Canadian Tire Corporation, Limited (CTCA) Earnings Call Transcript & Summary

Please welcome the Chairman of the Board, Mike Owens.

Good morning, and welcome to Canadian Tire Corporation's Annual Meeting of Shareholders. We meet today in complicated economic times. As a nation, it's now clear that many of the agreements, political norms and partnerships we once relied on are no longer reliable. But challenging as that may be, the reality is that, as a country, we need to compete in a tougher global world and build a stronger Canadian economy to secure our prosperity. At Canadian Tire, this is a familiar reality. For decades, this company has been tested and faced global competition head on from Walmart to Amazon to Shein. That reality has shaped us. It's made us more competitive, more resilient and more vigilant. Consider that when I stood before you last year, I committed to you that the lessons of 2023 would not be lost on us. We acknowledge that our performance the prior year had fallen short of expectations. But rather than making excuses or shifting blame, our team confronted the hard truths and they got to work and they delivered. I want to thank Greg Hicks and his team for leading with purpose and determination this past year. Keenly aware of the broader challenges facing the sector, they were laser-focused on performing and equally important, transforming the business for the future. Management and the Board collectively wrestled the tough questions around what it takes to be a top Canadian retailer in this highly competitive, rapidly evolving environment. We asked ourselves, if CTC had the structure, assets and core capabilities to compete with both traditional and digital-first retailers, through management's rigorous evaluation emerged True North, CTC's bold plan to transform in a transforming world, a defining moment in our 103-year history. This was, and continues to be, a collective effort. And I commend Greg and his leadership team, my fellow directors, especially Martha and Owen Billes, the Canadian Tire dealers and the tens of thousands of team members across the country for their willingness to boldly take on this transformation. And today, Canada is facing a defining moment, a crossroad where we either take ownership of our collective prosperity or let circumstances shape our future. It is my sincere hope that Canadians choose the former. But just like our company, this mission requires a collective leadership effort. The path for Canada offers a reset, an opportunity for us to take control of our destiny. On that path, CTC will continue to play its part in driving Canadian prosperity. After all, Canadian Tire and Canada are deeply intertwined. As Greg has previously said and will elaborate on shortly, this company has earned the right to have Canadian in its name. So we'll keep working, innovating and competing to remain stewards of the brand that Canadians and you, our valued shareholders, have entrusted with your confidence. We are grateful for your support and loyalty, and we are committed to earning it every single day. We are Canadian. We are proud to be True North strong. But our team knows that remaining strong and building a resilient company requires more than a slogan. The same can be said for building a resilient economy to protect our nation's prosperity. We need to get Canadians, our businesses and our leaders to rally together to support each other to make life in Canada better. And with that, I am pleased to introduce someone who knows a lot about making life in Canada better, the President and CEO of Canadian Tire Corporation, Greg Hicks.

