Canadian Tire Corporation (CTC) released its Q3 results today, revealing a 1.6% dip in consolidated comparable sales, particularly in Ontario and British Columbia. Despite this downturn, the company reported an increase in Retail Gross margin rate, attributed to a higher CTR product margin offsetting promotional intensity at other banners.
CTC also announced plans to buy back $200 million of its Class A Non-Voting Shares in 2024, alongside an increased annualized dividend. The company's capital allocation plans also include operating capital expenditures of $650-$700 million for 2023 and $550-$600 million for 2024.
CEO Greg Hicks expressed confidence in the company's resilience amidst softening consumer demand and reaffirmed commitment to the Better Connected strategy. He highlighted the business's ability to deliver value to customers and maintain resource efficiency in a challenging economic environment.
Sales trends varied across sectors, with essential category sales rising by 4%, led by Automotive. SportChek sales decreased by 7.4%, while Mark's comparable sales were up by 0.2%, bolstered by ladies casualwear and offset by declines in industrial and men's casualwear. Owned Brands penetration increased to 36.2%, driven by CTR.
Despite stable revenue, diluted EPS fell by 11.4% due to higher SG&A and net finance costs, lower Retail and Financial Services income before taxes, higher net impairment losses, the Scotiabank transaction that led to a $328 million charge, the A.J. Billes distribution center fire, and a $131 million insurance recovery.
The Financial Services sector saw a revenue growth of 9%. The financial services and retail segments reported revenue growth and gross margin increases despite higher net impairment losses and funding costs.
Normalized diluted EPS stood at $2.96, however, the Diluted EPS was reported at $(1.19). The company's annualized dividend was increased to $7.00 per share. Significant impacts from the Scotiabank transaction and the A.J. Billes distribution center fire were noted on the diluted EPS.
InvestingPro Insights
In light of the recent Q3 results released by Canadian Tire Corporation (CTC), we've gleaned some interesting insights from InvestingPro. Firstly, it's worth noting that management has been aggressively buying back shares (InvestingPro Tip 0), which aligns with CTC's announcement to buy back $200 million of its Class A Non-Voting Shares in 2024. This action could indicate the management's confidence in the future performance of the company.
Secondly, CTC has a history of raising its dividend for 13 consecutive years (InvestingPro Tip 1), and this trend continues with the increased annualized dividend announced in the Q3 results. This makes CTC a potentially attractive option for income-focused investors.
Regarding the financial health of the company, despite a declining trend in earnings per share (InvestingPro Tip 2), the company's liquid assets exceed short term obligations (InvestingPro Tip 7). This suggests that CTC is in a strong liquidity position to meet its immediate financial commitments.
InvestingPro's real-time data reveals that 4 analysts have revised their earnings downwards for the upcoming period (InvestingPro Tip 3). This, coupled with the fact that the revenue growth has been slowing down recently (InvestingPro Tip 4), might suggest a cautious outlook for CTC in the near term.
While the insights provided here offer a snapshot, InvestingPro provides numerous additional tips for a comprehensive understanding of the company's financial health and potential investment opportunities.
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