Q4 - Canadian Tire Corporation

Canadian Tire Corporation
Investor presentation
February 2013
Forward looking information
This document contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. Forward-looking
statements are provided for the purposes of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of our financial position, results of
operation and operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.
All statements other than statements of historical facts included in this document may constitute forward-looking information, including but not limited to, statements concerning management's expectations relating to
possible or assumed future prospects and results, our strategic goals and priorities, our actions and the results of those actions and the economic and business outlook for us. Often but not always, forward-looking
information can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or
the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its
experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made.
By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's assumptions may not be correct
and that the Company's expectations and plans will not be achieved. Although the Company believes that the forward-looking information in this document is based on information and assumptions which are current,
reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking
information for a variety of reasons. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - include (a) credit, market, currency, operational, liquidity and funding
risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of Canadian Tire to attract and retain quality employees, Dealers, Canadian Tire Petroleum agents and PartSource, Mark's Work
Wearhouse and FGL Sports store operators and franchisees, as well as our financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers
to shop at our stores or acquire our financial products and services; (d) our margins and sales and those of our competitors; (e) risks and uncertainties relating to information management, technology, supply chain,
product safety, changes in law, regulation, competition, seasonality, commodity price and business disruption, our relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the
risk of damage to the reputation of brands promoted by Canadian Tire and the cost of store network expansion and retrofits and (f) our capital structure, funding strategy, cost management programs and share price.
We caution that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect our results. Investors and other readers are urged to consider the foregoing risks,
uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information.
For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the "Risk Factors" section of our Annual Information
Form for fiscal 2012 and our 2012 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.
Statements that include forward-looking information do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the
Company's business. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring after such statements are made.
The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. The Company does not undertake to update any forward-looking information,
whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, unless required by applicable securities laws.
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Reasons to invest in CTC
We have a strong
competitive advantage
• National presence with more
than 1,700 outlets
• 90% of Canadians are located 15 • Leadership in key heritage
categories
minutes from a CTR store
• Diverse and innovative products • Global sourcing capabilities
• Enhanced loyalty program
• Unique strength in Automotive
• Enhancing our digital footprint
• Leading Sporting Goods retailer
• Leading market share in many
key business lines
• Complementary financial
products
We are committed to
consistent financial
performance
We have extensive reach We are investing in retail
and scale
leadership
• Tailored store formats: urban,
small market and rural
•
30 million ft2 in retail square
footage
• Canada’s most-read flyer
• One of the most visited retail
websites in Canada (CTR)
• Sustainable earnings growth
• Healthy free cash flow
• Strong balance sheet
• Prudent credit risk management
• Customer-friendly store layouts •
• Modern supply chain and
continued productivity
•
enhancements
Good liquidity with multiple
sources of funding
Consistent return to
shareholders
• Evolving e-commerce offering
We’re a leading Canadian retailer
“CTR” refers to Canadian Tire Retail
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2
Our core business is retail
We have six key
business categories
Customer
Preparing Canadians for the
Jobs & Joys of Life in Canada
Retail
banners
C$7.8B
2012 revenue = C$11.4B
C$1.6B
Reporting
segments
Business
categories
Products
and
services
3
C$1.0B
C$1.0B
Retail
Automotive
 Gas
 Auto parts
 Tires & power
sports
 Auto Service
 Car care &
accessories
 Roadside
assistance
Living
Home cleaning
Home decor
Home org
Kitchen
Backyard living
& fun
 Gardening
 Outdoor
tools
 Seasonal





