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Canadian Tire Corporation
Investor Presentation
November 2016
This document contains forward-looking information that reflects management’s current expectations related to matters such as future financial performance and operating results of the Company. Forward-looking statements are provided for the purposes of providing information about Management’s current expectations and plans and allowing investors and others to get a better understanding of the Company’s financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.
All statements other than statements of historical facts included in this document may constitute forward-looking statements, including but not limited to, statements concerning Management’s current expectations relating to possible or assumed future prospects and results, the Company’s strategic goals and priorities, its actions and the results of those actions and the economic and business outlook for the Company. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “believe”, “estimate”, “plan”, “can”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “aspire”, “foresee”, “continue”, “ongoing” or the negative of these terms or variations of them or similar terminology. Forward-looking statements are based on the reasonable assumptions, estimates, analyses, beliefs and opinions of Management, made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that Management believes to be relevant and reasonable at the date that such statements are made
By their very nature, forward-looking statements require Management to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that the Company’s assumptions, estimates, analyses, beliefs and opinions may not be correct and that the Company’s expectations and plans will not be achieved. Examples of Management’s beliefs, which may prove to be incorrect, include, but are not limited to, beliefs about the effectiveness of certain performance measures, beliefs about current and future competitive conditions and the Company’s position in the competitive environment, beliefs about the Company’s core capabilities and beliefs regarding the availability of sufficient liquidity to meet the Company’s contractual obligations. Although the Company believes that the forward-looking statements in this document are based on information, assumptions and beliefs that are current, reasonable and complete, these statements are necessarily subject to a number of factors that could cause actual results to differ materially from Management’s expectations and plans as set forth in such forward-looking statements. Some of the factors, many of which are beyond the Company’s control and the effects of which can be difficult to predict, include: (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of the Company to attract and retain high quality employees for all of its businesses, Dealers, Canadian Tire Petroleum retailers and Mark’s and FGL Sports franchisees, as well as the Company’s financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at its stores or acquire its financial products and services; (d) the Company’s margins and sales and those of its competitors; (e) the changing consumer preferences toward eCommerce, online retailing and the introduction of new technologies; (f) risks and uncertainties relating to information management, technology, cyber threats, property management and development, environmental liabilities, supply chain management, product safety, changes in law, regulation, competition, seasonality, weather patterns, commodity prices and business disruption, the Company’s relationships with suppliers, manufacturers, partners and other third parties, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by the Company and the cost of store network expansion and retrofits; (g) the Company’s capital structure, funding strategy, cost management programs and share price; and (h) the Company’s ability to obtain all necessary regulatory approvals. Management cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect the Company’s results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the "Risk Factors" section of our Annual Information Form for fiscal 2015 and our 2015 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.
Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made, have on the Company’s business. For example, they do not include the effect of any dispositions, acquisitions, asset write downs or other charges announced or occurring after such statements are made.
The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. The Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, unless required by applicable securities laws.
Forward looking information
2
$606.1
$429.6
$238.1
$1,612.5 $2,822.7
-0.1%
Retail Revenue by Banner4
4.3%
6.2%
3.5%
Q3 SAME-STORE
SALES
CANADIAN TIRE
FGL SPORTS
MARK’S
Recent Quarterly Results
Q3 RETAIL
SALES GROWTH
CANADIAN TIRE 4.9%
FGL SPORTS 8.5%
MARK’S 4.4%
Q3 DILUTED
EPS
$2.44 -6.7%1
Q3 RETAIL ROIC2,3
8.15%
Q3 FINANCIAL
SERVICES RETURN
ON RECEIVABLES2,3
7.40%
1,2
1 - Q3 2015 included a $0.33 per share gain from the sale of surplus property. Excluding this gain, diluted EPS increased 6.6 percent, year-over-year. 2 – Figures are calculated on
a rolling 12-month basis. 3 – Refer to Section 9.3.1 of the Q3 2016 MD&A for additional information on the Company’s key operating performance measures. 4 – Inter-segment
revenue within the retail banners of $63.6 million in the third quarter ( 2015 - $63.6million) has been eliminated at the Retail segment level. Revenue reported for Canadian
Tire, FGL Sports, Mark’s and Petroleum includes inter-segment revenue.
