Posted by Thomas J. Ryan | November 12, 2021 | Feature, SGB Executive

Canadian Tire reported that due to the return of hockey and organized sports, same-store sales of its SportChek division increased by 11.2% in the third quarter and 7% compared to 2019.

Executive vice president and chief financial officer Gregory Craig (Gregory Craig) told analysts on the conference call that sneakers, sportswear and hockey are driving revenue growth. He said: "We are also seeing a strong recovery in the back-to-school category, which increased by 20% this quarter."

Based on the 28.6% growth in the second quarter and 18.7% growth in the first quarter of 2021, SportChek's third quarter salary growth was 11.2%. After overall sales fell by 24.9% in the second quarter of 2020, sales in the fourth quarter of 2020 fell by 3% and the third quarter fell by 1.4%.

In the SportChek division, total sales including franchise contributions were C$560.6 million, compared with C$533 million in the same period last year, an increase of 5.2%. This section includes SportChek, Hockey Experts, Pro Hockey Life, Sports Expert, National Sports, Intersport and Atmosphere.

Helly Hansen, acquired by Canadian Tire in 2018, achieved revenue of 157.6 million Canadian dollars in the same period, an increase of 1.5%, which is a 3% increase at a constant exchange rate. Craig stated that Helly Hansen is supported by strong growth in continental Europe and the United States. From the category point of view, Helly Hansen's workwear and direct-to-consumer increased the most, increasing by 21% and 17% respectively.

The company-wide retail division revenue was 3.61 billion Canadian dollars, down 2.1%. Due to the decline in shipments from Canadian tire dealers, excluding oil, revenue in the retail sector fell by 6.2%. Compared with 2019, retail revenue increased by 9.4%, excluding oil, an increase of 11.1%. Consolidated comparable sales are up 3.3% from 2020 and 21% from 2019

Its flagship chain Canadian Tire’s retail sales during the quarter were unchanged from last year, down 0.6%, and comparable sales increased 1.4%. Compared with 2019, Canadian tire revenue increased by 14.1%.

At its workwear chain Mark's, comparable sales increased by 7.9% over last year, with strong growth in men's casual wear, footwear and industrial apparel.

Diluted earnings per share for the quarter was C$3.97, compared with the same period last year, a decrease of C$0.87 per share, or 18%; Standardized diluted earnings per share for the quarter was C$4.20, a decrease of C$0.73 or 14.8% per share

In the conference call, President and CEO Greg Hicks said that after the substantial increase in revenue in the first and second quarters, the decline in dealer shipments led to a decline in revenue, which is expected middle. E-commerce penetration rate dropped by 6.5% this quarter, and visits to physical stores increased, but doubled from 2019 levels.

Gross profit margin increased by 155 basis points. Retail gross profit margin, excluding oil, increased by 155 basis points from the previous year, thanks to the growth of the retail industry. Despite the unfavorable freight costs this quarter, the rate improvement of Canadian tire chains is attributed to the favorable pricing mix. The profit margins of Mark's and SportChek benefited from higher sales contributions from physical channels and lower promotions this quarter.

The normalized comprehensive operating expenses as a percentage of revenue was 24.6%, a decrease of 367 basis points from 2020. The decrease in revenue this quarter and the increase in operating expenses year-on-year resulted in operating expense ratios.

The increase in operating expenses reflects the loss in market value of equity hedging related to stock-based compensation, which was due to the decline in Candian Tire's stock price during the quarter and the increase in marketing and supply chain costs.

Hicks elaborated on the company's progress in customer engagement and supply chain capabilities.

The increase in customer engagement stems from the success of its Triangle rewards program, which now has 10.7 million active members and 1.7 million new members so far this year. These gains make the company expected to exceed 1.8 million members in 2020. Hicks said: "Looking at our 2020 and 2021 groups, it is clear that our Triangle program is attracting younger and more digitally engaged customers."

Supply chain mitigation In terms of supply chain, Hicks pointed out that compared with last year's supply chain challenges related to manufacturing supply, the challenges this quarter are mainly related to shipping capabilities.

He outlined how Canadian tires' supply chain capabilities enable the company to meet challenges, including rising commodity prices, factory shutdowns, port closures and container shortages.

"First of all, we are the largest general merchandise and clothing retailer in the United States. Although we are very concerned about inventory turnover, the fact that we are neither a grocery store nor a fast fashion retailer means that we can be very flexible during such times. Holding inventory quarterly reduces the risk of aging."

He said that the non-perishable nature of its products provides flexibility in terms of delivery time and commercial terms, and as an owner with substantial distribution and storage capabilities through its network of stores, company-owned real estate and REITs, Canadian Tire “can easily To hold surplus Canadian inventories."

In addition, Hicks stated that more than one-third of its revenue comes from its "private label" or private label, and direct contact with the NOMA Christmas website, Mastercraft tools and Denver Hayes clothing and other product manufacturers "means that we are controlling When and where the goods were produced."

Hicks said: "We also have a certain understanding of factory transportation, and clearly understand which input shortages may require a longer delivery period, which cost inflation may lead to higher product costs, or in long-term shortages or inflation. Under the circumstances, the product is redesigned. As one of the largest distributors of national brand products such as Nespresso and Nike, we are very confident that among Canadian retailers, we will gain a due share of products that are in high demand this holiday season. "

Regarding inflationary pressures, he said that Canadian tires have been able to offset most of the unfavorable factors this quarter. He said: "By using data and analytical capabilities related to sales promotion and price management, we have achieved an expansion of gross profit margin."

He specifically mentioned the ability of SportChek and Mark to maintain profitability under cost pressures. Hicks said: "The merchant teams in these two businesses are focused on increasing sales at regular prices, and we are seeing tremendous progress towards this goal. Looking ahead, we will continue to use the multiple levers we can use to Reduce gross margin and cost pressures, although we recognize that these pressures are not trivial."

In terms of capital allocation plan, Canadian Tire announced that it will increase its annual dividend by 10.6%, which is its 12th consecutive increase in dividends. After the company suspended its stock repurchase program during the pandemic, it also restarted its stock repurchase program and promised to repurchase up to 400 million Canadian dollars in stock by the end of 2022.

Looking ahead, Hicks said that this quarter so far, it will continue to see "healthy demand signals" in its business. Hicks said: "We will continue to prioritize our supply chain and maximize the value of triangular and digital investments."

Designed by Elegant Themes | Powered by WordPress