Q3 2020 Canadian Tire Corporation Ltd Earnings Call
Good morning, My name is Atlanta, and I will be your conference operator today.
At this time I would like to welcome everyone to the Canadian Tire Corporation Limited Q3, Twentytwenty earnings results Conference call.
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After the speakers remarks, there will be a question and answer session. If you would like to ask a question during that time simply press Star then the number one on your telephone keypad.
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This morning Canadian Tire Corporation limited released their final financial results for the third quarter of 2020, a copy of the earnings disclosure is available on their website and includes cautionary language about forward looking statements risks and uncertainties, which also apply to the discussion during today's conference call.
I would now like to turn the call over to Greg KCS, President and CEO Greg.
Thank you operator, welcome everyone and thank you for participating in this morning's call I'm joined today by our CFO Gregory correct.
Before we dive into the specifics I will start by saying that I am extremely pleased with our results which are by virtually any measure exceptional.
I'm so proud.
It's traded resilience of our business, which is truly a testament to our associate dealers and our employees.
Cannot overstate, how much I appreciate and I'm grateful for their countless hours of hard work ongoing flow of innovative solutions and unparalleled collaboration across the enterprise.
Our teams to our teams continue to approve more agile than ever before enhancing expanding or retail capabilities and furthering our positive trajectory.
You heard me say that through it depend on purpose and North star has been being there for life in Canada.
I think it's fair to say that this quarter. We once again proved that this is not only simply a tagline, it's who we are and what we do.
We continue to be there for our customers and our communities when they need us most as shown by the very busy quarter had by our corporate charity jumpstart.
You May know September jumpstart launched at sport relief fund.
Oh that 19 has forced many community organizations to close their doors and jumpstart stepped up to ensure the kids programming to return to as it becomes safe to do so.
They will dispersing $8 million to nearly 700 community support organizations across Canada.
And yet we know that there's still a significant need for support.
In addition to launching the sport relief fund Jumpstart continued to make impressive progress on its inclusive play project in.
In Q3 alone Jumpstart open new inclusive playgrounds in Winkler, Manitoba.
It's in Alberta, Canada.
Tibet, bringing the total to 10 inclusive jumpstart playgrounds across Canada.
These types of initiatives aren't easy to pull off at the best of times not to mention during a pandemic but.
But that just seems to be our teams ammo. This year do whatever it takes to make sure Canadians have the support that they need well also doing whatever it takes to ensure Canadians can access the essential products and services to help them navigate COVID-19.
With that let's dive into the results.
Our third quarter was exceptional across a number of key performance indicators.
In addition to recording the best comparable sales growth we've ever reported.
18.9%, excluding petroleum our ecommerce channel year to date has now surpassed $1 billion in sales.
211% from 2019.
Well digitally and in store our existing trying members were key contributors to increases in store transactions and basket size and the triangle program acquired approximately 400000, new members in the quarter.
We generated strong operational leverage enabling us to drop more earnings to the bottom line.
Normalized EPS of $4, a 93 cents up a remarkably remarkable 42.5% versus last year.
I'm pleased with where we stand with our profitability and cash generation and I'm proud to say that earlier. This morning, we announced 11 years of consecutive annual dividend increases a key pillar in our capital allocation priorities.
Now I'll move into the results by banner, starting with CE tier.
Once again ctr drove our performance in the quarter delivering exceptional comparable sales growth of 25.1%.
In Q3 more than 90% of Ctr is 200 categories grew.
80% of categories achieved double digit growth.
Once again this quarter and the entire year or for that matter has proven that home is where the heart is and where Canadians are choosing to invest.
Canadians continue to adapt to spending much more time at home.
The top selling products in Q3 were within our kitchen assortment supporting the home Cook at home dining themes.
The D. I Y. home improvement trend has accelerated demand across many home improvement categories, including lawn and garden tools paint and hardware.
This trend provides opportunities to strengthen these new customer relationships.
As an example, the average paid customer is much more lucrative than the average ctr shopper.