Q3 Operational Highlights
Aligned senior talent to strengthen our products and brands with the creation of new
Consumer Brands Division.
Focused on the lifecycle of our customer across all of our businesses and how, as
our businesses are all linked as one company, they form a marketplace.
“I am extremely encouraged by the strong performance in each of our core retail
banners this quarter. Our unique assortments and product development capabilities
are allowing us to bring our customers the products they need for the jobs and joys of
a lifetime in Canada”
-Stephen Wetmore, President & CEO, CTC
Implemented first phase of distributed order management system at Sport Chek,
allowing for a network view of real-time inventory and capabilities to efficiently
manage shipments.
Corporate Overview
Family of businesses Bringing our
customers the products they need for the jobs and joys of a lifetime in Canada.
Our strengths
Strong iconic brands that Canadians love
Market leadership and credibility in heritage categories
Financial flexibility / REIT / Scotiabank transaction
Strong balance sheet / credit rating
~1,700 bricks and mortar locations across Canada
Shared real estate, marketing, supply chain, support services
Our growth plan
Establish CTC as a world class leader in innovative uses of digital for
retailing
Growth and integration of in-store digital and e-commerce
Leading customer loyalty and reward programs
Engaging digital marketing, use of sponsorships and powerful
content
Continue to invest to strengthen our core businesses
Culture of productivity with a performance management focus
How we win
Exceeding customer expectations with best omni-channel retail
platforms
Conduit between customers and the best consumer brands in
the world
Building our brands and exclusivity
Family of CTC businesses – strong coalition
Sports and community partnerships
Financial highlights (2015) Growth (YoY)
Revenue* $12.3B -1.5%
Net Income (attributable to
shareholders of CTC)
$659.4M +9.2%
Adjusted Diluted Earnings Per
Share** $8.61 +8.4%
*Results for the full year 2015 (52 weeks ended January 2, 2016) are compared against results for the full year 2014 (53
weeks ended January 3, 2015)
**Refer to Section 11.3.2 of the Q4 and full-year 2015 MD&A for additional information on the Company’s Non-GAAP
financial measures
Market Leadership
Leadership position across heritage/core business categories:
Automotive, Living, Fixing & Playing
#1 in Men’s Industrial & Casual Apparel
1 in 5 Canadians hold a Canadian Tire credit card
5
Our Retail Network Across Canada
13
6
8
12
0
2
2
2
0
0
100
160
45
59
0
19
9
13
15
0
22
11
17
9
3
15
11
13
6
6
202
120
143
166
61
56
53
65
19
15
16
13
15
6
6
52
43
59
4
0
1
0
1
0
0
499
429
382
296
91
NEW
BRUNSWICK
NOVA SCOTIA
MANITOBA
ONTARIO
SASKATCHEWAN BRITISH
COLUMBIA
ALBERTA
NEWFOUNDLAND
AND LABRADOR
PRINCE EDWARD
ISLAND
QUEBEC
STORE TOTAL NORTHWEST
TERRITORIES
1
1
1
0
0
YUKON
4 CTR distribution centres
1 Mark’s distribution centres
1 Joint Mark’s and FGL Sports DC
3 Transload facilities
3 Auto parts distribution centres
3 FGL sports distribution centres
DISTRIBUTION FACILITIES
*Reflects store network as of the end of Q3 2016 6
Our Core Business is Retail
Six key business
categories
2015 REVENUE = C$12.3B C$8.1B C$2.0B C$1.1B C$1.1B
‣ Gas
‣ Auto Parts
‣ Tires & Power
Sports
‣ Auto Service
‣ Car Care &
Accessories
‣ Roadside
Assistance
‣ Home Cleaning
‣ Home Décor
‣ Home Org
‣ Kitchen
‣ Backyard Living
& Fun
‣ Gardening
‣ Outdoor Tools
‣ Seasonal
‣ Home Services
‣ Home Repair
‣ Paint
‣ Tools
‣ Hockey
‣ Golf
‣ Cycling
‣ Fitness
‣ Camping
‣ Hunting
‣ Fishing
‣ Industrial Wear
‣ Men’s Wear
‣ Women’s Wear
‣ Athletic Apparel
