Canadian Tire Corporation - Investor Presentation April 2015
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Canadian Tire Corporation
Investor Presentation
April 2015
Forward looking information 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 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", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" 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, and 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 for a variety of reasons. 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 agents and Mark's Work Wearhouse 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 e-commerce, online retailing and the introduction of new technologies; (f) risks and uncertainties relating to information management, technology, property management and development, supply chain, product safety, changes in law, regulation, competition, seasonality, weather patterns, commodity price 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; and (g) the Company’s capital structure, funding strategy, cost management programs and share price. 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 2013 and our 2013 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.
Table of Contents
Investor Day Highlights………………………………………………………………….4
Creating Value for Shareholders………………………………………………….....5-6
Corporate Overview……………………………………………………………………..7
Financial Aspirations 2010 – 2014…………………………………………………….8
2015 Strategic Objectives….……………………………………………………….9-10
Our Retail Network Across Canada………………………………………………….11
Our Core Business is Retail…………………………………………………………..12
Canadian Tire.………………………………………………………………………..13
FGL Sports….………………………………………………………………………...14
Mark’s……….………………………………………………………………………...15
CT REIT……………………………………………………………………………….16
Canadian Tire Financial Services.………………………………..….….…………17
Delivering Solid Results.……………………………………..………..………………18
Returning Value to Shareholders.………………………………………………..19-20
Canadian Tire - A Strong Investment Proposition…………………………...……..21
2014 Results.…………………………………………………………………………...22
2014 Year-to-Date Highlights…..…………………………………………………..23
2015 Outlook……………………………………………………………………………24
2015 Outlook………………………………………………………….………………25
Three Year Financial Aspirations 2015 – 2017 .……………………………………26
3
Investor Day Highlights – October 9, 2014
Announced new three-year financial aspirations for 2015 to 2017 (refer to slide 24)
Outlined strategic priorities across enterprise
Focus on talent, digital and analytics and brand
Provided key growth drivers in core business divisions including:
Successfully making a generational shift to reaching younger families at Canadian Tire
Growing Sport Chek network footprint and building an unassailable connection with target customers
Refreshing interior of stores, investing in targeted marketing to new customer demographic and increasing
presence in higher-traffic locations at Mark’s
Focusing on new initiatives such as instant credit, offering enhanced value through new loyalty program
and co-marketing opportunities with partners
Reiterated balanced approach to capital allocation and use of cash
Announced intention to repurchase additional $400 million (in excess of shares purchased for anti-dilutive
purposes) of Company’s Class A Non-Voting Shares to end of fiscal 2015
Highlighted financial strengths
Focus on productivity initiatives to make CTC more efficient and profitable
Outlined sources of financial flexibility
Insights into recent transactions - CT REIT and Financial Services
For more information on CTC’s 2014 Investor Day http://investors.canadiantire.ca
4
Creating Value for Shareholders
2014 Initiatives:
Closed strategic partnership transaction with Scotiabank on October 1, 2014
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
5
Creating Value for Shareholders
CT REIT Initial Public Offering:
May 2013 - Announced intention to form CT REIT to:
Surface the value of CTC’s real estate
Create 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
October 2013 - Completed CT REIT IPO
CTC retained 83.1% majority interest in CT REIT allowing CTC to retain