Thanks, Mike, and good morning, everyone. Standing here today, it's evident that a lot can change in a year. A year ago, I spoke about how our 2023 financial results fell well short of our expectations and our plans to improve our performance moving forward. This year, we are proud to be in a much stronger position. As consumers remain understandably cautious throughout 2024, we focused on 3 forms of leverage: Creating value and deeper relationships through our Triangle Rewards program; maximizing our existing assets; and driving operating leverage with a constrained top line. At the same time, we kept an eye to the future by focusing on investments with the strongest potential returns. As a result, in 2024, we enhanced our omnichannel capabilities from upgrading our One Digital Platform and in-store technology to refreshing and expanding our stores. We deepened connections with our Triangle members through new partners like Petro-Canada and programs like our first-ever cross-banner loyalty program. We became more tech-enabled and efficient, from advancing our supply chain modernization to continuing to integrate AI into our business, including through our AI-powered platform, CT. And all the while, we remain committed to supporting our communities through Jumpstart, partnerships, disaster relief and countless grassroots initiatives. Ultimately, by driving our business, controlling the controllables, making smart investments and remaining fiercely committed to our purpose, we achieved a 20% increase in earnings before tax, generated $1.6 billion of free cash flow and paid down $1 billion in debt, setting ourselves up well for 2025. A year ago, I also spoke about the negative impact of macroeconomic factors like stubborn inflation, unseasonable weather and geopolitical uncertainty. This year, we are navigating the macroeconomic environment well. We benefited from a strong Canadian winter and are seeing consumer resilience and are managing and mitigating tariff complications through the diligence of our enterprise task force. In the core of our business, our Q1 results demonstrate that our customers are pleased with the experiences, assortment and the value that we are offering. They are also showing a collective unflinching Canadian patriotism. As a company that's been Canadian-owned and operated since 1922 and recently top surveys for the most trusted, most reputable and most Canadian companies in the eyes of customers, we feel that patriotism, too. We also feel a strong sense of responsibility to live up to our reputation as a great domestic retailer, employer and engine of Canada's prosperity. We've earned the right to have Canadian in our name, and we never take that for granted. To quote our founder, A.J. Billes, "We strive always to make things better." This includes making our business operations better. I think back to COVID-19, which, to be blunt, was a wake-up call for our company. And although no one likes to relive those days, it did make us better and is a valuable context for where we are today. When the pandemic hit, we simply didn't have the capabilities to cope. When stores closed and everyone shifted to online shopping overnight, our CTR website crashed due to the overwhelming demand. Years of underinvestment in our stores and our omnichannel enablement made it very challenging for frontline staff to constantly adapt to ever-changing conditions. And our supply chain, which was at capacity, could not handle the growth that came our way. As a result, we became overly reliant on 3PLs to enable our throughput and inventory storage requirements. This experience made it clear that critical parts of our business were not up to the task of modern retail. We awoke to the reality that we needed to address these requisite capabilities. That's exactly what we did through our Better Connected strategy. As you'll recall, we focused on 4 strategic investment areas: Growing our own brands; creating a better, connected omnichannel customer experience; strengthening our supply chain fulfillment and automation capabilities; and modernizing our IT infrastructure. By tackling the retail fundamentals while investing in our privileged capabilities, we made great progress. We refreshed 1/4 of our CTR stores, upgraded our e-commerce and store technology platforms, enhanced our IT infrastructure and supply chain and elevated customer loyalty through investments in the Triangle Rewards program. And as proud as we were of our progress through Better Connected strategy, early last year brought a period of deep introspection within our leadership, team and Board. This introspection surfaced 2 key insights about our business. One was that although we've long been a great company, we believe that we can be a better stock. With that in mind, we asked ourselves how we could create more value for shareholders. And second, we took a necessary look ahead at a new era of retail, an era characterized by fierce global competition, rapidly emerging technology and ever-lasting rising customer expectations. We know what we're up against and what we need to be fit to compete. Above all, we now know that we have something that no one else has: A deep understanding of Canadians, built by over a century of experience and bolstered by privileged first-party data. Our investments in Triangle have allowed our customer interactions to transcend beyond transactions. We have the power to drive deeper engagement and create genuine relationships, relationships that we can cultivate and grow through a retail system that creates value greater than the sum of its parts. This is our world-class capability, one that equips us to compete against domestic and global scale players operating here in Canada. Ultimately, our industry has not been kind to retailers that cannot scale. Harnessing our scale requires that we operate and organize ourselves differently. To compete at the highest level in this environment, we need the agility and skills to rival any competitor today and in the future. You see the history of CTC has been written in chapters by people who believed in this company and met the challenges and opportunities of their time. And we know that to be a top-tier winning organization, our time calls for radical change. That's why our next chapter isn't about iteration, it's about transformation, and we call it our True North strategy. Unveiled on March 6, the True North is a transformative growth strategy with customers at the core. Our vision is to create stronger connections with customers. This will lead to higher performance in the metrics that matter, like improved sales, increased Triangle members and greater customer engagement. And that will accelerate shareholder value. We will achieve these results through dozens of initiatives across 4 cornerstones focused on delivering great modern retail experiences, expanding the sales impact of our coveted loyalty program, using customer data and insights to grow our business and becoming a tech-driven, agile and efficient company. Our retail-forward cornerstone includes initiatives designed to transform us into a modern retailer that offers exceptional experiences, both online and in-store. Through our flagship banners, Canadian Tire, Sport Chek and Mark's, we now have 3 investable modern store formats that captivate and drive deeper connections with our customers. Our Triangle-powered everyday cornerstone establishes our Triangle Rewards loyalty program as the foundation of our retail ecosystem. As the engine of our flywheel, it gives us a massive head start over our competition, one we keep extending through cutting-edge campaigns, cutting-edge campaigns and our growing list of loyalty partners. Our customer insights and action cornerstone comprises