Not only did they spend three times more than non paying customers. They visit the store more frequently.
And with ongoing travel restrictions and limited entertainment options in Q3 families came to us to enable their creative summer vacation plans, such as backyard station since camping and road trips and this drove sales across all the seasonally relevant categories.
The trend of one stop shopping continued in Q3, where we maintained solid growth in both average basket size and units per basket.
This trend was consistent across all regions with 84% of our store network see increased foot traffic.
So it should come as no surprise that Ctr grew omni share in all five divisions living and playing had the strongest performance, both achieving double digit year over year market share growth.
In addition to a strong brick and mortar or performance Ctr experienced continued growth in our E Commerce channel up 178% in the quarter.
E Commerce penetration is now double where it was a year ago.
Drilling down into top online category shows a slightly different profile this quarter.
Including larger bulky items, such as exercise equipment riser organization outdoor heating in both indoor and outdoor furniture we.
We have long said that last mile fulfillment for bulk Assortments is one of our core advantages.
And although E commerce demand has stabilized somewhat we anticipated to rise once again in Q4 and when it does we'll be prepared to execute and deliver an enhanced customer experience.
To support the digital demand, we continue to evolve our delivered a home curbside pickup and click and collect processes and continue to add more automated pick up blockers across the Ctr network.
Moving on to revenue.
As I mentioned on our Q2 call given exceptional consumer demand is only a matter of time before shipments caught up with saying.
And in Q3 than they did at record levels.
Ctr revenue rose, 28% with strong demand across regions and every division.
As unprecedented consumer demand continued to put pressure on global supply chains. The teams efforts and in collaboration with our dealers help prioritize the shipping and receiving of key categories.
Our throughput capacity in the quarter was stretched as we process, an all time record of product through our distribution centers achieving these results was no small feat.
Thats off to TJ flood and his leadership group for all of their efforts with strong collaboration and expertise in our supply chain and merchandising teams, we overcame countless challenges in getting product to stores and customers.
And Weve increased our distribution capacity by leveraging our existing assets, including the reopening of our airport Road DC facility in September which is now operational and shipping an average of 175 trailers per week. This facility has traditionally been used for overflow storage, but we have now enabled.
Good for outbound fulfillment to stores.
We continue to look for ways to keep up with demand and improve our supply chain flexibility.
Simply managing product flow more efficiently with direct ship balancing or inbound across all regional Dcs as well as the ongoing dynamic prioritization key categories.
I'll now move on to sport checks results.
Up against our strongest comparable sales quarter of 2019 comparable sales declined 1.4% in the quarter.
Sales momentum in June carry into July with sales up 17% versus 2019.
However, it tapered off with softer demand in back to school categories, which led to us dialing down or promotional activity to focus on full price sell through which improved our gross margins and optimized our profitability.
This is in contrast to how we manage the second quarter in which we prioritize topline sales through cash conversion of on hand inventory.
Virtual schooling, the postponement of hockey and cancellations cancellation of many organized sports and activities lowered the demand for kids footwear bags athletic clothing and hockey equipment.
You May also recall that we transferred or bicycle inventory from sport Chek, the ctr in Q2, which netted negatively impacted sales in the quarter.
Sales were strong in categories, like hiking, and camping as well as golf and fitness.
It's also important to note that 55% of our sport Chek stores operate within malls, which we all know continue to be subject to restricted operating hours and less foot traffic the headwind is likely to remain.
We accelerated sport checks engagement with the triangle pilot program with over 5 million customers receiving unique category specific offers through the deployment of one on one bonus offer sent to triangle members.
Sport Chek ecommerce sales accelerated further up 90% in the quarter.
Our ending inventory and the business has materially lower which sets us up well to be fresh next year and the teams have ramped up their purchasing efforts for Q4.
Steven Brinkley has jumped right into the operations of the business and I'm quite pleased with sport checks performance in the quarter.
Now moving onto marks.
Mark delivered a great quarter with comparable sales in E commerce growth of 5.7% and 166% respectively.
