Canadian Tire Corp. said its FGL Sports segment saw retail sales increase 13.3 percent for the fourth quarter with same-store sales climbing 12.5 percent. Comps at its core Sport Chek banner were up 15.6 percent for the same period.
FGL Sports net revenues expanded 16.9 percent in the quarter to C$519.2 million ($473.1 mm) from C$444.1 million despite a reduction in its store base to 421 from 475.
Growth at FGL Sports for the quarter was led by higher sales of new brands, such as Roxy and Quicksilver, and strengthened assortments in casual clothing and athletic footwear.
The chain was also helped by the addition of Olympic performance apparel products as well as continued emphasis on the Sport Chek brand and in-store execution. Sport Chek is the lead retail partner carrying the entire line of Adidas Canadian Olympic Team High Performance Collection. Sport Chek, as well as Canadian Tire and Sports Experts, are also Premier National Partners of Canada’s Olympic Team.
On a conference call with analysts, Michael Medline, president at Canadian Tire Corporation, particularly highlighted the performance of Sport Chek.
“Perhaps most heartening to us, our Sport Chek stores grew same-store sales in 2013 full year by double digits,” said Medline. “We were pleased with the performance of newly acquired Pro Hockey life in the quarter, as well.”
Medline added that FGL Sports saw only a “minimal impact” from the weather.
Last month, Sport Chek opened its first flagship store, an 80,000-square foot location at the West Edmonton mall that also includes a section for its outdoor lifestyle banner Atmosphere store on the second floor.
Said Medline, “We believe it is the most digitally advanced store in the world, and is our best store yet in terms of store design and partnering with key brands such as Nike, Adidas, Under Armour, Columbia, North Face and Arc' teryx. Initial sales and customer reaction have been well beyond our expectations. We believe we can put at least 12 flagship stores across Canada, and many innovations in the flagship can be retrofitted into our current stores, especially as our growing in-house technology teams have found ways to dramatically cut the cost of digital deployment in-store.”
Regarding overall expansion, Medline said FGL Sports is on schedule to add 2 million in square feet in Sports Chek and Atmosphere locations as part of its five-year plan announced in 2012. That will lead to a 50 percent hike in Sport Chek’s square footage. In 2013, it added 400,000 square feet and expects to add just under 500,000 in 2014.
Said Medline, “Increasingly we are finding better and better real estate as our very strong real estate group has had some time now to get some good locations.”
He said the flagship stores will range between 60,000 to 80,000 square feet, but FGL Sports still sees opportunities for 30,000 to 35,000 square foot stores in urban markets and even 10,000 to 12,000 square foot stores in small markets.
Atmosphere expansion will include both combo locations with Sport Chek as well as stand-alone stores. Said Medline, “Over the last, say, 18 months we have really been examining the Atmosphere brand. We think there is a real niche here for us. But we can't be everything to everyone all the time. And these boutiques just aren't working for us.”
For the full year, FGL Sports retail sales increased 6.8 percent to C$1.66 billion ($1.51 bn) with same-store sales growth of 7.7 percent. Sport Chek same store sales for the full year were up 10.3 percent. The positive retail sales performance in the quarter and for the full year also included the results of Pro Hockey Life, which was acquired in August.
As reported, FGL Sports purchased Pro Hockey Life, a private company, for C$85 million. Pro Hockey Life operates 23 in five provinces across Canada with annual revenue of approximately C$95 million. Besides Sport Chek and Pro Hockey Life, FGL Sports corporate and franchise banners include: Sports Experts, Atmosphere, Hockey Experts, National Sports, Intersport, and S3.
Companywide, Canadian Tire, which also owns Canadian Tire and Mark’s, reported Retail sales increased 5.5 percent to C$4.0 billion ($3.64 bn) and consolidated revenue increased 5.1 percent to C$3.3 billion over the same period last year.
Fourth-quarter earnings rose 17.2 percent to C$191 million ($174,0 mm), or C$2.34 a share. Adjusting for one-time costs related to the formation of CT REIT in 2013 and for restructuring, banner rationalization, tax and tax provision adjustments in 2012, diluted EPS was C$2.35, an increase of 9.8 percent over the same period last year. The earnings growth largely reflects strong top-line revenue and gross margin contributions from both the Retail and Financial Services segments.
