Canadian Tire Corporation, Limited

Thank you for standing by. My name is Lauren and I will be your conference operator today. Welcome to the Canadian Tire Corporation earnings call. All lines have been placed on mute to prevent any background noise. Following today's presentation, there will be a question and answer period. If you would like to ask a question during that time, simply press star 1 1 on your telephone keypad. To withdraw your question, press star then 1 1 again. Now I will pass along to Karen Keyes, Head of Investor Relations for Canadian Tire Corporation. Karen?

Thank you, Lauren, and good morning, everyone. Welcome to Canadian Tire Corporation's first quarter 2024 results conference call. With me today are Greg Hicks, President and CEO, Gregory Craig, Executive Vice President and CFO, and T.J. Flood, Executive Vice President and President of Canadian Tire Retail. Before we begin, I wanted to draw your attention to the earnings disclosure available on the website, which includes cautionary language about forward-looking statements, risks, and uncertainties, which also apply to the discussion during today's conference call. After our remarks today, the team will be happy to take your questions. We'll try to get in as many questions as possible, but we ask that you limit your time to one question plus a follow-up before cycling back into the queue. And we welcome you to contact Ambassador Relations if you don't get through all the questions today. I will now turn the call over to Greg.

Thank you, Karen. Good morning and welcome, everyone. After a period of turbulence driven by an uncertain macroeconomic outlook, our Q1 results tell a story of resilience and emerging stability. These are precisely the conditions we require to pursue gradual, steady gains and implement our Better Connected Strategy today. which we know is essential to strengthening our competitive posture. As is typical of Q1, our financial services segment drove profitability in the quarter. In our retail segment, gross margin rate was exceptionally strong, and overall we achieved a diluted EPS of $1.38, a significant improvement over last year. I previously stated that Canadian tire often acts as a barometer for the Canadian economy overall. Macroeconomically, the increased cost of living combined with higher interest rates has created a period of hesitation among Canadian consumers. This has had an obvious impact on our operations. We remain vigilant, closely monitoring economic indicators. Recent reports point to a slower pace of growth, potentially signaling forthcoming interest rate adjustments. Such a move could foster stability, easing uncertainties in our business operations. Meanwhile, we remain steadfast in controlling costs while advancing our strategy, ensuring our readiness to adapt to market shifts. Last quarter, I talked to you about shifting our focus to leverage, specifically our operating leverage. our existing assets and investments, and our strong relationships we've built through Triangle Rewards. I'm pleased with our efforts on all of these fronts, and this morning I will give you an update on the progress we've made in these areas, starting with Triangle. In Q1, a new partnership furthered Triangle's impact and reinforced it as an indispensable source of leverage. I'm speaking, of course, about our engagement with Petro-Canada's PetroPoints program. Already, our preliminary results tell us that nearly 200,000 Canadians have linked their Triangle Rewards and PetroPoints accounts, and over $2.4 million in incremental Canadian tire money has been issued to our membership. This boosted issuance returns to our stores in the form of redemption and incremental basket attachment. These numbers are encouraging and offer us a platform upon which we can continue to build. The results validate our leveraged thesis, provide important momentum for our Triangle Rewards brand, and send a clear signal to the marketplace about our viability and desirability as a partner and our ability to deliver trust and an emotional connection with Canadian consumers. Beyond our partnership with Petro-Canada, we saw more encouraging progress with Triangle Rewards in Q1. We grew our active registered member base by 2.3% in the quarter, and our active promotable members were up over 2% compared to last year, driven by increased authentication across our websites, growth in the number of customers engaging with our one-on-one offers, and improvements in quarterly active app users. In Q1, loyalty sales outpaced non-loyalty sales. underlining the value our customers are seeing in our membership program. We know how important value is to Canadians right now, which is why today we launched a new promotion we call the Max Stack Event. It allows our members to get even more value by stacking our great deals with opportunities to earn CT money multipliers across a range of products at Canadian Tire, SportCheck, and Marks. And when it comes to Triangle Select, in Q2, we are embarking on the acquisition strategy I mentioned last quarter with the objective of scaling membership. Transitioning to our operating leverage, our banner and product mix in Q1 drove a 193 basis point gain in retail gross margin in Q1 to 37.1%, excluding petroleum. We successfully lowered our supply chain OPEX, as expected in the quarter, driven by cost reductions associated with exiting all of our 3PLs and lower service provider costs, as well as lower volume-related costs. Last quarter, I mentioned how our supply chain would drive productivity savings and operating leverage in 2024. In Q1, our new apparel DC in the Greater Toronto Area handled 10% of the total unit volume in our DC network. throughput is currently tracking 17% higher than this time last year, with additional improvement in cost per unit. Overall, we are exceeding the productivity assumptions within our original investment thesis. Our entire domestic network is operating extremely well, with fill rates up almost 200 basis points relative to our planned targets, and we have no inbound or outbound backlog, which is a significant improvement. In addition, our automated goods-to-person retrofits in both our Calgary and Montreal DCs are tracking well and are expected to be completed by the end of this quarter. We continue to make solid progress drawing down our inventory, which has enabled us to reduce our use of rented storage trailers and third-party storage yards relative to Q1 of last year, as we had planned. Before I hand it over to Gregory, I'll give a quick update on how we are leveraging the investments that we've been making in our omnichannel customer experience. As I mentioned last quarter, now that we have completed our one digital platform, we are honing the user experience. In Q1, we made a number of improvements to our site speed and stability, and the NPS scores for CTR browse and purchase improved three and seven points respectively over last year. We also saw improvements for SportCheck and Marks, with purchase NPS improving over Q4 and browse at SportCheck up almost nine points. To maintain a momentum, we have a squad dedicated to elevating site experience for both SportCheck and Marks. We are also amplifying the value of Triangle throughout the purchase journey, and we've made several key digital enhancements. These improvements drive loyalty sales penetration and active registered members, increase incremental sales driven by our one-on-one offer program, and improve authentication rate and triangle NPS scores. In terms of implementing automation and AI, at the end of March, we introduced CT, our new shopping assistant powered by Microsoft AI technology that streamlines the shopping journey, by helping customers select the right tires for their vehicles. What makes CT truly stand out from other chatbots is that it feels like you're actually talking to a human, one who can handle unexpected questions, understand the intent behind them, and provide the most optimal answer. This is just the first step on our journey to harness the power of AI and large language models for our customers today. and we will continue to be a leading innovator in this space. Finally, the CTR mobile app continued to prove a key component of the omnichannel shopping journey, maintaining an industry-leading score of 4.8 stars and 1.9 million average monthly active users. And with that, I'll pass it over to Gregory to bribe more color on our financial results.