‣ Footwear
‣ Accessories
‣ Credit Cards
‣ Retail Deposits
‣ In-store
Warranties
‣ Insurance
‣ Deferred &
Installment
Payments
7
Financial highlights (2015) Banners
Revenue $6.4B
Sales growth * 2.4%
Same store sales growth ** 3.2%
Canadian Tire store count 498
*Results for the full year 2015 (52 weeks ended January 2, 2016) are compared against results for the full year
2014 (53 weeks ended January 3, 2015)
**Reported on a 52 week vs. 52 wk. period
Canadian Tire Retail
Our game plan Our strengths
One of Canada’s most trusted and iconic brands
Most knowledgeable retailer about Life in Canada
Market leader across core categories
Canada’s most read flyer – 12M / week
Local Dealer community presence and trust
Superior real estate locations and national store network
Our growth plan
Strengthen Canadian Tire brand and execute generational shift in
target customer
Revitalize and localize assortments, develop extended
assortments and grow new product pipeline
Build out private label and exclusive brands
Test innovative store concepts (Showroom and Showcase stores)
and refresh network
Analyze customer shopping data from new Canadian Tire Money
loyalty program
Create personalized customer connections and experiences
Expand e-commerce, supply chain and digital capabilities
How we win
Entrepreneurial Associate Dealer model
Offer the best, most relevant assortment and exclusive products
for Life in Canada
Tailored customer connections in-store, online and mobile
Sports partnerships and community engagement
How we fit in the CTC Family
Mature, healthy core business, cash generator
Flagship business, central to Corporate brand
Credibility in core categories
8
FGL Sports
Our game plan
Our strengths
Canada’s largest sporting goods retailer
Close relationships with elite vendor brands
Merchandising and store operations
Leader in digital marketing and concept/flagship stores
Best sports partnerships
Our growth plan
Network expansion: 2 million square feet of new retail space
from 2012 - 2017
Increase flagship stores and launch hero stores
Build unparalleled emotional connection with customers
Digitization of retail including stores, retail assortment,
promotions and brand
Hyper personalized customer experiences across digital and
physical channels
How we win
Conduit for all things sport and activity in Canadian communities
Premier real estate locations
Innovative and exciting in-store experience
Community engagement and sports partnerships activation
Seamless omni experience online, in-store and mobile
Financial highlights (2015) Banners
Revenue $2.0B
Sales growth* 2.7%
Same store sales growth ** 4.4%
Sport Chek same store sales
growth** 6.3%
Store Count 433
*Results for the full year 2015 (52 weeks ended January 2, 2016) are compared against results for the full year
2014 (53 weeks ended January 3, 2015)
**Reported on a 52 week vs. 52 week period
)
How we fit in the CTC Family
Growth driver
Engages younger customer throughout lifecycle
Leader in digital innovation
9
Mark’s
Our game plan
Our strengths
Industrial apparel, footwear and accessories
Product development, innovation and quality
Wholesale division – direct sourcing
Business to business (B2B)
Strong exclusive brands
National store network / ship from store to customer model
Our growth plan
Turbo-charging men’s casual apparel & footwear
Win with 30-50 year old Canadians
Re-invigorate Quebec network
Invest in targeted marketing to new customer demographic
Expanded and bi-lingual e-commerce capabilities – retail and
B2B
How we win
Building brand awareness and affinity
Utilize industrial credibility to grow in adjacent categories
Complement exclusive brands with select national brands
