Canadian Tire Corporation, Limited · TSX:CTC
Canadian Tire — Q1 2010 Earnings Presentation
39 slides from Canadian Tire's earnings presentation, May 13, 2010
Slide 1: 2010 First Quarter Financial Results Conference Call
2010 First Quarter Financial Results Conference Call May 13, 2010
Slide 2: Forward-looking Information
F Forward-looking d l ki IInformation f i This document contains forward-looking information that reflects management’s current expectations related to matters such as expected future events, financial performance and operating results of the Company. All statements other than statements of historic
Slide 3: Forward-looking Information Continued
F Forward-looking d l ki IInformation f i C Continued i d The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof including g assumptions p about the Canadian economy, y, interest rates,, foreign g exchange g rates,, inflatio
Slide 4: Stephen Wetmore, President and Chief Executive Officer
Stephen Wetmore President and Chief Executive Officer 4
Slide 5: Consolidated Highlights
C Consolidated lid d HiHighlights hli h ($ in millions except per share amounts) Q1 2010 Q1 2009 Change Retail sales1 1,892.0 1,789.8 5.7% Gross operating revenue 1,830.1 1,758.1 4.1% EBITDA2, 3 163.4 156.1 4.6% EBITDA2, 3 102.7 109.4 (6.1)% (excluding Financial Services) Adjusted net earnings3 51.5
Slide 6: Business Performance Highlights
B i Business P Performance f Hi Highlights hli h year-over-year percentage change Q1 2010 Q1 2009 CTR Retail sales1 2.1% 4.0% Gross operating revenue (0.7)% 2.6% Net shipments (0 6)% (0.6)% 2 0% 2.0% Mark’s Retail sales2 3.8% (2.3)% Petroleum Retail sales 19.5% (21.3)% Gasoline volume (0.6)% (1.2)%
Slide 7: Performance Highlights
P f Performance Highlights Hi hli h Company results demonstrate positive trend for 2010 – Adjusted consolidated earnings before taxes increased 13.0% from the prior year; a result of the strong earnings performance in Financial Services – CTR retail sales up p22.1% 1% – Financial Services’ gross o
Slide 8: 2010 Strategic Priorities
2010 S Strategic i PPriorities i ii Optimize the significant investments made in store and supply chain infrastructure and drive sustainable, long-term earnings growth Build the strength of the core Canadian Tire Retail business and brand – Improve overall customer service – Leverage industry-le
Slide 9: Financial Aspirations
Fi Financial i lAAspirations i i Five Year Financial Aspirations POS – CTR 3 – 5% Consolidated adjusted j EPS 8 – 10% Retail ROIC 10%+ Financial Services ROR 4.5 – 5.0% Leading to TRS (includes dividends) 10 – 12% 9
Slide 10: 2010 Key Initiatives
2010 K Key IInitiatives ii i Improve p the customer experience p at CTR Begin development of approach to Customer Centric Retailing with best of class partners Develop p a redesigned g and enhanced loyalty y yp program g Continue roll-out of capital-light CTR Smart and Small Market stores
Slide 11: 2010 Key Initiatives Continued
2010 K Key IInitiatives ii i C Continued i d Evolution of “Clothes That Work” strategy at Mark’s Enhance supply chain and operations capabilities at Mark’s Develop Financial Services growth initiatives such as instant credit, and deferred and instalment financing Ongoing focus on credit risk
Slide 12: Marco Marrone, Chief Financial Officer
Marco Marrone Chief Financial Officer & Executive V.P., Finance Fi 12
Slide 13: Consolidated Highlights
C Consolidated lid d HiHighlights hli h Retail Sales ($ billions) Gross Operating Revenue ($ billions) 5.7% 4.1% $1.89 $1.83 $1.79 $1.76 Q1 10 Q1 09 Q1 10 Q1 09 Net Earnings Adjusted Earnings Per Share ($ millions) ($) (0.6)% 4.0% $49.4 $49.7 $0.63 $0.61 Q1 10 Q1 09 Q1 10 Q1 09 13
