FGL Sports saw same-store sales climb 8.6 percent in the first quarter, led by an 8.7 percent romp by its flagship Sport Chek chain, according to the quarterly report of its parent, Canadian Tire Inc.
The comp gain came on top of a 6.4 percent same-store increase in the year-ago quarter, and was attributed to the success of new marketing campaigns. Key category sales drivers included footwear and athletic apparel due to the launch of the “All Sweat is Equal” campaign and strength in spring-related categories including cycling, team sports and camping.
“Sport Chek, our fastest growing retail banner, continues to see material strength in week-to-week same-store sales that simply did not exist three years ago,” said Medline last week at the company’s annual meeting. “We believe Sport Chek has been the fastest growing retailer of significance in North America.”
On a conference call with analysts on its Q1 results, Michael Medline, Canadian Tire’s president and CEO, noted that an analyst last year had questioned whether 2014’s Sochi Olympics would present overly-tough comparisons for FGL Sports in the first quarter of 2015.
“I think I said there was no way we were headed toward disappointment at FGL due to our strong Chek brands, the continuous improvement we've been seeing, and the fact that the halo effect for the Olympics would not be ephemeral,” said Medline. “So boy, was I ever glad when we saw the FGL results in Q1.”
Net revenues at FGL Sports rose 6.7 percent in the period to $405 million from $379.4 million a year earlier. Retail revenues, including both corporate and franchise stores, rose 8.6 percent, the same increase as the comp gain. Sales were boosted by 18 additional Sport Chek stores compared to the prior year. Sales per square foot improved to $292 from $282 a year ago.
FGL Sports, formerly known as Forzani Group Ltd. and acquired by Canadian Tire in 2011, ended the period with 434 stores at the end of the period, up from 417 a year ago. It ended the period with 188 Sport Chek, 73 Sports Experts, 107 Atmosphere and 107 other formats. Other banners include Hockey Experts, National Sports, Intersport and Pro Hockey Life.
Companywide, Canadian Tire reported net income improved 16.7 percent to $88.3 million, or 88 cents a share. Revenues declined 2.3 percent to $2.51 billion from $2.57 billion, including a $104.3 million decline in Petroleum revenue resulting from lower gas prices. Excluding Petroleum, consolidated revenue increased 2.2 percent.
Consolidated retail sales increased 0.1 percent. Excluding Petroleum, consolidated retail sales increased 5.3 percent due to increased sales across
FGL Sports, Canadian Tire and Mark’s. Comps grew 4.7 percent at the Canadian Tire chain and 5.5 percent at Mark's.
Gross margins improved 261 basis points to 35.1 percent, largely due to a higher Petroleum margin. Excluding Petroleum, gross margins increased 113 basis points due to higher margin rates at Financial Services, Canadian Tire and FGL Sports.
SG&A expenses expanded to 30.1 percent from 28.7 percent. The increase was attributed to costs to support information technology initiatives and its digital strategy; open Sport Chek locations, and higher property taxes and maintenance costs from its CT REIT segment.
Canadian Tire reiterated its goals for the three years through 2017 calling for annualized retail sales growth over 3 percent at Canadian Tire over the three-year period, over 5 percent at Mark's and over 9 percent at FGL Sports. FGL Sports’ growth will be supported by an expansion of 2 million square feet of retail space at Sport Chek, as well as grow in e-commerce and strong same-store growth. Averaged diluted EPS companywide is expected to expand 8 to 10 percent over the three-year period.
