Canadian Tire Reports Strong 2001, Expects Momentum to Continue in 2002

Canadian Tire has reported that its 2001 earnings were up nearly 20 percent–with its PartSouce chain experiencing double digit growth–even in light of tough economic conditions.
The company reported that unaudited 2001 consolidated net earnings were up 19.3 percent to $176.7 million, or $2.25 per share, compared to $148.0 million or $1.89 per share recorded in 2000.
Key moves during the included the opening of 37 new-format stores, including 9 incremental stores, for a total of 270 new-format stores opened since this program began in 1994, bringing Canadian Tire’s total store count to 450. Also, the company completed the integration of the Auto Village/Drivers banners under the PartSource format, bringing the total to 30 PartSource stores opened across Canada. The company repoorted that PartSource achieved double-digit growth in comparable store sales in 2001.
Consolidated net earnings for the fourth quarter were up 28.8 percent, to $41.0 million or $0.53 per share compared to $31.9 million or $0.41 per share a year earlier. Retail sales in 2001 increased 6.9 percent and comparable store sales increased 2.2 percent. All figures in Canadian dollars.
“During 2001 it became clear the retail sector would be impacted by economic uncertainty. Canadian Tire’s ability to increase sales by 6.9 percent in this environment demonstrated the strength of our position in the marketplace and the value we provide to our customers,” said Wayne C. Sales, president and CEO, Canadian Tire. "While we are pleased with our financial performance, we are very excited with our opportunity to continue to accelerate our growth in earnings even further,” added Sales. “While our 19.3 percent earnings per share growth benefited from certain one-time gains and year-over-year reductions in specific expenses, our earnings excluding these items exceeded the upper end of our previously released forecast. These results were delivered by a team totally focused on our operations, adjusting our plans and strategies to drive top-line growth, reduce costs and strengthen our balance sheet, ultimately increasing shareholder value,” added Sales.
Several factors enhanced the Corporation’s earnings before tax in 2001, including: $15.4 million from the sale of credit charge receivables; $8.0 million from the sale of Hamilton Discount Corporation, Limited (HDCL); and $11.8 million from the disposition of redundant real estate properties. Both the proceeds from the sale of redundant real estate properties and gains from the sale of credit charge receivables are expected to provide recurring earnings contributions during the outlook period of 2002-2005.
These positive contributions to earnings before tax were partially offset by several factors, including: $10.5 million in net expenses in www.canadiantire.ca, which is targeted to break even on an operating basis in 2002; $3.8 million invested to accelerate conversion of Canadian Tire retail cards to Options Mastercard accounts; $6.2 million in expenses for CustomerLink, Canadian Tire’s supply chain initiative to develop and deploy multi-channel capability in its Distribution Centres in Brampton and Calgary; and an estimated $3.5 million in lost earnings contributions due to the sale of HDCL early in 2001.
The Corporation also benefited from reduced effective tax rates due to working capital initiatives and lower rates associated with the mix of income. Consolidated gross operating revenue increased 3.2 percent to $5.4 billion from the $5.2 billion reported in 2000. Fourth quarter consolidated gross operating revenue was $1.4 billion, up 4.2 percent from the fourth quarter in 2000. Canadian Tire Retail gross operating revenue was up 4.0 percent in 2001, while Canadian Tire Financial Services gross operating revenue rose 6.9 percent. Canadian Tire Petroleum’s gross operating revenue declined 1.8 percent. “We continued to make progress during the year in improving Canadian Tire’s financial flexibility and strengthening our balance sheet,” noted Sales. “Cash generated from operations reached $362 million. In addition, our Treasury group undertook a series of successful financing activities that were well received by the capital markets. We closed the year with a cash position of $579 million.”
Total capital expenditures in 2001 were $358 million, down $70 million from the original plan. Canadian Tire’s capital expenditure plan for 2002 is approximately $300 million, a further reduction of about $60 million from the previous year. During the past several years Canadian Tire has invested in growth and in required infrastructure such as supply chain capacity and capability. Starting in 2002, a larger percentage of our capital investments will be deployed to areas of profitable growth as infrastructure investments are completed.
During the year, Canadian Tire made significant progress in a number of key areas, including:
– the development and implementation of the Corporation’s strategic agenda for the period of 2002 through 2005;
– driving top-line growth and performance of our core business. Retail sales increased 6.9 percent to reach a record $5.3 billion;
– making significant progress in its Customer Values initiative to improve customer service, including the roll-out of Canadian Tire’s proprietary eLearning online training. This system is focused on customer service and product knowledge training for front-line store team members. Significant improvement was also made to store in-stock position with record service levels for shipments to stores from the supply chain;
– implementing the Next Generation merchandising concept in 15 existing new-format stores opened prior to 2001; – commissioning the 500,000 square foot distribution centre in Calgary, Alberta, which is now shipping to 140 Western Canadian stores as part of a broader supply chain improvement initiative;
– achieving status as one of Canada’s most-visited retail eCommerce sites, reaching 2 million visitors in the month of October: CTR’s online operations are targeted to break-even on an operational basis in 2002;
– converting 450,000 retail cards over to Canadian Tire’s Options MasterCard, now representing more than two-thirds of Financial Services’ outstanding receivables, bringing outstanding receivables in Financial Services to an all-time high of $1.4 billion;
– continuing to outperform the gasoline industry in sales volume per site, with record sales volume and continued marketshare gains in 2001.