control over its real estate properties
Surfaced value of owned real estate portfolio and led to new approach to
valuation (sum-of-the-parts)
Provides future access to capital through investment in CT REIT
6Corporate Overview
Family of companies
Our strengths No one
prepares you better for the
Family of the most recognized retail brands in Canada jobs & joys of everyday living
Market leadership and credibility in heritage categories
Financial flexibility / REIT / Scotiabank transaction
Strong balance sheet / credit rating
Nearly 1,700 retail and gasoline outlets and community presence
Shared real estate, marketing, supply chain, services
Our growth plan
Strengthen and grow core businesses
Retailer first with strong financial services Financial highlights (2014) Growth (YoY)
Record earnings in competitive environment
New flagship stores and concept renewal Revenue $12.5B +5.7%
Expanded assortments and endless aisle Net Income (before NCI) $639.3M +13.3%
National rollout of e-commerce
Personalized offers using information gathered from ‘My Canadian Diluted Earnings Per Share $7.59 +9.8%
Tire Money’ loyalty program
How we win
Family of CTC companies – strong coalition Market Leadership
Investing in digital and customer experience
Building our brands and exclusivity Leadership position across heritage/core business
Loyalty and the power of customer data categories – Automotive, Living, Fixing & Playing
Activating on sports and community partnerships #1 in Men’s Industrial & Casual Apparel
The store for ‘Life in Canada’
1 in 5 Canadians hold a Canadian Tire credit card
7Financial Aspirations – 2010 – 2014
Aspirations
2010 to Achieved
over 5-year 2014 Achieved in
Financial Aspirations 2014 from 2010 to
period to Results 2014
CAGR1 2014
2014
Canadian Tire retail sales (POS)
annual growth2
3 to 5% 4.4% 2.4%
Consolidated EPS annual growth 8 to 10% 10.0% 13.3%
Retail return on invested capital2 10% + 8.1% 8.1%3
Financial Services return on
receivables2
4.5 to 5.0% 7.4% 7.4%3
Total return to shareholders
including dividends
10 to 12% 24.3% 17.5%
1 Cumulative average growth rate.
2 Key operating performance measures. Refer to section 9.3 in the Q4 2014 and full-year MD&A for additional information.
3 ROIC and ROR are targets intended to be achieved at the end of the outlook period, therefore, have been calculated as at the year-end date.
82015 Strategic Objectives
Execute strategy for Retail business growth including innovative marketing campaigns,
banner network expansion, focus on core customer segments at Canadian Tire, FGL
1. Achieve Sports and Mark’s and continuing with Canadian Tire product category focus on specialty
retail operations
financial Improve supply chain efficiencies and capabilities with new Calgary and Bolton DC
aspirations Continue to grow Financial Services through offering new and innovative products and
services, integrating with Retail businesses, enhancing loyalty proposition and through new
account acquisition
Complete $400M share repurchase of Class A Non-Voting Shares in excess of amount
required for anti-dilutive purposes through December 2015
2. Make balanced
Maintain operating capital expenditures within $600M to $625M and capital expenditures for
capital allocation additional distribution capacity within $175M to $200M
decisions CT REIT to gain access to capital markets and demonstrate its ability to raise equity and debt
independently
Continue to rollout and evolve current Canadian Tire store concepts
Continue to test and develop a new Canadian Tire store concept
Identify new and innovative ways to remain relevant to target customers, including active
3. Drive growth in families and reinforce Canadian Tire’s place as “Canada’s store”
core businesses Continue to rebrand Mark’s Work Wearhouse stores to Mark’s format and begin to rejuvenate
L’Equipeur stores in Quebec
Continue to expand FGL Sports’ retail footprint with the addition of flagship stores
Launch the Sport Chek Hero store concept
Further integrate Financial Services with Retail businesses through additional services offering
