Growth accelerated sharply at Canada’s largest sporting goods retailer FGL Sports – in the second quarter thanks to continued improvement at its core Sport Chek banner, according to parent company Canadian Tire Corporation’s (CTC) earnings report.
FGL’s retail sales reached CAD$398.8 million ($366 mm) during the quarter ended June 28, up 13.7 percent from the same quarter a year ago, when sales grew 1.5 percent. Same-store sales accelerated to 8.2 percent from 7.4 percent a year earlier. The results were buoyed by FGL’s rapidly expanding flagship Sport Chek banner, where same store sales grew 10.8 percent. Even after adding 800,000 square feet of retail space, FGL generated a 3.6 percent increase in sales per square foot, which reached CAD$282 ($258).
The strong sales performance was led by men’s and women’s athletic and casual apparel, incremental sales of FIFA World Cup apparel, cycling, fitness and team sports apparel. Casual apparel sales were up in the high-single digits, outerwear was up in the double-teens and wearable technology sales increased 38 percent, according to FGL COO Chad McKinnon. McKinnon added that while FGL is watching the decline in golf sales closely, it is expanding its presence soccer and basketball.
CTC President Michael Medline said Sport Chek continues to get great results from a “digital flyer” pilot program it is spearheading. The program involves promoting individual items featured in paper flyers via YouTube, Instagram, Facebook and Google.
The approach has enabled Sport Chek to reach consumers every day across the entire country for less money than mailing a flyer that may drop over a four-day period, said Medline.
“We just completed another two-week period and the results were better than the other periods but very consistent in what we are seeing — the ability to be flexible,” said Medline, who was named last week to succeed CTC CEO Steven Wetmore when he retires Dec. 1. Wetmore has agreed to remain on the board in the non-executive role of deputy chairman.
FGL Sports accounted for 80 percent of the CTC’s square footage expansion and 32 of its 36 stores openings in the 12 months ended June 29. Most of that growth came at Sport Check, which added 13 stores and Atmosphere, a specialty outdoor retailer that added six stores. FGL ended the quarter with 427 stores, including 181 Sport Chek, 72 Sport Experts and 64 Atmosphere stores.
CTC reported overall retail sales grew 4.8 percent to CAD$3.72 billion ($3.4 bn) up from 2.1 percent growth a year earlier thanks to growth at all its banners and higher gasoline prices. Same store sales growth accelerated to 2.8 from 2.0 percent at its 493 Canadian Tire general merchandise stores, which also sell sporting goods. At Mark’s, which sells casual and active wear through 365 stores, same-store sales growth slowed to 2.6 from 6.5 percent a year earlier.
CTC ended the quarter with CAD$307.8 million in cash and cash equivalents, 46.2 percent from June 29, 2013. Merchandise inventories grew 7.8 percent to CAD$1.56 billion.
In another announcement made last week, CTC disclosed it had agreed to sell a 20 percent equity interest in its financial services business to Scotiabank for CAD$500 million in cash. The agreement also includes a credit card funding facility whereby Scotiabank will provide Canadian Tire’s financial services business with credit card receivable financing of up to CAD$2.25 billion satisfying the original objective of mitigating future funding risk. In addition, the partnership includes the option for Canadian Tire to sell an additional 29 percent of its financial services business to Scotiabank within 10 years.
Wetmore said the agreement creates an unprecedented opportunity for growth and innovation that will drive additional traffic to Canadian Tire, Mark’s and Sport Chek stores.
The deal, which is expected to close by Sept. 30, calls for the companies to work together to enhance customer affinity for their brands, maximize sponsorship commitments and showcase a wide range of products and services offered by both organizations.