Canadian Tire Corporation reported retail sales at its FGL segment, including Sport Chek, were up 1.6 percent in the third quarter with comparable sales up 2.2 percent.

FGL’s comps had dipped 0.3 percent in the second quarter. The segment also includes Hockey Experts, Sports Experts, National Sports, Intersport and Atmosphere.

Companywide, Canadian Tire said it delivered :

  • Strong topline growth in the third quarter in retail and financial services
  • Third quarter diluted EPS was $3.15 . Normalized EPS was $3.47 , up 34.1 percent, adjusted for Helly Hansen acquisition costs
  • Increase of $0.55 or 15.3 percent 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

“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 percent, in the third quarter. Excluding Petroleum, consolidated retail sales were up 2.6 percent over the same period last year.
  • Consolidated revenue increased $365.6 million , or 11.2 percent, 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 percent, 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 percent in the quarter.
  • Diluted EPS was $3.15 in the quarter, an increase of $0.56 per share, or 21.7 percent.
  • Normalized diluted EPS was $3.47 , an increase of $0.88 per share, or 34.1 percent, 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 percent. Excluding Petroleum, retail segment revenue increased 10.6 percent.
  • Canadian Tire Retail saw retail sales increase 2.4 percent and comparable sales were up 2.2 percent.
  • FGL retail sales were up 1.6 percent and comparable sales were up 2.2 percent.
  • Mark’s retail sales grew 6.4 percent and comparable sales increased 6.1 percent.
  • 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 percent. Normalized income before income taxes increased by $28.8 million , or 18.0 percent.

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 percent, commencing with the December 31, 2018 record date.

FINANCIAL SERVICES OVERVIEW

  • Gross average credit card receivables was up 11.2 percent over the prior year.
  • Revenue grew 10.5 percent over the prior year.
  • Income before income taxes increased 31.6 percent in the third quarter to $131.9 million partially due to:

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 percent 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 percent to 40 percent 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.

Image Sport Chek