92015 Strategic Objectives
Continue to grow and enhance the My Canadian Tire ‘Money’ loyalty program
4.Transition from
Improve the digital experience across each of the Company’s major retail banners,
old-world including e-commerce channels
retailing to the Commence deployment of a new POS system at Mark’s and FGL Sports
new world Launch the first phase of a mobile wallet pilot
Continue to focus on being a brand-led organization, with continued investment in key brand
building assets, including: Olympic and Sports partnerships; community involvement
5. Strengthen the programs; and Canadian Tire JumpStart Charities
Continue to build high-quality private-label and exclusive brands
brands Continue to grow assortment of top national brands at FGL Sports and Mark’s
Develop cross-banner co-marketing initiatives internally and within the scope of the
Company’s strategic partnership with Scotiabank
10Our Retail Network Across Canada
DISTRIBUTION FACILITIES
4 CTR distribution centres
2 Mark’s distribution centres
YUKON NORTHWEST 3 trans load facilities
TERRITORIES 3 auto parts distribution centres
1 1 3 FGL sports distribution centres
1 0
1 1
0 0
0 0
BRITISH ALBERTA SASKATCHEWAN MANITOBA
COLUMBIA
52 55 14 14
43 53 11 10
58 63 16 13
5 19 6 6
0 15 6 6
ONTARIO QUEBEC NEWFOUNDLAND NEW NOVA SCOTIA PRINCE EDWARD
AND LABRADOR BRUNSWICK ISLAND
202 99 13 19 21 2
124 167 6 8 11 2
146 45 8 13 17 2
167 59 12 15 8 0
61 0 0 0 3 0
11Our Core Business is Retail
Customer
Six key business
categories Preparing Canadians for the
Jobs & Joys of Life in Canada
Retail
banners
zz
2014 revenue = C$12.5B C$8.4B C$1.9B C$1.1B C$1.1B
Reporting
segments Retail
Financial
Business Automotive Living Fixing Playing / Apparel Services
categories Sporting Goods
Gas Home Cleaning Home Repair Hockey Industrial Wear Credit Cards
Auto Parts Home Decor Paint Golf Men’s Wear Retail Deposits
Tires & Power Home Org Tools Cycling Women’s Wear In-store
Sports Kitchen Fitness Athletic Apparel Warranties
Products Auto Service Backyard Living Camping Footwear Insurance
and Car Care & & Fun Hunting Accessories Deferred &
Accessories Gardening Instalment
services Fishing
Payments
Roadside Outdoor
Assistance Tools
Seasonal
Home
Services
12Canadian Tire
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 Financial highlights (2014) Banners
Act less like a general merchant and more like a specialty retailer
Revitalize and localize assortments, expand key categories (specialty Revenue * $6.3B
pro shops, endless isle) and grow new product pipeline Sales growth 4.4%
Testing innovative store concepts (Showroom and Showcase stores)
and refreshed network Same store sales growth ** 2.4%
Analyze customer shopping data from new Canadian Tire Money Canadian Tire store count 493
loyalty program
Expand e-commerce and digital capability PartSource store count 91
How we win Gas+ gas bar count 297
*Excludes Gas+ Revenue
Newly strengthened Dealer relationship **Reported on a 52 week vs. 52 wk. period
Tailored customer connections throughout the shopping experience How we fit in the CTC Family
Store concept, redesign and omni-channel investment
Sports partnerships and community engagement
Mature, healthy core business, cash generator
Flagship business, central to Corporate brand
Credibility in core categories
13FGL Sports
Our game plan
Our strengths
Canada’s largest sporting goods retailer
Close relationships with elite vendor brands
Wholesale division – direct sourcing
Merchandizing and store operations
World-class digital concept and flagship stores
Our growth plan
Network expansion: 2M square feet of net new retail space from
2012 - 2017 Financial highlights (2014) Key banners
Launch Hero stores & expand number of flagship stores
Revenue $1.9B
Super-branding for three lead retail banners
Build unparalleled emotional connection with customers Sales growth 11.5%
Digital and e-commerce integration Same store sales growth* 6.9%
Use innovation and digital technology to bring brands and
products closer to customers Store count 436
*Reported on a 52 week vs. 52 week
How we win period
Conduit to the best sports brands in the world