initiatives that leverage our rich customer data to grow our business. We are harnessing customer insights to expand and reach new markets, growing both our piece of the pie and the pie itself. And our last cornerstone focuses on becoming one team, agile and scaled. It's a commitment to transforming CTC into a more efficient operating company with the structure and technology to thrive. As such, we are reorganizing our structure and systems, empowering our people and deploying advanced AI technology to enhance efficiency and innovation. In summary, True North is less about transforming what we do and more about how we do it, including how we're structured, how we work and how we serve our customers. For instance, we've already started restructuring our team, and we are reinventing core retail processes to become a more nimble and tech-driven company, integrating AI deeper into our operations. By building better systems and implementing programs to upskill our workforce, we are taking our customer insights to the next level. We're integrating the strengths of all our retail businesses to provide our customers with more personal experiences that cover a broader scope of their wants and their needs. Our True North transformation is necessary, timely, and it already has great momentum. You can see it in our recent actions. We've refined our company through decisions that create a more focused, higher-performing Canadian retail business. For example, we kept our bank for its unique retail driving capabilities, announced the sale of Helly Hansen to unlock value and closed certain uncompetitive stores to invest in productive, new concepts. We are extending the places in everyday moments where people are rewarded with Canadian Tire Money by striking new partnerships. In March, we announced our long-term strategic loyalty partnership with RBC. Launching in 2026, this partnership will significantly expand Triangle's reach and provide even more value for millions of Canadians. And just this morning, we announced our long-term strategic loyalty partnership with WestJet. Set to take off in early 2026, this partnership will create more value, flexibility and rewarding experiences for millions of Canadians while further entrenching Triangle into Canadians' lives. Partnerships like these amplify our network and provide even greater value and end-to-end solutions for our members, ultimately driving higher and more sustainable sales. We're also using data and AI to reengineer our core retail processes, amplify our strengths, streamline tasks and enhance data-driven collaboration across our teams. We have exciting work underway that will translate customer insights into growth in our sales, market share and total addressable market. Not only is this allowing for greater efficiency and effectiveness, but it's also the unlock for democratizing actionable customer insights across the enterprise in a way that's both effective and responsible. It's one thing to say you are putting customers at the core of every decision, it's another thing to actually do it. And well-executed, well-governed, responsible AI will play a pivotal role in getting this done right. We are changing our company structure, starting with our senior leadership team, including introducing 3 new roles overseeing clear priorities. Our new Chief Transformation Officer, Susan O'Brien, is actively managing the transformation, ensuring that True North is delivered and driving real value. As I said, True North requires us to transform how we make decisions and deliver priorities. Susan and her Transformation Office have implemented a disciplined process for decision-making, ensuring our investments are generating strong value and ultimately, that our True North initiatives deliver as planned. With her many years of CTC experience and unquestionable love for this brand, Susan is the perfect leader to ensure the systematic delivery of our strategy. Our new Chief Commercial Officer, Matt Moore, now leads all customer-focused retail product, marketing and loyalty strategies to generate the best customer connections. Matt has extensive leadership and experience in improving financial performance, products and operations, customer satisfaction, franchise relationships and digital and loyalty strategies. He understands our connection with Canadians and the power of our purpose, which is serving him well as he works to transform how we engage with Canadians. It's Matt's responsibility to create an excellent go-to-market strategy. Following which, our new Chief Operating Officer, TJ Flood, will ensure we go to market with excellence. A 20-year company veteran who's run our biggest banners, TJ now leads core retail execution and growth overseeing the Canadian Tire, Mark's and Sport Chek leadership teams. Having TJ in this role allows us to see the entire landscape, all of our banners at once and wow customers with our full spectrum of great Canadian retail. And finally, as you know, we also have a new Chief Financial Officer, Darren Myers. Darren is a 3-time public company CFO with the skills, experience and knowledge needed to lead a dynamic strategy and successful transformation. We know that structure must follow strategy, and we have the right leadership team in place to execute True North. And here's what you can expect us to deliver. First, you can expect us to be committing to drive -- committed to driving Canadian Tire's prosperity. We delivered the strategy with the understanding that prosperity isn't a given. The reality is that we exist in the most disrupted retail environment ever. Hundreds of Canadian stores have shut their doors in the first quarter of 2025, proof that nostalgia alone is not enough. What got us here won't get us to where we need to go. And that's why this transformation is so critical. Challenging as retail may be right now, we have unique strengths and a strategy to secure our continued prosperity. Second, you can expect us to be committed to driving Canada's prosperity. As I mentioned earlier, we've been Canadian and locally owned since 1922. One out of 20 Canadians has worked for CTC. 4,000 local companies rely on us. And for every $1 we make, we create another $14 for other businesses and workers across this country. Over the last decade, we've injected $150 billion into the national economy. What's more, together with Jumpstart, we've invested over $300 million in amateur sport and helping kids play. And we can't even begin to quantify the impact that the dealers and stores have had in those same communities. In short, Canada's prosperity is intrinsically linked with our own. As such, we feel an overwhelming responsibility to ensure we continue living up to our purpose that we're here to make life in Canada better. And third, you can expect that through True North, the fortunes of this company will improve considerably. That starts with stronger connections with customers, leading to higher performance in the retail metrics that matter, ultimately generating accelerated value. When we get True North right, the transformation will be visible and impactful. Customers will enjoy seamless and rewarding experiences. Employees, dealers and partners will enjoy the clarity and momentum of a winning team. And you, our valued shareholders, will see leading and sustainable returns that reflect a modern, thriving retail company. Thank you for your continued trust and trust that there is more to come. Next year, when we reconnect at our 2026 Annual Meeting of Shareholders, we will look different as a result of this transformation because as I said off the top, a lot can change in a year. Thank you again for joining us this morning. I'll now pass it back to Mike Owens to continue with today's formal business.