Marks remains highly relevant for Canadians with industrial as the growth leader in the quarter and work were proving to be a highly resilient category.
In addition, our Levi's denim program resonated very well with our customers in the quarter as did our men's and women's casual footwear assortments similar to Ctr sales were driven by both higher traffic and a larger basket size.
Marks continued to shift to a more digital approach throughout the quarter, including efforts to shift from traditional print Flyers digital Flyers launching targeted one on one offers to the triangle member base offering its first ever exclusive triangle member offer on Denver, Hayes product and improving the customer experience.
For curbside pickup.
In addition, merx achieved a new milestone with owned E mail audiences, reaching over 2 million E mail subscribers up 20% from last year.
It's quite refreshing to hear PJ sank talk about experimentation efforts designed to create greater engagement with triangle members and how these digital marketing efforts will drive the business going forward.
Moving on to Helly Hansen.
Although external revenue was down 2.9% on a constant currency basis in the quarter, we're seeing encouraging signs of a rebound in key areas of the business.
He is managing the ecommerce shift effectively with the business delivering solid results in the direct to consumer channel at plus 26%.
Ecommerce mix within DC was up 82% in the quarter.
Hello, Hansen's workwear category, which represents almost a quarter of their business continues to be a resilient and strong performer.
And the Heli team continues to focus on the future recently signing partnership agreements to be the official head to toe apparel partner for all Canadians ski patrol members and the official supplier of the Norwegian National Alpine ski team.
These deals are a testament to how lease status as the leading apparel brands ski professionals and their dedication to the development of high performance apparel.
Before I hand, the call over to Gregory for the financial remarks, I want to highlight the impressive performance of our own brands portfolio.
With $1.3 billion in sales that CPC owned brands accounted for an incredible 36% of our retail sales in the quarter delivering impressive 23% growth over last year.
Ctr owned brands grew 28%, thanks to big names, such as Mastercraft modem faster Noma Woods and canvas were also very pleased with strong growth achieved a newer owned brands, including Vermont castings, Taipei and rally.
At sport Chek owned brands penetration reached 14% up from 10% a year ago.
Leading owned brands, such as rips own Helly Hansen in Woods drove those results, which helps sales and led to meaningful gross margin improvement.
Our strong performance in the owned brand portfolio will position us well going forward as we believe that once customers moved to trial, but they will be thrilled with our product quality and performance and hopefully overtime evolve to coveting and remain remaining loyal to our own brands.
And with that I'll pass it over to Gregory.
Thanks, Greg and good morning, everyone as Greg mentioned, we are very pleased with the results in Q3.
We converted our exceptional topline growth and profit while also generating strong operating leverage on a normalized basis after adjusting for $8 million of operational efficiency charges in the quarter diluted earnings per share were $4 or 93 cents up 42.5% versus the prior year.
This earnings growth was driven by exceptional performance in our retail business, which drove approximately three quarters of our IBT in the quarter with positive results across all of our key retail performance metrics.
First with respect to our retail topline revenue growth, excluding petroleum grew 18.6% and this was closely aligned to the comparable sales trend in the quarter.
This performance was driven by significant growth in dealer demand at Ctr and that marks by strong sales, especially in the industrial category.
Growth was only partially offset by softer revenue at check in Helly Hansen, which Greg touched on earlier.
The retail gross margin rate, excluding petroleum, while down 137 basis points in Q3 improved relative to where it stood last quarter there.
There are several factors impacting margin rate in the quarter. As a reminder, ctr has the lowest margin rate among the retail banners and similar to Q2 ctr significantly higher contributions to revenue weighed down the overall retail margin rate.
Additionally, within Ctr, there was a business mix impact due to the relatively smaller contributions of our higher margin automotive business.
A final dynamic I would want to highlight is related to foreign exchange, while our currency hedging program typically limits our exposure to the spot rate. The recent significant growth in demand has led us to making more purchases at the spot rate, resulting in a gross margin headwind.
