Canadian Tire (CTC) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw consolidated comparable sales decline 4.6% year-over-year due to cautious consumer spending, especially in discretionary categories, and adverse weather outside Atlantic Canada, but disciplined margin and OpEx management led to improved profitability and EPS of CAD 3.56, up from CAD 3.08 year-over-year.

• Loyalty sales outperformed non-loyalty, with record penetration and strong engagement driven by promotions, partnerships, and 75,000 new members; linked Petro Points and Triangle Rewards members spent 9% more year-over-year.

• Digital investments and operational improvements, including AI shopping assistants, pickup lockers, and technology integration, enhanced customer experience and efficiency.

• In-store net promoter scores improved at SportChek and Mark's, reflecting positive customer sentiment from store investments and brand availability.

• Inventory was actively managed down 15% at the corporate level, with dealer inventory down 6%, positioning the company well for Q3 and Q4.

Financial highlights

• Q2 2024 consolidated revenue was $4,132.7M, down 2.9% year-over-year; retail sales were $5,000.2M, down 4.1%; retail revenue (excluding petroleum) declined 4.3%.

• EPS rose to CAD 3.56, up CAD 0.48 year-over-year, including a CAD 0.17 one-time gain from a property sale; net income rose 76.0% to $223.5M.

• Retail gross margin rate (excluding petroleum) increased 36 bps to 36%, aided by lower freight costs and margin management.

• SG&A expenses were down 6% on a normalized basis, with retail SG&A down CAD 60 million (7%) year-over-year.

• Financial services IBT was CAD 89 million, flat year-over-year; gross average receivables up 3.2%.

Outlook and guidance

• Q3 sales decline at CTR slowed to -2% in July, with optimism for the balance of the year due to rate cuts, better weather, and easier comps, but management remains cautious due to ongoing consumer softness, mortgage renewals, and employment trends.

• Positioned for the second half with the right assortment and inventory, leveraging investments to strengthen customer connections both online and in stores.

• Capital allocation update for 2025 expected with Q3 results; share buybacks remain paused pending CTFS strategic review.