Thank you, Greg. We will now move to the formal business for which this meeting has been called. In accordance with our bylaws, as Chairman of the Board, I will act as Chairman of this meeting. I've asked our Corporate Secretary, Eleni Damianakis, to act as secretary of the meeting. I appoint Daniela Munoz and Roxanne Parsaud of Computershare Trust Company of Canada to act as scrutineers of the meeting. Notice calling the meeting, together with the management information circular, were filed on SEDAR and posted to our website. In addition, a notification regarding how to access these materials and our 2024 report to shareholders, together with a proxy or voting instruction form, were mailed to shareholders of record as of the close of business on March 14, 2025. The scrutineers' report has been received, and I am advised that a quorum of holders of both the common shares and the Class A nonvoting shares of the corporation is present in person or represented by proxy. I, therefore, declare this meeting duly constituted for the transaction of business. The scrutineers' report, which will indicate the number of shares represented at this meeting, will be read by the secretary at the end of the meeting. Now we have a few guidelines for you on how the formal business of the meeting will proceed. To facilitate the introduction of motions, I have arranged in advance for certain employees who are shareholders to move and second motions required at this meeting. These arrangements are in no way intended to influence or discourage discussion of the motions. The items to be voted on today are the election of directors and the appointment of the corporation's external auditor. These items will be voted on by ordinary resolution, requiring a simple majority of the votes cast for approval, and voting will occur by show of hands. For shareholders who have voted in advance of the meeting, your voting instructions have been recorded, and you do not need to take any further steps. The items that you may vote on depend on whether you hold common shares or Class A nonvoting shares. If you hold common shares, you may vote on the election of 13 common share director nominees and the appointment of the corporation's external auditor. If you hold Class A nonvoting shares, you may vote on the election of 3 Class A director nominees. I remind shareholders that the Board of Directors recommends that you vote for the director nominees set out in the circular and for the appointment of the corporation's external auditor. As this is an in-person shareholders' meeting, only those shareholders or their duly appointed proxy holders who are present in person may ask questions in connection with the formal business. Once the formal business has been completed, we will open the meeting to general questions from our shareholders and proxy holders, including shareholders who are watching the live webcast of this meeting. Only questions that relate to the business and affairs of the corporation will be answered during the meeting. To ensure online questions are received in time, please submit these questions as early as possible during the meeting. Now the first order item of business is to place before the shareholders the consolidated financial statements of the corporation for the year ended December 28, 2024, and the external auditor's report thereon, which can be found in our 2024 report to shareholders. Report was sent to shareholders who requested a copy and was also filed on SEDAR and posted on our website. The next item of business is the election of 13 directors by the holders of common shares. I will now ask for the 13 individuals named in the circular to be nominated for election by the holders of common shares.