Partially offsetting the margin compression in retail was a rate improvement that sport chek attributable to a favorable price impact in what has been a less promotional environment and a more profitable product mix.
In light of the strong revenue growth our corporate revenue is our corporate inventory is sitting $106 million lower versus prior year.
Strong sell through at marks and lower purchases at sports in the first half of the year contributed to the reduction in inventory.
Offsetting this our higher ctr inventory levels in anticipation of our busiest fourth quarter and we are in a strong position to meet dealer and customer demand.
I am pleased with the progress we have made in the quarter generating operating leverage.
Our consolidated normalized opex rate, excluding petroleum improved by 264 basis points.
Double digit revenue growth, our ongoing efforts to control discretionary spend and meaningful progress within our operational efficiency program resulted in a considerable improvement through our operational leverage.
I also want to highlight that on a year to date basis, our normalized ox ratio was 13 basis points better.
And while this figure reflects a more muted revenue growth due to the Q2 store closures. It captures our expense control efforts and the operational efficiency benefits, we've realized to date.
While I'm covering opex I have to hope it related expense items I'd like to call out.
First we incurred $18 million and costs associated with the enhanced safety protocols at the stores and the special support program for frontline employees. This.
This is less than we saw in Q twos results, partially due to the fact that the support payment came to an end in August.
And second as was the case in Q2, we saw a benefit and our share based compensation expense of approximately $16 million due to the continued recovery of the share price, which at the end of Q3 had rebounded to its pre pandemic level.
This was reflected in personnel costs.
The combined impact of these two offsetting opex items netted out to $2 million increase in expenses and a 7% hit to our diluted EPS.
Our balance sheet remains in a healthy position and we ended the quarter with over $1.7 billion in cash and marketable securities.
Comments on our financial services business, which continues to deliver strong operational metrics and a challenging environment.
Consistent with the second quarter in general industry trends the ongoing impact of the pandemic has led to lower credit card spending which is translated into receivables being down 7.1% in the corner.
As a result of this trend we collected less interest charges and interchange fees in the corner and our gross margin dollars declined by 20 million $20 million versus last year.
Our credit card portfolio continued to be operationally strong ending the quarter with a P. D. Two plus rate of 1.91% better by 83 basis points compared to Q3 last year customer payments trends remain strong.
If we look at our allowance rate it was 15.32% in the quarter slightly higher than where it was a Q2 of this year as we continued to see a decline in receivables in Q3 as compared to Q too.
All in all in the quarter the business delivered earnings before taxes of $91 million, which was $18 million below the prior year.
And while they're still significant uncertainty looking ahead, we have reasons for cautious optimism.
Despite the continuing headwinds headwinds impacting our receivables we were encouraged to see credit card spending trends improve throughout the quarter.
And in fact in September credit card sales were essentially flat to last year.
We are also keeping an eye on some favorable macroeconomic trends related to savings levels and decreasing levels of debt as a percentage of of disposable income both of which may be positive signs as we look forward.
Clearly these are all trends, we continue to keep a close eye on but I do want to remind everyone that we believe are payment trends have been helped by government subsidy programs and mortgage interest deferral plans offered by the banks.
As it relates to liquidity of financial services, we repaid $700 million on a note purchase facility with Scotiabank and also repaid $500 million of Glacier term notes at maturity.
We subsequently you'd $480 million of glacier term notes.
And we're pleased to see investor demand at the high end of our historical experience oversubscribed on both the senior and sported notes.
Our success with the Glacier deal was a nod to the strength of the business and a clear signal of investor confidence before.
Before I hand, it back over to Greg a quick reminder, that 2020 has 53 weeks and as a result, we will have one additional week in the fourth quarter.
Consistent with our past practices, we will provide you with a comparable same sales metric that is based on a comparable number of weeks in both years, but we will not try to isolate out its impact on earnings.
With that I'd like to hand, the call back over it.
Thanks, Gregory before I close I'll say, hey, we've got good momentum heading into our busy of selling season.
