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Canadian Tire Corporation Reports Strong Q3 Results, Increases Dividend 15.3% and Announces a New Share Repurchase Program

November 08, 2018
  • Strong topline growth in the third quarter in retail and financial services
    • Consolidated comparable sales up 2.5%; CTR up 2.2%; FGL up 2.2%; Mark's up 6.1%
    • Financial Services receivables grew 11.2%
  • Third quarter diluted EPS was $3.15. Normalized EPS was $3.47, up 34.1%, adjusted for Helly Hansen acquisition costs
    • Retail IBT grew 4.1%. Normalized retail IBT grew 18.0%, adjusted for Helly Hansen acquisition costs
    • Financial Services IBT grew 31.6%
  • Increase of $0.55 or 15.3% in the annual dividend from $3.60 to $4.15 per share on each Class A Non-Voting and Common Share
  • Intention to return capital to shareholders through repurchase of $300-$400 million of Class A Non-Voting Shares by the end of 2019

TORONTO, Nov. 8, 2018 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.A) today released third quarter results for the period ended September 29, 2018.

"We delivered strong topline growth in our retail and financial services businesses this quarter. The exceptional success of Triangle Rewards™, a strong start from Helly Hansen and our continued commitment to the substantial investments we are making to develop the future capabilities required to meet our customers' expectations, will be fundamental to the long-term growth of CTC for years to come", said Stephen Wetmore, President and CEO, Canadian Tire Corporation. "With the national rollout of deliver-to-home capabilities at CTR, combined with our best-in-class store and digital experience, our customers can now shop how they want, when they want at any of our banners."

"The double-digit increase in our dividend and the continuation of our share repurchase program further signal our confidence in the Company's future," continued Wetmore.

CONSOLIDATED OVERVIEW

  • Consolidated retail sales increased $164.2 million, or 4.4%, in the third quarter. Excluding Petroleum, consolidated retail sales were up 2.6% over the same period last year.
  • Consolidated revenue increased $365.6 million, or 11.2%, which includes a $74.7 million increase in Petroleum revenue resulting from higher per litre gas prices. Excluding Petroleum, consolidated revenue increased $290.9 million, or 10.4%, in the quarter.
  • Normalizing item in the quarter reflects costs incurred in relation to the acquisition of Helly Hansen of $22.4 million.
  • Consolidated adjusted normalized EBITDA increased by 14.8% in the quarter.
  • Diluted EPS was $3.15 in the quarter, an increase of $0.56 per share, or 21.7%.
  • Normalized diluted EPS was $3.47, an increase of $0.88 per share, or 34.1%, over the same period last year.

RETAIL OVERVIEW

  • Financial results reflect Q3 2018 performance compared to Q3 2017.
  • This quarter's results reflect the inclusion of Helly Hansen's operations for the first time.
  • Retail segment revenue increased $338.3 million, or 11.4%. Excluding Petroleum, retail segment revenue increased 10.6%.
  • Canadian Tire Retail saw retail sales increase 2.4% and comparable sales were up 2.2%.
  • FGL retail sales were up 1.6% and comparable sales were up 2.2%.
  • Mark's retail sales grew 6.4% and comparable sales increased 6.1%.
  • Helly Hansen revenue in the third quarter was $181.7 million.
  • Normalizing item in the quarter reflects costs incurred in relation to the acquisition of Helly Hansen of $22.4 million.
  • Income before income taxes increased $6.4 million, or 4.1%. Normalized income before income taxes increased by $28.8 million, or 18.0%.

CT REIT OVERVIEW

  • As disclosed in the Q3 2018 CT REIT earnings release on November 5, 2018, CT REIT announced six investments with an estimated cost of $72 million.
  • CT REIT also announced an increase in the annual rate of distribution to $0.757 per unit, an increase of 4.0%, commencing with the December 31, 2018 record date.

FINANCIAL SERVICES OVERVIEW

  • Gross average credit card receivables was up 11.2% over the prior year.
  • Revenue grew 10.5% over the prior year.
  • Income before income taxes increased 31.6% in the third quarter to $131.9 million partially due to:
    • a $21.4 million year- to-date adjustment booked in the quarter relating to the positive impact of a change in Management's estimate of the present value of future recoveries; and
    • a $15 million reduction in the incremental allowance for loans receivable due to improved customer default rates compared to the original expected credit loss model assumptions.

CAPITAL EXPENDITURES

  • Operating capital expenditures were $139.1 million in the quarter, up from $99.2 million in the third quarter of 2017.
  • For fiscal 2018, the Company expects annual operating capital expenditures to be at or below the low end of the previously announced range of $450 to $500 million.
  • For fiscal 2019, the Company expects annual operating capital expenditures to be within the range of $475 million to $550 million.

DIVIDEND

  • In November 2018, the Company announced an increase in its annual dividend from $3.60 to $4.15 per share and declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $1.0375 per share, an increase of $0.1375 or 15.3% per share on its quarterly dividend, payable on March 1, 2019 to shareholders of record as of January 31, 2019. The dividend is considered an "eligible dividend" for tax purposes.
  • The Company has a consistent record of increasing its annual dividend and has targeted a payout ratio of approximately 30% to 40% of prior year normalized earnings.

SHARE REPURCHASE

  • In October 2018, the Company completed its previously announced (November 2017) $550 million share repurchase.
  • The Company intends to repurchase a further $300-$400 million of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of 2019, subject to regulatory approval of the renewal of its normal course issuer bid.

To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see:
http://files.newswire.ca/116/CTC_Q3_2018.pdf

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking information that reflects 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 our anticipated financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Certain statements other than statements of historical facts included in this press release may constitute forward-looking information, including but not limited to, statements concerning the Company's expectations with respect to its annual operating capital expenditures for fiscal years 2018 and 2019 under the heading "Capital Expenditures", the Company's intention to repurchase certain of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of 2019 under the heading "Share Repurchase".

By its very nature, forward-looking information requires us to make assumptions and is 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. Although the Company believes that the forward-looking information in this press release is based on information, assumptions and beliefs which are current, reasonable and complete, this information is necessarily subject to a number of factors, risks and uncertainties that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information.

For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, refer to section 2.11 (Risk Factors) of our Annual Information Form for fiscal 2017 and 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 our Management's Discussion and Analysis for fiscal 2017 and section 3.1 (Three-Year (2018-2020) Financial Aspirations) of our Management's Discussion and Analysis for Third Quarter 2018, as well as the Company's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.

The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof and 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. 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.

CONFERENCE CALL
Canadian Tire will conduct a conference call to discuss information included in this news release and related matters at 1:00 p.m. ET on November 8, 2018. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at https://corp.canadiantire.ca/English/investors/default.aspx, and will be available through replay at this website for 12 months.

ABOUT CANADIAN TIRE CORPORATION
Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: CTC) or "CTC", is a family of businesses 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. 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, the world's largest hockey centric retailer; and FGL (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport and Atmosphere), which offers the best active wear brands. The approximately 1,700 retail and gasoline outlets are supported and strengthened by our Financial Services division and the tens of thousands of people employed across Canada and around the world by the Company and its local dealers, franchisees and petroleum retailers. In addition, Canadian Tire Corporation owns and operates Helly Hansen, a leading global brand in sportswear and workwear based in Oslo, Norway. For more information, visit Corp.CanadianTire.ca.

SOURCE CANADIAN TIRE CORPORATION, LIMITED

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