Premier real estate locations How we fit in the CTC Family
Innovative in-store experience
Community engagement and sports partnerships activation
Growth driver
Engages younger customer throughout lifecycle
Digital testing ground
14Mark’s
Our game plan
Our strengths
Industrial apparel, footwear and accessories
Product development, innovation and quality
Strong private label program
National store network
Our growth plan
Interior store refresh
Increase presence in higher traffic areas
Financial highlights (2014) Banners
Invest in targeted marketing to new customer demographic
Turbo-charging men’s casual apparel & footwear Revenue $1.1B
End-to-end retail infrastructure fortification Sales growth 4.5%
Win with 35-50 year old Canadians
Same store sales growth* 3.1%
How we win Store count 383
Building brand awareness and affinity *Reported on a 52 week vs. 52 week
period
Utilize industrial credibility to grow in adjacent categories
Enhance style in private label brands
Grow assortment with national brands like Columbia, Helly How we fit in the CTC Family
Hanson, Merrell, Buffalo and Silver
Improve in-store merchandising and presentation
Reactivated growth driver
Strong customer alignment with Canadian Tire
Synergies with FGL Sports in sourcing, merchandising,
supply chain and real estate
15CT REIT
Our game plan
Our strengths
Irreplaceable Canadian real estate portfolio of more than 270
properties totaling approximately 20 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
Financial highlights (2014)
Contractual annual rent escalations Property revenue $344.8M
Funds from operations $176.9M
How we win Adjusted funds from
$132.9M
operations
Highly diversified retail portfolio
Flexible design, configuration and dimension provides capability AFFO payout ratio 88%
of supporting a multitude of retail platforms
Actively pursuing third-party retail acquisition opportunities
CT REIT is structured for stability even in potentially volatile
How we fit in the CTC Family
markets CTC is a major retail tenant with strong brand
recognition
Right of first offer on all CTC properties provides
preferred access to captive pipeline
16Canadian Tire Financial Services
Our game plan
Our strengths
$4.7B 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 GAAR
Increasing acquisition of loyal Canadian Tire customers and
generating higher profitability from these accounts Financial highlights (2014) Change
Increasing share of tender across all CTC banners Revenue $1.1B 4.8%
Growing innovative services and offerings to customers
Gross average accounts
Strengthening digital capabilities $4.7B 7.1%
receivable (GAAR)
How we win Average number of
Reinvigorating the value proposition of credit cards accounts with a balance 1,837 3.7%
(thousands)
Tighter integration with retail banners and Dealers
Scotiabank partnership creating growth through co-marketing Return on receivables 7.36%
opportunities
How we fit in the CTC Family
Earnings generator
Supports core retail business
17Delivering Solid Results
Consolidated Revenue Financial Services Return on
(C$ in millions) Receivables (%)
12,463 7.6%
11,786 7.32% 7.36%
11,427 7.4%
11,500
5.7% 7.2%
7.0%
9,500 6.76%
6.8%
2012 2013 2014
6.6%
6.4%
Consolidated EBITDA 2012 2013 2014
(C$ in millions)
1,376
1,500 1,138 1,236
1,000 11.4%
500 Retail gross margin
(% of revenue)
0
2012 2013 2014 29.5%
28.9%
Basic EPS attributable to owners of the 29.0%
Company 28.5% 28.2%
($) 28.0%
7.65
6.96 27.5% 27.3%
$7 6.13
10.0% 27.0%
$5 26.5%
2012 2013 2014 2012 2013 2014
18Returning Value to Shareholders
Dividends:
Q3 2014 – increased annual dividend to $2.10 per share, up 5.0%
Q2 2014 – increased annual dividend to $2.00 per share, up 14.3%
Q3 2013 – increased annual dividend to $1.75 per share, up 25%. Raised
dividend payout ratio to 25% to 30% of prior year’s normalized earnings
Q3 2012 – increased annual dividend to $1.40 per share, up 16.7%
Share repurchases:
Announced $400M share repurchase from October 9, 2014 to December 31,
2015 (beyond anti-dilutive purchases). Approx $316M remains to be
repurchased in 2015.