And I'd love to say more but Gregory won't let me.
And although we've chosen to take a more cautious approach with our queue for promotional calendar in order to maintain safe levels of traffic at our stores, we feel good about our business as we head into Christmas.
Regardless of how COVID-19 progresses, we're confident that Canadians will still find ways to celebrate the seasons and we expect that decorating the house will be one of our customers biggest choice. This Christmas Aleve.
Believe it or not Christmas sales are already quite strong and C. T R and the early snow in the west drove her outerwear business at both marks in sport check when.
When it comes to digital we are hardening the ctr site to handle what we know will be increased man during the quarter.
We know that having a broader online assortment is critical and a significant opportunity for us given height heightened demand to our tier site.
We are currently Onboarding, new online only vendors as we look to expand our relevance and key categories.
New Assortments have already been lunch baby and furniture and that are now our top two categories, an online only sales and.
And will serve as a template as we went to accelerate the growth of online only sales in 2021.
As I look ahead I am pleased with the progress we are making on our one digital platform and we're on track to roll out in 2021.
We're continuing to invest in our store network, having opened three new concepts stores during the pandemic.
Our new Liberty village Niagara Falls in Fort Saint John stores provide seamless shopping experiences a focus on a community connection and offered highly tailored assortments led by data analytics and a focus on bringing owned brands to life in an environment that better enables our customers to shop how they.
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Between the proven strengthened relevancy of our brand and current momentum I feel confident about our future.
We know what we need to do.
As much as our business may be complex or purposes simple continue to be there for Canadians.
With that I'll turn it back over to the operator for questions.
Thank you.
At this time I would like to remind everyone in order to ask a question. Please press star than the number one on your telephone keypad.
We ask that you limit your time to one question plus one follow up question will pause for just a moment to compile the Q&A roster.
The first question is from Patricia Baker with Scotiabank. Please go ahead.
Good morning, everyone I have one question in the follow up so in in the really send in your comments, Greg and actually you too correctly. You know you really emphasize the fact that triangle with a big contributor to your success in Q3, and particularly that you saw very soon.
Both with young families, which is which is target group that you've been talking about for years that you really want to get to with the loyalty program and I guess it could be and to be fair to say that you know I mean, I think Kobe, providing you with an opportunity to really show what what you can deliver.
You know through triangle with you have your three banners about particularly uhm with Canadian tire I'm. Just curious if you can talk a little bit about what specifically you know in in the quarter drove that with respect to your penetration of young families. In Canada <unk> you still see that there's further room to go.
And is there endings anything specific that you're that you're doing with triangle for the holiday season. This year that will differ from what you might've done last year in other words are you leveraging the the the strength of that that business and the data analytics further than you might have in the past.
Sure. Thanks, Patricia I'll try and hit on a few things there I mean, I think contextually I would I would start by just saying I am so encouraged by the the matrix that I'm seeing in terms of customer engagement and and I guess, just the adoption of a real understanding of how critical to try.
Angle program is in and creating a differentiated value throughout the organization.
In my prepared remarks, I talked about digital acquisition in marks as an example, and I think one of the most important things from a metric standpoint.
Is how the program is engaging new members.
I quoted 400000, new customers, but that's not the whole story we had.
Just under 200000 customers re engage with us meaning they shopped us in the quarter, but have not shopped with us in the last 12 months. So it's 600000 customers that we now have the chance to build a relationship with going forward.
And if you just look at how they spent this quarter they spent over $125 million with us across the portfolio, which on an isolated basis is three points of comp when you compare it to last year. So it's a it's an extremely meaningful opportunity for us if we look at the number inclusive of.
Q2, and Q3, it's over a million new and ran gauged customers and as you point out it's now up to us to try and build a continued sticky relationship with them.
And engage them in our program post Covid. So yeah, we believe to answer a couple of things in in your question.
We really believe that we have room to go I mean, we just have unbelievable opportunity with these new customer they are over indexing too.
Young.
Adults and active families, which is right in our sweet spot.
