Canadian Tire Reports Another Strong Quarter

Canadian Tire Corporation, Limited has reported an increase of 13.9 percent in consolidated net earnings, rising to $56.6 million for the third quarter compared to $49.6 million in 2002, with PartSource operations exceeding company targets.
Net earnings per share increased 11.7 percent to $0.70 per share compared to $0.63 per share last year. Net earnings, excluding non-operating gains and losses, were up 11.7 percent to $55.4 million compared to $49.6 million in the same quarter of 2002. Net earnings benefited in the third quarter from a lower tax rate, a net gain of $1.0 million on the sale of surplus property and equipment and from a $0.2 million gain on the sale of credit charge receivables. In the comparable period last year, non-operating gains or losses did not impact earnings. Net earnings per share for the third quarter, excluding the non-operating gains and losses, were up 9.5 percent to $0.69 compared to $0.63 in 2002.
“Canadian Tire has delivered another strong quarter and we are pleased with our sales and earnings momentum heading into the all important fourth quarter. We are confident in our ability to meet our established objectives and targets for the year, as all of our businesses are performing well and we continue to make good progress in implementing our strategic agenda,” said Wayne Sales, president and CEO, Canadian Tire.
Total retail sales in the third quarter were up 4.6 percent to $1.93 billion from $1.84 billion in 2002. Consolidated gross operating revenue for the quarter increased 7.3 percent to $1.56 billion compared to $1.46 billion in 2002. For the first nine months, total retail sales were up a healthy 7.1 percent to $5.49 billion compared to $5.13 billion in the same period in 2002.
Consolidated gross operating revenues rose 8.9 percent to $4.65 billion compared to $4.27 billion last year. Canadian Tire net earnings increased 10.4 percent to $153.0 million for the first nine months compared to $138.5 million last year. Excluding non-operating gains and losses, net earnings were up 11.2 percent to $148.7 million compared to $133.6 million in 2002. Net earnings per share for the first nine months grew 8.3 percent to $1.90 compared to $1.76 last year. Net earnings per share excluding non-operating gains and losses were up 11.2 percent to $1.88 compared to $1.69 in 2002.
Year-over-year sales growth in the Canadian Tire Retail (CTR) segment, which includes the PartSource operations, was achieved against a very strong comparable period in 2002. Third quarter retail sales for CTR climbed 3.7 percent to $1.6 billion, compared to $1.5 billion in 2002. Comparable store sales increased by 1.9 percent compared to the third quarter of 2002. Sales growth was led by strength in the automotive, housewares and lawn and garden categories. CTR opened three new-format stores during the quarter and is on track to open 19 new stores during 2003. Gross operating revenue was up 5.0 percent during the quarter to $1.1 billion compared to $1.06 billion last year.
The rise in revenue was principally due to an increase in product shipments to Canadian Tire stores, in addition to revenue contributions from PartSource. Earnings before income taxes and minority interest increased 11.3 percent to $54.3 million compared to $48.8 million in the third quarter of 2002. Growth in product shipments combined with lower interest costs due to improved working capital management contributed to CTR’s earnings performance. For the first nine months, CTR total retail sales were up 4.9 percent to $4.4 billion from $4.1 billion in 2002.
Comparable store sales grew 2.8 percent for the same period. CTR gross operating revenues were up 5.1 percent to $3.32 billion for the first nine months compared to $3.16 billion in 2002. CTR earnings before income taxes and minority interest increased 7.7 percent to $147.7 million compared to $137.2 million in 2002 and, excluding non- operating gains and losses, increased 8.7 percent to $143.5 million for the first nine months of the year compared to $132.0 million in 2002. PartSource again delivered a strong quarter with total retail sales and comparable store sales above the targeted range. PartSource accelerated its store openings during the quarter with five new stores in the Ontario market, bringing the total store count to 38.
Canadian Tire Petroleum pumped 7.1 percent more gas in the third quarter compared to last year. Total litres pumped were 360.9 million compared to 337.0 million in 2002. Convenience sales grew 12.7 percent compared to last year. Petroleum’s continued focus on increasing its car wash business resulted in a 52.5 percent sales increase compared to the same period last year.
Mark’s Work Wearhouse total retail sales in the third quarter increased 3.4 percent to $103.9 million compared to $100.6 million in 2002. Comparable store sales were up 2.1 percent in the third quarter compared to last year. Mark’s again experienced double digit sales increases at corporate stores in health care apparel, business-to-business work wear and ladies casual wear. Mark’s continued to accelerate the opening of stores with nine new stores in the third quarter, bringing to 17 the number of stores opened in 2003. In addition to new store openings, Mark’s made significant progress in its strategy of converting Work World stores to the Mark’s Work Wearhouse banner, converting 30 stores during the quarter bringing the year-to-date total to 70 stores. Including the stores converted in 2002, Mark’s has now converted 79 stores.
Canadian Tire Financial Services’ (CTFS) record of growth continued in the quarter with significant expansion of the Options MasterCard portfolio during the quarter. Net credit charge receivables were up 27.5 percent to $2.15 billion compared to $1.69 billion at the end of the third quarter of 2002. Canadian Tire Bank, a wholly-owned subsidiary of CTFS, completed its first full quarter of operations. During the quarter, Canadian Tire Bank converted 247,000 retail card accounts to Options MasterCard(R) accounts, bringing the year-to-date total of conversions to more than 293,000. An additional 151,000 new accounts were secured and Financial Services now has more than 3.1 million Options MasterCard accounts, an increase of 49.0 percent year-over-year. Earnings before income taxes for the third quarter were up 3.8 percent to $26.6 million compared to $25.7 million last year.
Canadian Tire made significant progress during the quarter on its Strategic Plan imperative of increasing financial flexibility. The company ended the third quarter with no short-term debt and a reduction of long-term debt to $1.20 billion compared to $1.33 billion at the end of 2002. The company expects to use existing cash reserves to pay rather than refinance $75 million of long-term debt due before the end of the fiscal year. Canadian Tire’s working capital requirements have also improved significantly, decreasing $177.8 million on a net basis since the third quarter of 2002. Targeted capital expenditures for 2003 have been reduced to $320 million from the original budget of $380 million, reflecting deferral of some site development work for new stores and gas bars, prioritization of investments on high-return projects as well as timing of investments in the CustomerLink supply chain program.