2014 – repurchased $284M of Class A Non-Voting shares (beyond anti-dilutive
purchases)
2013 – repurchased $100M of Class A Non-Voting shares (beyond anti-dilutive
purchases)
Q4 2012 – repurchased $2.5M of Class A Non-Voting shares (beyond anti-
dilutive purchases)
19Returning Value to Shareholders
Policy to maintain dividend payments equal to 25% to
$1.88
30% of the prior year’s normalized basic net earnings
Member of S&P/TSX Canadian Dividend Aristocrats index
$1.40
Annual Dividends Paid $1.20
$1.10
$0.82 $0.84 $0.84
$0.72
$0.64
$0.56
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
* In Q3 2014, CTC announced an annual dividend increase of 5% to $2.10 per share
* In Q2 2014, CTC announced an annual dividend increase of 14.3% to $2.00 per share
20Canadian Tire – a Strong Investment
Proposition
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
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
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
$12.5 billion in revenue
31.5 million retail square feet
212014 Results
222014 Highlights
Record performance across all businesses
Maintained a disciplined balance between sales and margins
Innovative product and promotional programs helping to drive sales across all banners
CT REIT executed on growth plan and investment strategy through acquisitions
Business results Olympic merchandise and marketing increased customer affinity for Canadian Tire and Sport Chek retail
brands
Completed strategic business partnership with Scotiabank that will grow Financial Services and Retail
Introduced digital loyalty program "Canadian Tire Money” to complement existing Loyalty program
Capital allocation priorities:
Investing in the businesses – network growth, IT systems and in-store digital capabilities
Maintaining investment-grade debt and credit ratings – retired $200M in corporate debt
Returning capital to shareholders
Increased annual dividend to $2.10 per share
Capital allocation Completed $200M share repurchase commitment
Announced new $400M share repurchase intention through to December 2015
Identifying organic and inorganic growth opportunities that will strengthen the brand
Expanding assortments and products in key categories
Seeking acquisitions that enhance the brand and build on heritage categories (i.e. sports,
automotive, outdoor living)
Canadian Tire – Shifting focus to operating key category businesses as a specialty retailer
Investing for the future:
Adding strong retail talent to the businesses
Building on momentum in Automotive business
Growth FGL Sports - changing the face of Canadian retail through in-store customer experience
Creating innovative in-store digital and mobile experiences to engage younger customer demographic
Second generation Sport Chek flagship store opened in Burnaby, British Columbia in Q4 2014
Mark’s – building on re-branding and new marketing focused on men’s casual and industrial wear
Identified new markets and non-seasonal areas for growth such as in denim
232015 Outlook
242015 Outlook
Operating expense growth aligned with revenue growth
Effective tax rate estimate: 27.5% for 2015
Reflects estimated full year impact of Scotiabank NCI and assumes a lower
anticipated stock-based compensation expense
In 2015, operating CAPEX estimated between $600 million and $625 million due
primarily to Retail store network investment, and investment in IT and digital
initiatives
Additional CAPEX:
Approximately $175 million to $200 million associated with future distribution
capacity in 2015
Third-party property acquisitions by CT REIT
25Three Year Financial Aspirations
2015 – 20171,2
Financial Aspirations Details
Aspirations separated by banner to better reflect
Canadian Tire retail – 3%+
different stages of maturity/growth of individual
Retail sales (POS) growth retail banners
Mark’s – 5%+
(annual aspirations)
Based on annual square footage growth
FGL Sports - 9%+
estimates and same store sales assumptions
Consolidated diluted EPS attributable to owners
Diluted earnings per share (EPS) 8% to 10% of Canadian Tire Corporation
(average over three year period)
Long-term aspiration remains 10%+
Return on invested capital 9%
(aspiration by end of 2017) Aspiration of 9% is more achievable by end of
three year period
Return on receivables (ROR) Based on assumptions for rate of receivables
6% +
(annual aspiration) growth and operating expenses management
1Established on October 9, 2014 at Canadian Tire Investor Day
2 Forward looking information – refer to slide 2 for additional information
26For more information http://investors.canadiantire.ca lisa.greatrix@cantire.com or (416) 480-8725 Follow us on twitter @CTCShares
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