For for Ctr and for for lifetime value across the portfolio and in terms of what's different as we head into queue for I would say the biggest point of differences our ability to engage triangle members for sport check in marks we talk to you a little bit about.
Attraction that we made in changes we made in with the signing of a new dealer contract, which gives us a little bit more access to the utilization of that customer data for engaging customers and my prepared remarks would have suggested that we were off and running on that in in Q3. So you can expect that to be very different.
Of on a year over year basis in Q4, and our analytics just in terms of recommended offers next best offer engines et cetera.
Personalized basis are just getting stronger more work to do.
Really kind of hone in and make it as efficient as possible, but our return on AD spending a lot of the metrics that we look at from an efficiency standpoint for a one on one offers are all going in the right direction.
Okay. Thank you so much for that now in your <unk>. This is related follow up button in your M. Closing remarks, you talked about your investment in the store in network and I was intrigued hearing you talk about that these stores have highly tailored assortments now, presumably yeah, the ability to that could be wrong, but the ability to the happy highly Taylor Assortments you know <unk>.
<unk> on a lot I guess the data that you have from customers and and and goes back to to to triangle. When you know another you said that I'm. Just curious do you think there's an opportunity to further Taylor assortment and your you know bring that notion back into your you know existing not new store base overdue.
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Absolutely well uhm.
Where we've engaged externally.
From artificial intelligence standpoint, with some real expertise to completely turn our business processes for planting ramming stores upside down to have it very store specific to utilize big data to really cater and curate assortments at an individual level.
So the intent and are the kind of the north star of the work effort is for us to be able to sit down or or for the dealer to be able to self serving on the room and really optimize assortment in and I'll buy a business by a division the overall store.
Et cetera, and quite frankly, if we if we get the capability to where we were we would like we think there's lots of ability and the rest of the retail portfolio as well so.
Lots of great analytical work going on in our network performance Division and the Great News is the dealers or just eating it up.
Can't go fast enough. So we think it's a tremendous opportunity going out to the entire network Patricia.
Okay. Thank you so much I'll get back into Q.
Thank you and the next question is from Peter Sklar with me No capital markets. Please go ahead.
Mr Square your line is now open. Please proceed.
Thanks, I'm just wondering if you could give some flavor on.
You know how things were looking at the end of the quarter and as you exit the quarter you know in terms of.
Or Canadian tire banner and and the comp.
You indicated that there was some commentary that you're gonna be less promotional when.
In the fourth quarter.
But you are seeing but you'll have said, you're seeing strength pretty well across all categories. It's just not the obvious summer seasonal category. So.
Uhm a bit of a mixed message there I'm just wondering if you could talk a little bit about what you're saying as you exit the border and as you get into the the fourth quarter and obviously there were some weather effects as well you talked about the.
The weather you've seen west we're getting some warm weather in Ontario, now, there's there's a lot of moving parts here Gregory or anything you can kind of Phyllis in on.
Sure.
Start Gregory May keep you honest here.
Yeah, you know as I mentioned.
You know over 90% of Ctr's category screw in Q3, which just I think continues to speak to the relevance of this multi category assortment.
We believe that the the macro trend with respect to one stop shop is here to stay.
At least over the winter and while the pandemic is ongoing and this certainly is a big tailwind for Ctr's. So you can expect that to continue right into the queue for.
In terms of what will be different in queue for we do we do think that our Christmas categories will be top of mind for customers. We already saw similar trend play out with our Halloween decor categories in late October.
Additionally, we have tremendous Ah ongoing strength in poor very large non seasonal businesses the kitchen business the tools business. The cleaning business are all performing exceptionally well.
And our top drivers of the overall portfolio. So we don't expect any changes associated with that is the weather turns here as the cold weather arrives.
Customers are certainly shifting to restoring the comfort of their home and and wellbeing. So we're seeing fixing projects continue.
To be critical and maybe even dial up a little bit and businesses like painting.
Setting up Workspaces for a number of family members and then wellness is just so top of mind.