Fixing




Home repair
Paint
Tools
Home Services
Playing /
Apparel
Sporting Goods







Hockey
Golf
Cycling
Fitness
Camping
Hunting
Fishing
Financial
Services





Industrial wear
Men’s wear
Women’s wear
Athletic apparel
Footwear




Credit cards
Retail deposits
In-store warranties
Insurance
3
Our retail network across Canada
4 CTR distribution centres
2 Mark’s distribution centres
At least one
Canadian Tire
store is within
3 trans load facilities
3 auto parts distribution centres
1 FGL Sports distribution centre
15 minutes
of 90% of
Canadians
West
Store count as at December 29, 2012
4
Ontario
Quebec
East
136
200
99
55
157
127
182
29
151
146
48
41
38
164
62
35
25
59
-
3
4
Our 2013 strategic objectives
1.
2.
3.
4.
Strengthen core retail
Align all business units to reinforce the core
Build a high-performing organization
Create new platforms for growth
Our strategic objectives serve as the foundation for
achieving our five-year financial aspirations
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Progressing towards our financial aspirations
Five year financial aspirations
(2010 to 2014)
2012
results
2011
results
2010 to
2012 CAGR
3 to 5%
0.8%
2.0%
1.7%
Consolidated EPS growth
8 to 10%
(diluted)
6.9%1
5.3%
14.3%
6.7%
7.7%
6.7%2
6.8%
5.5%
6.8%2
CTR retail sales growth
Retail ROIC
10% +
FS return on receivables 4.5 to 5%
1
2
Normalized for the items described in the table in section 7.1 of the 2012 Management’s Discussion and Analysis, consolidated EPS growth was 13.1 per cent.
Retail ROIC and ROR are targets intended to be achieved at the end of the outlook period, therefore, have been calculated as at the year-end date.
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 Strengthen core retail
Achieve growth in
Canadian Tire Retail through a
customer-centric approach
>
Continue rollout of new
concept, capital light CTR
stores
• Complete at least 50 Smart store
projects in 2013
• Pilot new-concept CTR Express store
• Develop next new CTR store concept
>
Retain and grow market
leading positions
• Continue implementation of key
category strategies (e.g., Living
and Pro Shops)
• Leverage investment in
Automotive Infrastructure to
build leadership in Auto Service
• Evolve Loyalty program
• Launch digital catalogue and
expand e-commerce offering
7
>
Strong collaboration
with Associate Dealers
• Align our focus on the
customer and on delivering
exceptional customer
experiences
• Seek efficiencies to allow
execution on initiatives that
make sense for our customers
– faster
7

