Canadian Tire Reports Second Quarter Earnings Up 8.9%, Same Store Sales Up 7%

Canadian Tire Corporation, Limited reports its consolidated net earnings of $53.4 million, compared to the $49.0 million recorded in 2000, are an 8.9% increase.
Earnings before interest expense, income tax, depreciation and amortization (EBITDA) also rose 8.9% to $142.8 million from $131.1 million in the second quarter last year. Earnings per share for the quarter were $0.67, up 8.5% from the $0.62 per share recorded in 2000.
"I am pleased to report that Canadian Tire Retail experienced exceptionally strong comparable store sales in a very challenging economic environment. During the quarter we also achieved double digit growth in total retail sales. These results reflect not only very strong seasonal sales, but also healthy increases across all of our key merchandising categories.
"In particular, we experienced very strong sales of non-promotional merchandise. Our results also reflect significant achievements in our focus on improving productivity and implementing strategic initiatives," said Wayne Sales, president and chief executive officer. "All of our businesses contributed to our earnings performance during the quarter, including Retail, Financial Services and Petroleum," Sales added.
Canadian Tire Associate Dealers reported strong second quarter retail sales up 12.9%.
Comparable store sales increased by 7.0%, the strongest quarterly increase in over seven years. Major factors contributing to improvements in consolidated pre-tax earnings included a 12.0% increase in pre-tax earnings in Financial Services reflecting cost reductions and productivity improvements, and a significant increase in pre-tax earnings in Petroleum.
Increased shipments and revenues in Canadian Tire Retail helped offset the significant investments in growth initiatives.
Increased expenses associated with these initiatives reduced pre-tax earnings during the quarter by $4 million for the continued development of CTR’s e-Commerce offering and $2 million for PartSource. The net result was a 1.9% pre-tax earnings increase in CTR.
Canadian Tire finished the first six months with consolidated net earnings of $82.1 million, up 12.2% from a year earlier. Earnings per share were $1.04, an 11.7% increase over the first half of 2000. First half results reflect increased earnings in all businesses as well as the $8 million first quarter pre-tax gain on the sale of the third-party credit card receivables business in Financial Services. Consolidated gross operating revenue for the second quarter was $1,499.3 million, up 7.2% from the $1,398.2 million recorded in 2000. Major factors included strong retail sales contributing to a 7.3% increase in shipments at Canadian Tire Retail, complemented by a 10.4% increase in gross operating revenue in Petroleum. Revenues in Financial Services for the quarter were down 1.8%, reflecting reduced revenue contributions due to the sale in the first quarter of the third-party receivables business. Consolidated gross operating revenue for the first half of 2001 was $2,634.6 million, an increase of 5.3% over the $2,502.5 million recorded in the same period last year.

OPERATIONAL HIGHLIGHTS
– Construction of the new Calgary Distribution Centre building has been substantially completed and handed off to Canadian Tire and GENCO, the third-party operator of this facility. Integration and system testing is underway and the Distribution facility will be fully operational commencing in the first quarter of 2002. This represents a key milestone in the development of the Corporation’s more cost-effective regional replenishment and multi-channel distribution system.
– Vendor supply chain service levels to the Corporation reached a record high during the second quarter. Service levels from the distribution centres to Canadian Tire Associate Stores were up 103 basis points over the same period last year.
– As part of the Customer Values initiative, web-based learning technology has been introduced in more than 90% of Canadian Tire stores, with more than 100 learning modules in production delivering product knowledge and customer service training for store staff.
– Consumer traffic to www.canadiantire.ca, including unique visitors, continues to be very strong and Canadian Tire’s web store is one of the top ten e-Commerce sites in Canada.
– 12 new-format stores were opened during the quarter, bringing to 249 the total number of new-format stores that have been opened since the rebuilding program was initiated in 1994.
– PartSource completed the conversion and integration of Auto Village/Drivers stores to the PartSource format and banner.
– Financial Services made significant progress in its continued expansion of the Options MasterCard portfolio and average balances and ancillary credit products benefited during the quarter as a result.