quarter of 2006. The division’s earnings growth over the
half of the year will be impacted by expenses of approximately $10.2 million
to support the retail banking initiative, the majority of which will be
incurred in the fourth quarter. The retail banking investment has been
incorporated in the Company’s 2006 capital plan and earnings guidance.
EARNINGS GUIDANCE UPDATE
Based on the Company’s performance in the first half of the year, which
is slightly ahead of expectations, Canadian Tire management has raised its
guidance for 2006 and now forecasts that earnings per share will be in the
range of $4.25 to $4.40, excluding non-operating items, as compared to the
previously forecasted range of $4.20 to $4.35, excluding non-operating
Canadian Tire Corporation, Limited (TSX: CTC, CTC.a), 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 464
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
PartSource is an automotive parts specialty chain with 59 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 262 gas bars, 248 convenience stores and kiosks, and 73 car
Mark’s Work Wearhouse is one of the country’s leading apparel retailers
operating 330 stores in Canada. Under the Clothes that Work(TM) marketing
strategy, Mark’s sells apparel and footwear in work, work-related,
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 over 4 million Canadian Tire
MasterCard accounts and markets related financial products and services for
retail and petroleum customers. Canadians can also access Financial Services
online at www.ctfs.com. Over 50,000 Canadians work across Canadian Tire’s
organization from coast-to-coast in the enterprise’s retail, financial
services, and petroleum businesses.
For complete details on CTFS’ latest results visit CardData (www.carddata.com).