Across Ctr and sport checks. So we're we're seeing continued demand for exercise equipment.
And then wellness of the mind I guess with indoor games I mean, the the search result differences on a year over year basis for for searches like games rooms, Ping Pong tables pool tables et cetera.
Winter cycling for indoors and outdoors. So it is it's really amazing when you think about the breadth of the categories that we offer it just different categories end up being in the mindsets of Canadians at different times.
And we've got solutions and I think you heard us talk about the demand for outerwear another banners as people you'll.
You'll get ready for the cold weather, but I also believe that's a nice tailwind just in terms of people wanting to continue to get out of their house people and walking routines et cetera, you Gotta put different gear on as we move to a different season. So.
October was strong.
But but as you know November and December are huge months.
But we feel like the teams are doing everything they everything they can as are the dealers and we're certainly better prepared.
Then we were early in the crisis that's for sure.
And why did you make the commentary them, but you're scaling back on your promotional intensity for queue for is it just because of the sales are there are you don't have the inventory.
What your style is better.
It's completely from a consumer safety standpoint, and I don't expect you are going to see anything different from our competition I mean, when when we have heard us talk about just how much of the business in queue for travels through the last five weeks of the year and specifically those four or five days at the end of November.
Remember red Thursday through to cyber Monday.
We can't handle the traffic patterns into the store effectively and safely.
Even at kind of last year's numbers.
With without contemplating.
Any growth that will lay around that the lineups would be completely out the door. So I think you can expect us to be highly competitive.
I know they've been back in the stores testing you know acquisition in store that is safe for both the employees and obviously safe for the customers and I think they've found a methodology and an approach that they think is now scalable, but I mean, it's going to just take a little bit of time, you can't turn that it's not like a light switch where you can turn it kind of on and off that quickly. So it's going to take a <unk>.
Bit more time to to go back into the stores again, Greg talked about safety. It's just top of our mind right and so you know I think that's what we'll just keep an eye on is kind of the sales trends and I mentioned, both those macroeconomic trends as well that.
Those are making us feel a little bit better than than certainly we would have been three or four months ago. So.
I think we feel very good about financial services I still think there's a great opportunity to improve integration within retail dad kind of longer term value as well, but I just think we want to be careful over these next little while to just not.
Similar Greggs point, when I don't Wanna drive kind of promotional activity and want to keep everybody safe would be how I would answer.
Okay. Thank you.
Thank you and the next question is from Ivy Natal with RBC capital markets. Please go ahead.
The research that we.
That we conduct externally that we are taking share significantly both both bricks and mortar and E. Com I think I I stated that with all of the divisions in which we compete.
And.
It's it's really crystal ball time in terms of of how we think through what was pull forward versus not I wish I had a better kind of.
Based answer for you but.
It's it's really difficult to figure out what was what's pulled forward.
We every store we opened we get some incremental benefit.
And but but but the data and the capability just gets stronger and stronger, especially as we're starting to engage with much more sophistication for from an AI stamp.
There were banners as well, but just sort of going through the pandemic and seeing how consumers are shopping your banners how does that affect how you think about your assortment categories that you that you offer but also depth and breadth of the assortment and I guess you know obviously owned brands as a as a key part of this you know you noted the strength that you're seeing there and I know it.
Spent a long term focus but just also interested specifically how all of this fits in with your own brand strategy.
Just trying to think about how to answer that mark.
[laughter] we have.
Cause you know, it's almost 200 categories under the roof of Canadian tire already.
So you know it's it's one of the reasons that I felt the need to just call out and prepared remarks. This notion of how we extend the relevance of our assortments with online only we we've seen how Canadians have come to I guess, the front door of all of our stores, which is the website uhm and.
Please do breadth and depth reviews as part of that kind of normal process.
But I think it's just focus on making sure the businesses that were in that we are ready for the demand next year sprinkling in.
Sprinkling in the online only and party city is a is a whole new category that the team has been quite focused on in the party assortment.