In-store digital improvement and e-commerce expansion
Leverage enhanced sourcing capabilities
Financial highlights (2015) Banners
Revenue $1.1B
Sales growth* -2.3%
Same store sales growth** -0.5%
Store count 380
*Results for the full year 2015 (52 weeks ended January 2, 2016) are compared against results for the
full year 2014 (53 weeks ended January 3, 2015)
**Reported on a 52 week vs. 52 week period
How we fit in the CTC Family
Reactivated growth driver
Strong customer alignment with Canadian Tire
Synergies with FGL Sports in sourcing,
merchandising, supply chain and real estate
10
CT REIT
Our game plan
Our strengths
Irreplaceable Canadian real estate portfolio of 287 properties
totaling approximately 21.5 million square feet of GLA
Durable portfolio features
Investment grade anchor tenant - CTC
Exceptional cash flow predictability and reliable monthly
distributions
Well-planned solid long-term growth
Our growth plan
Acquisition and intensification opportunities
Canadian Tire Corporation property pipeline
Contractual annual rent escalations
How we win
Highly diversified retail portfolio
Flexible design, configuration and dimension provides
capability of supporting a multitude of retail platforms
Actively pursuing third-party retail acquisition opportunities
CT REIT is structured for stability even in potentially volatile
markets
Financial highlights (2015) Growth (YoY)
Property revenue $378.2M +9.7%
Funds from operations $194.7M +10.1%
Adjusted funds from
operations $151.7M +14.1%
AFFO payout ratio 82%
How we fit in the CTC Family
CTC is a major retail tenant with strong brand recognition
Right of first offer on all CTC properties provides
referred access to captive pipeline
11
Canadian Tire Bank
Our game plan
Our strengths
$4.8B in receivables, 1.8M active accounts including over 500K of
Canadian Tire’s most loyal customers
Successful management of higher credit risk through the economic
cycle
Extensive customer data and strong analytics capability
Award winning customer service
Highly effective customer acquisition through retail channels
Our growth plan
Growing gross average accounts receivable (GAAR)
Increasing acquisition of loyal Canadian Tire customers and
generating higher profitability from these accounts
Increasing share of tender across all CTC banners
Strengthening digital/mobile capabilities
How we win
Reinvigorating the value proposition of credit cards
Tighter integration with retail banners and Dealers
Scotiabank partnership creating growth through co-marketing
opportunities
Financial highlights (2015)
Revenue $1.1B +2.4%
GAAR $4.8B +3.3%
Average number of accounts
with a balance (thousands) 1,840 +0.2%
Return on receivables 7.73%
How we fit in the CTC Family
Earnings generator
Supports core retail business
12
11,427 11,786
12,463 12,280
9,500
10,500
11,500
12,500
2012 2013 2014 2015
Consolidated Revenue (C$ in millions)1
Delivering Solid Results
1,138 1,236 1,376 1,519
0
1,000
2,000
2012 2013 2014 2015
Consolidated EBITDA (C$ in millions)1
6.45 7.02
7.94 8.61
$5
$7
$9
2012 2013 2014 2015
Adjusted Diluted EPS attributable to owners of CTC ($)1,2
27.3%
28.2%
28.9%
30.0%
25.0%
26.0%
27.0%
28.0%
29.0%
30.0%
31.0%
2012 2013 2014 2015
Retail gross margin (% of revenue)
6.76%
7.32% 7.36%
7.73%
6.2%6.4%6.6%6.8%7.0%7.2%7.4%7.6%7.8%8.0%
2012 2013 2014 2015
Financial Services Return on Receivables (%)
13 1 – Results for the full-year 2015 (52 weeks ended January 2, 2016) are compared against results for the full-year 2014 (53 weeks ended January 3, 2015) 2 – Refer to Section 11.3.2 and 10.3 of the Company’s Q4 and full-year 2015 and 2014 MD&A , respectively, for additional information on adjusted diluted EPS.
