Canadian Tire Q1 2025 slides: Strong sales growth offset by transformation costs

Introduction & Market Context

Canadian Tire Corporation (CTC) released its first quarter 2025 financial results on May 8, showing strong sales growth across all banners, though reported earnings were significantly impacted by transformation costs related to the company’s new "True North" strategy. The retailer’s stock has shown resilience in recent trading, with shares closing at $228 on May 5, up 2.7% for the session and well above its 52-week low of $192.10.

The Q1 results come as Canadian Tire continues to navigate a retail environment that has been challenging in recent quarters, with the company’s previous earnings call highlighting pressures from rising interest rates, inflation, and adverse weather conditions affecting consumer spending.

Quarterly Performance Highlights

Canadian Tire reported robust sales growth across all its retail banners in the first quarter of 2025. Consolidated comparable sales increased by 4.7%, while consolidated retail sales grew by 5.1% to $3,423.0 million. The company attributed this growth to increased customer traffic across all banners.

Canadian Tire Retail (CTR), the company’s flagship banner, saw comparable sales growth of 4.7%. SportChek delivered its third consecutive quarter of comparable sales growth at 6.3%, while Mark’s posted a 2.2% increase. The company also reported that loyalty penetration reached 54.5% of retail sales, up 132 basis points.

As shown in the following highlights from the presentation:

Despite strong sales performance, reported earnings declined significantly due to transformation costs. Consolidated income before income taxes decreased by $51.3 million to $51.6 million, resulting in diluted earnings per share of $0.67, down from $1.38 in the same period last year.

However, when normalized for True North transformation expenses, the picture changes dramatically. Normalized income before taxes on continuing operations increased by $62.8 million to $165.7 million, with normalized diluted EPS from continuing operations reaching $2.00, up $0.92 from the previous year.

The following chart illustrates the bridge between reported and normalized earnings:

Detailed Financial Analysis

Canadian Tire’s consolidated revenue for Q1 2025 increased by 3.7% to $3,456.7 million, while gross margin dollars grew by 3.5% to $1,190.8 million. The gross margin rate remained relatively stable at 34.4%.

The company’s comprehensive financial results are detailed below:

The significant difference between reported and normalized results stems from $114.1 million in transformation costs, including $95.4 million in restructuring expenses related to the True North strategy and $18.7 million in other transformation and advisory costs. These one-time charges had a $1.26 impact on diluted EPS.

When examining normalized metrics, Canadian Tire’s performance shows considerable improvement:

The Retail segment, when normalized for transformation costs, showed strong improvement with income before income taxes from continuing operations of $50.9 million, compared to a reported loss of $63.2 million. The retail segment’s gross margin rate excluding Petroleum improved from 35.9% in Q1 2024 to 36.1% in Q1 2025, while EBITDA margin increased from 10.1% to 10.9%.

The following table provides a detailed breakdown of the Retail segment’s normalized metrics:

Canadian Tire’s Financial Services segment continued to perform well, with revenue increasing by 1.7% to $395.6 million and income before income taxes growing by 1.4% to $97.0 million. The gross margin rate for this segment was 48.5%.

Strategic Initiatives

During the first quarter, Canadian Tire launched its "True North" strategy, a four-year transformative growth plan. As part of this initiative, the company announced new strategic partnerships with WestJet Rewards and RBC as Triangle partners, both expected to launch in 2026.

The True North store enhancement program includes plans for more than 30 Canadian Tire store projects and 18 Mark’s store projects in 2025. Additionally, SportChek opened its second "Destination Sport" concept store in Toronto in April 2025, further expanding its premium retail footprint.

Canadian Tire also reported progress on its previously announced divestiture of the Helly Hansen business, which is now reported as a discontinued operation. The company has begun restructuring into what it describes as "a more agile operating company" to support its transformation strategy.

To provide a clearer picture of the company’s continuing operations after the Helly Hansen divestiture, Canadian Tire presented the following normalized results:

The retail segment’s normalized results from continuing operations show improvement in both revenue and profitability:

Forward-Looking Statements

Canadian Tire’s presentation indicates that the company is positioning itself for long-term growth through its True North strategy, despite the short-term impact on reported earnings. The significant investments in store enhancements, strategic partnerships, and operational restructuring suggest confidence in the company’s future direction.

The expansion of the Triangle Rewards program through new partnerships with WestJet and RBC indicates a continued focus on customer loyalty and data-driven insights. These partnerships are expected to enhance the value proposition of the loyalty program when they launch in 2026.

With the divestiture of Helly Hansen progressing, Canadian Tire appears to be refocusing on its core Canadian retail and financial services businesses. The company’s normalized results from continuing operations provide a clearer picture of the underlying performance of these core segments, which show positive momentum despite broader economic challenges.

Investors will likely be watching closely to see if Canadian Tire can maintain its sales momentum while successfully executing its transformation strategy in the coming quarters. The significant gap between reported and normalized earnings highlights the substantial investment the company is making in its future growth.

Full presentation:

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