And we've done a lot of work in Q3 that will manifest in late Q1, and early Q2 next year, which has us rejigging some of the retail floor and the categories et cetera and had us.
A must call where this year, we drew the brand by 250% and just the incremental margin on those sales have paid for over 50 per cent of the acquisition in less than a year or so.
No fly zone in marks just lots of stuff going on so that obviously has the capability. We've been building over the last two or three years and is a very important part of how we how we view breath that architecture price ladder and all that good stuff.
Assortment planning.
Okay. Thanks, and then just quick in terms of a follow up you touched on online only obviously that it is going to play an increasing role I'm just curious how material that is today and how does the financial model work for that for that business. Thanks a lot.
Yeah.
It's small today like I said, it's just a few categories here there.
You talked to monetization opportunity sure been lots of retailers are doing that we have you've heard me talk about our belief that we have very rich digital customer platforms.
And so I.
I certainly wouldn't be surprised if that's part of our strategy going forward.
And the last piece is you've seen us.
You've seen us through the bank with a value proposition on the credit card.
Engage with partners to kind of increase our value proposition stickier relationships, you've seen us extend that.
You're going to see more so.
The the into specifics around those customers you've identified I think the you know the question to me will be where are we with them in a year from now so how many of them were one and done and how do we re engage them. So I think and that's that's kind of top of mind I think for all of US here on the management team is how do we continue to maintain a relationship with these customers overtime. So I think it's it's a great question.
And I think we've got a lot of strengths that we can start to leverage and use now to kind of a really build that I would even more.
Thanks Bye.
Thank you.
The last question will be from Brian Morrison with T. D Securities. Please go ahead.
Hi, Good morning, just a couple of follow up questions. Greg first one on loyalty the 400000 new members.
What's the total numbers now can you just clarify really what drove that increases at your portfolio of a one stop shop and then what's the average spend up a loyalty remember versa non loyalty remember purchase.
[noise] I I, we may have to get back to you on those stats right. The actual you know total we call him active members. We've got you know.
Sorry, we've quoted 10 million total members before 9 million active members.
If that was the cutoff line prior to Q3, we would have probably 9.6 million active members with the 600000 I talked about there could have been some churn in the 9 million, but yeah I don't have an off the top of my head and in general it really depends on the segment.
In terms of spend but you know, it's it's roughly double the spend a a non loyalty member on average and and certain segments like active families, which is why we are so attracted to them.
Wood Index Wood index much more.
From a spend standpoint.
Okay, and the increases that really just your one stop shop across the board.
Okay, I'll start because I've got.
It's Gregory here I I I think that's a piece of it but it Brian I think it's broader than just the fact of one stop shop I think I I really think it's the value prompted Greg mentioned around.
Customers getting it understand I think it's product assortment as you as you bring customers back to the store to realize you know, it's it's maybe a bit of a different kidney entire then they remembered or or you know kind of the the other banners to check in marks as well. So I I think that's a big piece of it is the one stop shop, but I wouldn't discount the other pieces of that is all I am suggesting there's there's more.
Or to that puzzle in my mind than just the fact that it's one stop shop I think.
It's all the things that they're working on it the own brand strategies. All these things to me that we've been working on over the past few years or.
Putting them altogether to be honest with Ya, Yeah, I I would agree I think the it may start with the one stop shop, given the vastness of the portfolio, but if you take if you take the 400000 new members as as an example, a large percentage of them engaged with us online.
And so what's great about that as in order to engage with US online you authenticate almost immediately from an E mail Contactable standpoint information et cetera, and now we can segment them. So we we we think our online capabilities as well or or a big big driver of this and.
And to the degree that we get to know these customers.
Just sharpens, our ability to be able to engage with them and keep them around so.
So I would agree with Greg it's more than one stop shop, but I think.
The premise of your of your question I think there's a lot there given just how many categories. We participate in how many jobs enjoys we cover off her life in Canada.
My thoughts.
Right. That's helpful. Thank you both.
Thank you.
Thank you.
This will conclude today's call.
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