2016 Strategic Imperatives
14
Strengthen brands and enhance customer experiences
Transition to the new world of omni-retail where digital complements physical
Drive growth and productivity in core businesses
Create an agile and high-performing corporate culture
1
2
3
4
Balanced Capital Allocation
0.3 0.5 0.5
0.7 0.1
0.1 0.1
0.2
0.0
0.1
0.3
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2012 2013 2014 2015
CAPEX* Dividends Share Repurchase**
$0.5B
$0.7B
$1.0B
$1.3B
1 2 3 4 Invest in the
business
Repurchase shares/
grow dividend (target payout ratio 25%-30%)
Maintain investment
grade credit rating Inorganic growth
opportunities
Since 2012, Canadian Tire Corporation has
returned in excess of $1.3B to shareholders1
while investing $2.1B in its store network2, IT
and distribution capacity3
Announced intention in November 2015 to
repurchase $550M Class A Non-Voting
shares in excess of anti-dilutive repurchases
by end of 20163
Canadian Tire Corporation maintains a BBB
(high) and BBB+ rating and a stable outlook
from both DBRS and S&P, respectively.
* Excluding REIT capital. ** Buybacks in excess of anti-dilutive buybacks 1 – Dividends and share buybacks in excess of anti-dilutive buybacks
2 – Excludes REIT capital
3 – See slide 18 for Q3 2016 dividend and share buyback announcements and slides 22 and 23 for
updated 2016 and 2017 guidance
15
39%
31% $0.3B
$0.5B $0.5B
21%
$0.7B
8%
3%
5% 4%
5%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
0
100
200
300
400
500
600
700
800
900
1,000
2012 2013 2014 2015
Store Network IT Supply Chain/DC Other
For 2016, forecast operating CAPEX of $475M to $500M (additional DC capacity CAPEX in the range of $100M to $125M)
2016 includes increased spend on retail network expansion, including the costs to open 12 former Target locations, the continuation of the
FGL Sports growth strategy, and for continued investments in digital and technology initiatives.
Capital Investments
CAPITAL INVESTMENTS (2012 – 2015)1
1 –Excludes REIT capital
% of Revenue
16
Shareholder Value Creation
CT REIT Initial Public Offering
CTC retained 83.1% majority interest in CT REIT allowing CTC to retain control over its real estate
properties
Surfaced the value of CTC’s real estate
Created a stand-alone vehicle for CTC’s real estate which will support continued real estate investment
Provide CTC with increased financial flexibility to pursue new opportunities to invest in and grow the
business
Scotiabank Partnership Transaction
Scotiabank purchased 20% minority interest in Canadian Tire’s Financial Services business for $500
million
Scotiabank provided committed funding facility of $2.25 billion to backstop funding of Financial Services’
credit card receivables
Partners identifying co-marketing opportunities to improve customer loyalty and generate incremental
sales through sponsorships and new products and services
Canadian Tire and Scotiabank aligned on community-based initiatives and sports partnerships
17
Returning Value to Shareholders
Q3 2016 – authorized the repurchase of up to $550M of Class A Non-Voting shares (beyond anti-dilutive)
through the end of 2017. In Q3 2016, $110M of Class A Non-Voting shares (beyond anti-dilutive) were
repurchased, leaving $110M of Class A Non-Voting shares to be repurchased in the balance of 2016.
Q2 2016 – repurchase of $110M of Class A Non-Voting shares (beyond anti-dilutive purchases)
Q1 2016 – repurchase of $110M of Class A Non-Voting shares (beyond anti-dilutive purchases)
Q4 2015 – repurchase of $110M of Class A Non-Voting shares (beyond anti-dilutive purchases)
Q3 2015 – authorized the repurchase of up to $550M of Class A Non-Voting shares (beyond anti-dilutive)
through the end of 2016.