Slide 14: Consolidated Highlights
C Consolidated lid d HiHighlights hli h ($ in millions except per share amounts) Q1 10 Q1 09 Change Earnings before income taxes 71.7 66.4 8.0% Less pre-tax adjustment for: Executive retirement obligations1 0.2 0.5 Net effect of securitization activities2 (1.4) 0.5 Loss on disposals of property and
Slide 15: Financial Ratios
Fi Financial i lRRatios i A att As A att As April 3, 2010 April 4, 2009 Long-term debt (including current portion of LTD g and long-term deposits) p ) $2.63 billion $ $2.26 billion $ Book value per share $45.54 $43.61 Retail return on invested capital (on a rolling 12- month basis)1 8.3% 8.7% For th
Slide 16: Consolidated Cash Flow
Consolidated Cash Flow Q1 primary sources of funding: – $146 million of cash generated from operating activities before other changes in working capital; and – $71 million of cash arising from the net investment in loans receivable During the quarter, we used cash primarily for: – $81 million fo
Slide 17: 2010 Capital Expenditures
2010 C Capital i lE Expenditures di $51 million Q1 CAPEX: – $31 million for growth initiatives; – $9 million for maintenance projects; – $6 million for strategic initiatives; and – $5 million for productivity initiatives 2010 CAPEX in the range of $280 to $300 million: – $122 million for growth
Slide 18: Financing Sources
Fi Financing i S Sources Financing Source Amount Available Description Committed bank lines of credit $1 17 billion $1.17 • Provided by 10 domestic and international financial institutions • Supports the $800 million commercial paper program • No amounts were drawn on the bank lines as at April 3, 2
Slide 19: Other Items
O h Items Other I 2010 statutory tax rate will be approximately 31%, reflecting federal income tax rate changes Comprehensive hedging program to stabilize impact on fluctuations in foreign currency-based transactions Quarterly dividend unchanged at $0.21 19
Slide 20: Mike Arnett, President, Canadian Tire Retail
Mike Arnett President, Canadian Tire Retail 20
Slide 21: CTR Retail & Same Store Sales
CTR R Retailil & S Same S Store S Sales l year-over-year percentage change Q1 2010 Q1 2009 CTR Retail sales1 2.1% 4.0% Same store sales2 1.7% 2.5% (1) Includes sales from Canadian Tire stores, PartSource stores and the labour portion of CTR’s auto service sales. (2) Includes sales from Canadian Tire
Slide 22: CTR Performance Highlights
CTR P Performance f Hi Highlights hli h Retail Sales Gross Operating Revenue ($ billions) ($ billions) 2.1% (0.7)% $1.29 $1.27 $1.09 $1.10 Q1 10 Q1 09 Q1 10 Q1 09 Net Shipments1 EBITDA2 (year-over-year percentage change) ($ millions) (7.2)% 2.0% $96.8 $ $89 9 $89.9 (0.6)% Q1 10 Q1 09 Q1 10 Q1 09 (1)
Slide 23: CTR Earnings Highlights
CTR E Earnings i Hi Highlights hli h Pre-tax Earnings1 ($ millions) 2.1% 2 1% increase in retail sales and 1 1.7% 7% increase 40 in same store sales reflects strong sales of spring merchandise in March 30 $32.8 First quarter sales were slow in the first half, but picked up towards the end of the
Slide 24: CTR Drivers of Growth
CTR D Drivers i off G Growth h 1. Growth from key business categories Retail sales 2. Growth from strategic initiatives 3% to 5% 3 Growth from store performance & 3. CAGR customer experience improvement 24
Slide 25: Michael Medline, President, Automotive and Dealer Relations
Michael Medline President, Automotive and Dealer Relations 25 25 25
Slide 26: Automotive Business
A Automotive i B Business i Overview Going forward: a much improved customer experience Net result • Growing market • Stronger in accessories and tires Canada s Canada’s automotive • National reach • The parts customers need authority • No. 1 brand in the aftermarket • Tools and training employees n
