Forzani’s Revenues Showing Momentum

Overall, Canadian Tire's consolidated revenues rose 19.4 percent as a result of a strong 16.3 percent increase in retail sales. Consolidated net income rose 35.9 percent to $136.5 million from $100.5 million in the prior year and basic earnings per share rose to $1.68 from $1.23.  Included in this quarter's results were the positive impacts from the inclusion of Forzani and a lower tax rate.

“I'm pleased with the positive results in the quarter.  Customers responded to our offerings, we managed our expenses effectively and continued to execute our strategies.  The strong cash flow from our operations and our underlying confidence in our business has resulted in an increase to the quarterly dividend,” said Stephen Wetmore, President and CEO of Canadian Tire Corporation.

“As we look ahead, I'm optimistic about the execution of our strategies to strengthen our business for the future,” continued Wetmore.  “One of these strategies was the acquisition of FGL Sports – a major addition to our Company as we seek to become Canada's ultimate authority in sports.  The transition at FGL Sports is progressing very well and is meeting our expectations – both in top line sales and realizing synergies.”

The Company's quarterly results include FGL Sports for the first time, commencing August 19, 2011. Consolidated retail sales rose 16.3 percent to $2.9 billion compared to the same period last year with the inclusion of FGL Sports sales of $218.4 million. Excluding FGL Sports, consolidated retail sales and revenues remain strong, up 7.6 percent and 11.0 percent, respectively.

Retail sales at CTR stores increased 3.2 percent (same store 2.3 percent) over the prior year driven by sales increases across all key categories.  Consumer traffic increased as a result of new product offerings and strong marketing programs.  Living and Playing category revenues were particularly strong in the quarter primarily driven by kitchen, outdoor recreational activities and cycling product lines.  The Automotive category continued its growth trajectory in the quarter which saw the launch of an e-commerce site for tires.

Canadian Tire Gas (Petroleum) saw a 27.4 percent increase over the prior year, driven by a significant increase in fuel prices over the prior year and a 4.5 percent increase in volume.

Retail sales at Mark's increased 2.8 percent (same store 2.7 percent) over the prior year, driven by its core strength in the industrial wear category.  In casual wear, summer clearance sales were strong, although the late arrival of colder weather this fall compared to last year affected sales in September.  In the quarter, Mark's progressed with its important store conversion program – a real estate and rebranding project which has been launched in three markets, including 14 stores in Calgary.

Compared to the same period last year, FGL Sports had retail sales growth of 6.6 percent and same store sales growth of 7.3 percent.  Sales were strong across corporate and franchise stores and all corporate banners saw positive growth with Sport Chek and Sports Experts performing well in hard goods, apparel and footwear.

Retail segment net income before taxes increased 25.6 percent due to higher sales, lower finance costs and the impact of FGL Sports.

FINANCIAL SERVICES

Financial Services continues to be a strong contributor to CTC earnings and to the value proposition for Canadian Tire's customers.  CTFS revenue increased 0.5 percent in the quarter to $243.1 million compared to $241.9 million in the prior year.  As previously disclosed, Auto Club services revenue was included in Financial Services in 2010 and is now reported in Retail. Adjusting for this change, revenue in Financial Services increased 2.7 percent due primarily to higher interest income on credit card receivables.

Financial Services income before taxes increased $9.9 million or 18.3 percent over the prior year due to the increased revenue, a reduction in loan loss allowance as a result of improved portfolio aging, declining insolvency and unemployment rates, and continued management of operating expenses compared to the prior year.

The rolling 12-month net write-off rate on the credit card loan portfolio was 7.33 percent, down from 7.72 percent in Q3 2010.  The rolling 12-month return on receivables was 5.10 percent, up from 5.02 percent in Q3 2010.

CAPITAL EXPENDITURES

Capital expenditures for the third quarter 2011 were $120.2 million compared to Q3 2010 spending of $95.5 million.  The increase was driven primarily due to the timing of expenditures and total 2011 expenditures are expected to be in line with previous estimates, excluding FGL Sports.