2013 through Q2 2015 – cumulative repurchase of $700M of Class A Non-Voting share (beyond
anti-dilutive purchases)
Share Repurchases
Dividends
18
Q3 2016 – increased annual dividend to $2.60 per share, up 13.0%
Q3 2015 – increased annual dividend to $2.30 per share, up 9.5%
Q3 2014 – increased annual dividend to $2.10 per share, up 5.0%
Q1 2014 – increased annual dividend to $2.00 per share, up 14.3%
$0.56
$0.64
$0.72
$0.82 $0.84 $0.84
$1.10
$1.20
$1.40
$1.88
$2.10
$2.30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Returning Value to Shareholders
Policy to maintain dividend payments equal to 25% to
30% of the prior year’s normalized basic net earnings
Member of S&P/TSX Canadian Dividend Aristocrats index
Annual Dividends Paid
* In Q3 2016, CTC announced an annual dividend increase of 13.0% to $2.60 per share
19
13.7% CAGR
Canadian Tire – a Strong Investment Proposition
~490 Associate Dealers in local communities across Canada
Attracting and retaining world-class talent to grow businesses
Experienced leadership in key functions across the Company
Continued focus on brand-led organization
$12.3 billion in revenue
32.0 million retail square feet
Financial Services GAAR of $4.8B 20
Extensive reach and scale of business
90% of Canadians located 15 minutes from a Canadian Tire store
National presence with ~1,700 retail and gasoline outlets
One in five Canadians hold a Canadian Tire Options MasterCard
Differentiators
Delivering strong financial results
Clearly defined growth plan with underlying financial aspirations
Strong balance sheet and multiple funding sources
Committed to balanced approach for returning capital to shareholders
Delivering strong financial results
2016 & 2017 Outlook
21
2016 Outlook Update
22
Operating expense growth aligned with revenue growth
Effective tax rate estimate: 26.5% for 2016
In 2016, operating CAPEX estimated between $475 million and $500 million due primarily to Retail
store network investment, including the cost to open 12 former Target locations in 2016, and
investment in IT and digital initiatives.
Additional CAPEX:
Approximately $100 million to $125 million associated with future distribution capacity in 2016
Third-party property acquisitions by CT REIT
Expected three year (2015-2017) average annual CAPEX between $450 million and $500 million to
support significant investments in digital technology and Retail store network growth
2017 Outlook
23
Operating expense growth aligned with revenue growth
Effective tax rate estimate: 27.0% for 2017
In 2017, operating CAPEX estimated between $400 million and $425 million due primarily to Retail
store network investment, and investment in IT and in digital technology.
Additional CAPEX:
Approximately $25 million to $50 million associated with future distribution capacity in 2017
Third-party property acquisitions by CT REIT
Operational efficiency initiatives
Expected three year (2015-2017) average annual CAPEX between $450 million and $500 million to
support significant investments in digital technology and Retail store network growth
Three Year Financial Aspirations
2015 – 20171,2
Financial Aspirations3 Details
Retail sales (POS) growth (annual aspirations)
Canadian Tire retail – 3%+
Mark’s – 5%+
FGL Sports - 9%+
Aspirations separated by banner to better reflect
different stages of maturity/growth of individual retail
banners
Based on annual square footage growth estimates
and same store sales assumptions
Diluted earnings per share (EPS) (average over three year period)
8% to 10%
Consolidated diluted EPS attributable to owners of
Canadian Tire Corporation
Return on invested capital (aspiration by end of 2017)
9%+
Long-term aspiration remains 10%+
Aspiration of 9% is more achievable by end of three
year period
Return on receivables (ROR) (annual aspiration)
6%+ Based on assumptions for rate of receivables
growth and operating expenses management
1 Established on October 9, 2014 at Canadian Tire Investor Day
2 Forward looking information – refer to slide 2 for additional information
3. Refer to Section 5.0 of the Q4 and full-year 2015 MD&A for additional information of the Company’s three year financial aspirations 24
25
For more information http://investors.canadiantire.ca [email protected] or (416) 480-8725
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