Align all business units to
reinforce the core
All of our business
units will operate as
>
>
“One Company”
Mark’s
• Continue Mark’s network
expansion with more than 30
stores rebranded to Mark’s
• Improve merchandising and
assortment planning
• Grow B2B business: Imagewear
8
FGL Sports
• Focus on core banners:
complete banner rationalization
program by end of Q1 2013
• Expand footprint: complete 39
store network projects, including
27 new Sport Chek and
Atmosphere stores and two
Sport Chek flagship stores
>
Financial Services
• Expand offering and support of our
retail businesses, including emphasis
on in-store financing offers
• Explore opportunities to provide
additional financing options for
Home Services customers
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 Build a high-performing organization
Establish a corporate
culture of continuous
>
>
improvement
Advance key
productivity and
efficiency initiatives
• Continue rollout of line
review processes
• Better evaluate
performance of SKUs within
assortments
Drive business
sustainability as a
business strategy
• Continue to integrate
Business Sustainability across
the Company’s operations
• Optimize key sustainability
metrics and reporting
• Streamline supply chain
operations
• Simplify the flyer process
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Proud to be the store for Canadians
And it’s just the
beginning of the next
phase of our journey
>
Strengths
• Strong competitive advantage
• Extensive reach and scale
• Investing in retail leadership
>
• Consistent financial performance
Targeted strategy
• Strengthen core retail
• Align all business units to
reinforce the core
• Build a high-performing
organization
• Create new growth platforms
10
>
In summary
Five–year financial aspirations
• EPS growth: 8 to 10%
• CTR Retail sales
growth: 3 to 5%
• Retail ROIC: 10% +
• FS ROR: 4.5 to 5%
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Consolidated highlights
Q4 and full-year 2012
Q4 2012
($ in millions except per share amounts)
2012
% change vs
2011
Retail Sales1
$
3,780.5
1.4% $ 12,852.5
10.1%
Revenue
$
3,166.7
1.0% $ 11,427.2
10.0%
Net income
$
163.1
(1.9%) $
499.2
6.9%
Basic earnings per share
$
2.00
(1.9%) $
6.13
6.9%
Diluted earnings per share
$
2.00
(1.8%) $
6.10
6.9%
1
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% change vs
Q4 2011
Retail sales for 2011 has been restated. See section 10.4 of the 2012 MD&A for more details.
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Retail segment highlights
Q4 and full-year 2012
Q4 2012
($ in millions)
Retail Sales
CTR retail sales growth
Mark's retail sales growth
Petroleum retail sales growth
FGL Sports retail sales growth 1
Revenue
(0.5%)
3.7%
5.0%
4.5%
$
Gross margin (per cent of revenue)
% change vs
Q4 2011
0.8%
4.2%
4.0%
4.1%
-
-
0.9% $ 10,381.2
2,901.1
28.5%
2012
% change vs
2011
-
27.3%
10.9%
-
$
658.2
10.6% $
2,364.8
19.3%
Net finance costs
Income before income taxes
$
18.8
154.9
(4.0%)
(11.6%) $
73.2
400.3
0.7%
(2.6%)
EBITDA
$
258.9
(7.1%) $
798.7
3.9%
Operating expenses
2
Retail ROIC
6.67%
(101 bps)
-
-
1
FGL Sports’ key operating performance metrics are calculated using the Company’s weekly sales calendar, which begins on Sunday and ends on Saturday. The
metrics reported in the table are for comparison purposes only as the Company did not own FGL Sports prior to August 18, 2011.
2
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Rolling 12 months
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Financial Services segment highlights
Q4 and full-year 2012
% change vs
Q4 2012
($ in millions)
% change vs
2012
2011 1
Revenue
$
248.0
1.8% $
981.9
2.2%
Operating expenses
$
71.4
6.2% $
263.6
(0.4%)
Net finance income
$
(0.5)
Income before income taxes
$
61.7
10.8% $
276.9
26.4%
Gross average accounts receiveable
$
4,209.6
3.6% $
4,096.0
1.5%
(19.9%) $
Net credit card write-off rate2
6.58%
-
Return on average total managed portfolio2
6.76%
-
1
Financial Services’ operating segment results have been reclassified to correspond to the current year presentation
to the 2012 consolidated financial statements for more information.
2
Rolling 12 months
13
Q4 2011
1
(1.2)
(43.2%)
-
-
. See note
7 of the notes
13
Canadian Tire Corporation
Additional information
Automotive strategy
Canada’s authority
in Automotive
>
Improve Auto Service
• Completed Automotive
Infrastructure (AI) program
rollout in 2011
• Reporting and metrics
redesigned as part of rollout
• Auto Service performance
improvement program continues
to educate technicians on the
system and its benefits
15
>
Remain a leader in Tires
• Tires and wheels e-commerce
site launched in 2011
• CTR is now Canada’s leading
online tires and wheels retailer
• New “tire wall” to be rolled out
across CTR stores in 2013
• New staff training and tire
warranty enhancements also in
the pipeline for 2013
>
Strengthen Auto Parts
• Improve the in-store parts
assortment
• Fully leverage AI program to
take advantage of customerspecific part lookup and
preventative maintenance part
purchasing opportunities
• PartSource to supply more CTR
stores through network
expansion of Hubs, Mini Hubs
and Micro Sites in select areas
15
Business sustainability
Business
sustainability is
integrated into our
operations and
business plans
>
Energy and climate
1. Profitably grow the business without
increasing the net carbon footprint
of the economy
>
Waste
2. Profitably grow the business while
eliminating unnecessary packaging
and send zero waste to landfills
953 projects were completed in 2012 forecasted to annually avoid:
$3.6 million in costs
II 233,000 gigajoules of energy use II 16,200 tonnes of GHG emissions II 2,000 tonnes of waste
To read more about CTC’s commitment to business sustainability, and to access our business sustainability
performance reports, please visit: http://sustainability.canadiantire.ca
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Three aspirational goals
drive our strategy
>
Products
3. Provide innovative products and
services that meet our customers’
needs without compromising the
ability of future generations to meet
their needs
– Offer more than 1,100
environmentally preferable products
to our customers
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Financial flexibility
Financing source
• Short-term borrowing
Amount
• $1.5 billion
Description
• Committed bank lines of credit provided by 9 domestic ($1,325
million) and 2 international ($175 million) financial institutions are
available for general corporate purposes and to support the
commercial paper programs of both Canadian Tire and Glacier Credit
Card Trust (“Glacier”)
– Bank lines were undrawn as at December 29, 2012
– $119 million of Glacier commercial paper was outstanding at
December 29, 2012
• Corporate Medium Term Notes (MTN)
program
• $750 million
• Base Shelf Prospectus renewed in April 2011. The Company intends to
file a new Shelf Prospectus in March 2013, providing the Company
with access to up to $750.0 million for 25 months from that date
• No issuance under this Shelf Prospectus at this time
• Securitization of receivables
• Transaction specific
• Handled through Glacier in form of commercial paper and medium
term notes
• Two five-year term securitization transactions completed in 2012:
$211.6M at an average coupon of 2.863% maturing May 2017 and
$423.3M at an average coupon of 2.437% maturing October 2017
• Broker GIC deposits
• No specified limit
• Funds are readily available through broker networks
• Retail deposits
• No specified limit
• Consists of high interest savings accounts, tax-free savings accounts
and retail GIC deposits
• Sale/leaseback transactions
• Transaction specific
• Strategic transactions involving company-owned properties
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For more information
http://investors.canadiantire.ca
[email protected] or (416) 480-8725
Follow us on twitter @CTCShares