I nominate Eric Anderson, Martha Billes, Owen Billes, Lyne Castonguay, Cathryn Cranston, Steve Frazier, Greg Hicks, Sylvain Leroux, Donald Murray, J. Michael Owens, Christine Rupp, Sowmyanarayan Sampath and Justin Young for election as the directors of the corporation by the holders of common shares to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. Are there any further nominations? There being no further nominations, I declare that nominations are closed. I'm advised that sufficient votes in favor of the election of each director nominee were received by the company's proxy holders prior to the meeting. Accordingly, I propose that we proceed with a single motion. May I please have a motion to elect the individual nominees.

I move that the individuals nominated for election by the holders of common shares be elected as directors of the corporation to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. May I have a seconder?

I second the motion.

Thank you. Only registered holders of common shares and their proxy holders are entitled to vote on the motion. Everyone in favor of the motion, please raise your hand. [Voting]

Opposed, if any? [Voting]

I declare the motion carried and the 13 individuals nominated for election by the holders of common shares are duly elected as directors of the corporation. The next item of business is the election of 3 directors by the holders of Class A nonvoting shares. I will now ask for the 3 individuals named in the circular to be nominated for election by the holders of Class A nonvoting shares.

I nominate Norman Jaskolka, Nadir Patel and Cynthia Trudell for election as directors of the corporation by the holders of Class A nonvoting shares to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. Are there any further nominations? There being no further nominations, I declare that the nominations are closed. I'm advised that sufficient votes in favor of the election of each director nominee were received by the company's proxy holder prior to the meeting. Accordingly, I propose that we proceed with a single vote. May I please have a motion to elect the individuals nominated?

I move that the individuals nominated for election by the holders of Class A nonvoting shares be elected as directors of the corporation to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. May I have a seconder?

I second the motion.