Slide 27: Q1 Progress Update
Q1 P Progress U Update d First q quarter Canadian Tire Retail Automotive sales ((excluding g PartSource and Petroleum) were $316 million, down 2.2% year-over- year – Lack of winter weather negatively impacted January and February sales of seasonal products such as batteries, wiper blades, washer f
Slide 28: Q1 Progress Update Cont'd
Q1 P Progress U Update d C Cont’d ’d Project Accelerate – Halifax/Dartmouth – Initiative to drive hard parts sales – Pleased with results to date – Learnings to-date to be rolled-out across the country – Assortments, supply chain, training and marketing Website W b it tire ti selector l t tool t
Slide 29: PartSource Performance Highlights
P S PartSource P f Performance Highlights Hi hli h Q1 sales down with nonnon-seasonal seasonal product sales performing better than winter winter- related sales, largely due to unseasonable winter weather Shipments to Canadian Tire Retail stores continue to increase as key p components of the Au
Slide 30: Petroleum Earnings Highlights
P Petroleum l E Earnings i Hi Highlights hli h Pre-tax Earnings Q gross Q1 g operating p g revenue increased ($ millions) illi ) 20.2% due to higher gas prices at the pump $10 compared to the first quarter of 2009 Convenience same-store sales increased $8 11.5% in the first q quarter driven by y
Slide 31: Dean McCann, President, Canadian Tire Financial Services
Dean McCann President, Canadian Tire Financial Services 31
Slide 32: Financial Services Performance Highlights
Fi Financial i lSServices i P Performance f Hi Highlights hli h Gross Average Receivables Operating Expenses1 ($ billions) (as a percentage of gross average receivables) 0.4% 0 4% 5.9% 5 9% YOY 7.79% YOY 7.33% 6.70% 6.92% $4.03 $3.98 $4.01 $3.76 Q1 10 Q1 09 Total Managed Portfolio Credit Card Portfo
Slide 33: Financial Services Earnings Highlights
Fi Financial i lSServices i E Earnings i Hi Highlights hli h Pre-tax Earnings ($ millions) 60 Growth in Q1 earnings year-over-year attributed to three primary factors: 35.6% 50 YOY – Higher credit card gross average receivables, which were up by $220MM 40 $44.1 $38.4 – Higher total revenues result
Slide 34: Getting Back to Targeted ROR
G i Back Getting B k to T Targeted d ROR Q1 2010 Q Q4 2009 Q Q1 2009 Q Target g Revenues 25.18% 25.14% 24.59% 25.6% Variable expenses 14.59% 14.65% 12.55% 13.9% G Gross margin i 10 59% 10.59% 10 49% 10.49% 12 04% 12.04% 11 7% 11.7% Operating expenses (OPEX) 6.70% 6.92% 7.33% 6.7% - 7.2% Return on re
Slide 35: Paul Wilson, President, Mark's Work Wearhouse
Paul Wilson President, Mark’s Work Wearhouse 35
Slide 36: Mark's Performance Highlights
M k’ P Mark’s Performance f Hi Highlights hli h Retail Sales1 Same Store Sales2 ($ millions) (year-over-year percentage growth) 1.5% 3.8% $174.9 $168.5 (4.1)% Q1 10 Q1 09 Q1 10 Q1 09 EBITDA3 ($ millions) 43.6% $3.1 $2.2 Q1 10 Q1 09 (1) Includes retail sales from corporate and franchise stores. (2) M
Slide 37: Mark's Q1 Highlights
M k’ Q1 Hi Mark’s Highlights hli h Mark s retail sales increased 3 Mark’s 3.8% 8% in the quarter driven by higher industrial wear and women’s wear sales increasing 4.1% and Q1 Category Growth % Change 2.9%, respectively (Year-over-year) Mark’s Mark s positive earnings growth reflects Women’s Wea
Slide 38: Mark's Growth Strategies
M k’ G Mark’s Growth hSStrategies i Reinforcing the core1 Expand customer base 2 Retail Sales Even more innovation 3 3% to 5% CAGR Expand channels 4 p renewal 5 Store concept 38
Slide 39: Questions and Answers
Questions and Answers 39