Thank you. Only registered holders of Class A nonvoting shares and their proxy holders are entitled to vote on the motion. Everyone in favor of the motion, please raise your hand. [Voting]

Opposed, if any? [Voting]

I declare the motion carried, and the 3 individuals nominated for election by the holders of Class A nonvoting shares are duly elected as directors of the corporation. And now ladies and gentlemen, it's my pleasure to introduce you to your directors for the coming year. I will call upon each of my fellow directors to stand and be recognized: Eric Anderson, Martha Billes, Owen Billes, Lyne Castonguay, Cathryn Cranston, Steve Frazier, Greg Hicks, Norman Jaskolka, Sylvain Leroux, Donald Murray, Nadir Patel, Christine Rupp, Sowmyanarayan Sampath, Cynthia Trudell and Justin Young. The next item of business is the appointment of the corporation's external auditor and authorizing the Board of Directors to set the external auditor's compensation. I'm advised that sufficient votes in favor of the appointment of the external auditor were received by the company's proxy holders prior to the meeting. May I please have a motion for the appointment of the external auditor?

I move that Deloitte LLP, Chartered Professional Accountants, be appointed the external auditor of the corporation to serve until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to set the external auditor's compensation.

Thank you. May I have a seconder?

I second the motion.

Thank you. Only registered holders of common shares and their proxy holders are entitled to vote on the motion. Everyone in favor of the motion, please raise your hand. [Voting]

Opposed, if any? [Voting]

I declare the motion carried. Deloitte LLP is hereby appointed as the corporation's external auditor for the ensuing year, and the Board of Directors is hereby authorized to set the external auditor's compensation. I will now ask the secretary to read the scrutineer's report on attendance.

There are 30 holders of common shares present in person or represented by proxy, representing 2,537,220 common shares or 74.11% of the issued common shares of the corporation. There are 198 holders of Class A nonvoting shares present in person or represented by proxy, representing 32,249,789 Class A nonvoting shares or 61.9% of the issued Class A nonvoting shares of the corporation. These figures are subject to amendment to cover late arrivals and to correct any clerical errors or omissions. The voting results will be available after the meeting, which we will announce by way of press release, and we will also file the voting results on SEDAR.

Thank you, Eleni. This completes the formal business for which this meeting was called. May I please have a motion to terminate the formal business of the meeting?

I move that the formal business of the meeting be terminated.

Thank you. May I have a seconder?

I second the motion.

Thank you. Shareholders and proxy holders in favor of the motion, please raise your hand. [Voting]

Opposed, if any? [Voting]

Thank you. I declare the formal business of the meeting terminated. I will now take my seat, and we will open the floor to questions. If you have a question, please approach the microphone, state your name and indicate whether you are a shareholder or a proxy holder. We will also be taking online questions from our shareholders. Thank you.

Michael, Greg, thank you for an extraordinary year. My name is Victor. I'm an individual shareholder. I just have a question on Triangle. Since it's a digital-based business, usually, those business trading at a higher multiple. Would there be any capital allocation decisions on that division in the future?

I'll let Mike answer that.

I knew he was going to do that.

Thanks. Thanks for the question. Yes, I think as you would have heard in the speech today and the call this morning, the epicenter of the True North strategy is this privileged capability that we have, which is about data and using that data to create a digital ecosystem that tears down the walls and the roofs of all of the offerings that we present to Canadians. And if you did get a chance to listen to the call today, one of the things that we suggested was that we didn't think that we were getting the appropriate credit for the privileged capability that we have. And that is the predominant reason for us to really embrace a different strategy, ensure the organization first is using the data digitally and physically to create better experiences for Canadians. And we hope with the right level of sustained performance that the markets will recognize the fact that this is privileged. And truly, as I said in my prepared remarks this morning, that is a world-class capability that the market should recognize accordingly. From a capital allocation standpoint, I think we've got work to do to demonstrate to the market that, that is truly privileged. And so you can expect us to continue to just be very focused on telling our story, putting points on the board from a performance standpoint, storytelling with respect to how that privileged capability is driving our performance. And then who knows what that could lead to in the future. But right now, we're just focused on using it to run our business better.

Thank you for the question. Are there other questions? We have nothing online. Okay. Well, we've reached the end of the meeting. Thank you to our shareholders, directors, management, employees and other guests for joining us today and for your continued support of Canadian Tire. Thanks.

Thank you.