Q3 2025 Canadian Tire Corp Ltd Earnings Call

Thank you for standing by. My name is Lauren Cannon 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, simply press star 1, 1 on your telephone keypad,

to withdraw your question, please press star 1 1

Now, I will pass along to Karen Keyes, head of investor relations for Canadian Tire Corporation. Karen.

Thank you, Lauren. Good morning everyone. Welcome to Canadian Tire. Corporation's. Third quarter, 2025 results conference call.

With me today are Greg Hicks, president and CEO Executive Vice President and CFO Darren Myers.

And TJ flood Executive, Vice President and Chief Operating Officer.

Before we begin, I'd like to remind you that today's discussion contains information that may constitute forward-looking information within the meaning of applicable securities laws, including Management's current expectations regarding future events.

And the company's True North strategy.

Although the company believes that the forward-looking information in today's discussion is based on information estimates and assumptions that are reasonable. Such information is necessarily subject to a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in such forward-looking information.

For information on these material risks, uncertainties factors and assumptions. Please see the company's mdna which is available on our website and filed on Cedar Plus

The company does not undertake to update, any forward-looking information, whether written or oral, except as is required by applicable laws.

I would also highlight that our discussion today will focus on the normalized results of the business on a continuing operations basis.

Remember that the sale of how we hands and completed on May 31st with the business being treated as a discontinued operation, in our results up to that date.

After a remarks today, the team will be happy to take your questions.

We'll try to get in as many questions as possible, but ask that you limit your time to 1 question plus a follow-up before cycling back into the queue.

And we welcome you to contact investor relations if we don't get through all of your questions today.

I will now turn the call over to Greg.

Thank you, Karen and good morning everyone.

Financial Services businesses.

We achieved strong Topline and underlying retail performance across our business.

Our loyalty engagement increased with over 7 million members shopping our banners in the quarter, an increase of 3%.

Sales. Also grew across our major banners with CTR and Sport Chek driving Revenue gains

These results were supported by our teams, very strong margin management and ultimately diluted earnings per share. Grew nearly 7%.

There's no question that the consumer demand landscape remains dynamic.

Yet Canadian Shoppers continue to demonstrate admirable resilience.

We are cautiously optimistic. Recognizing the macroeconomic backdrop, remains uncertain and unpredictable.

With ongoing trade negotiations and government actions, that will shape the Canadian economy for years to come.

We are actively monitoring. These Trends and developments. Ensuring we remain agile and responsive.

And like the entire retail industry. We are watching the Canada Post labor dispute closely.

And with disappointment that it comes at a time when consumers are craving value.

With 1 of Canada's best love Flyers. This is a headwind that we are working to match and we are hopeful this situation, stabilizes swiftly and sustainably.

With the launch of True North, we've talked at length about the importance of CTC performing and transforming in parallel.

that was evident in Q3 as we charted strong results while advancing our transformation

We've done the work to organize and set our teams up for Success both at the corporate and store level.

And September, we held our annual Canadian Tire Dealer convention.

and there's no question that the dealers are aligned with where we're going strategically

In Q3 we also completed our internal restructuring as planned.

With our new organizational structure. Now, complete, we are set to accelerate the next phase of our journey.

which includes harnessing technology and AI to drive the business forward and deliver operating Leverage

We're moving the entire Enterprise to take more streamlined approaches. Based on data informed, go to market strategies and great retail execution.

As we continue to roll out, this new approach, the impact will be evident in our retail forward, strategic Cornerstone.

You can expect us to show up as an even better retailer through a mix of both tested and new tactics.

We'll leverage the alignment of the dealers. Our restructured teams are high low pricing, and our Omni Channel customer experience to capture market, share

For instance, throughout 2025 our e-commerce. Growth continues to outpace bricks and mortar. As we invest in great, Digital customer experiences.

Awareness of our comprehensive range of omni Channel offerings and services, like in-store pickup of online orders shipped to home. And same day delivery across. All our banners continues to increase helping us grow.

The awareness is critical in both busy, Urban markets and non-vegetarian of our sales.

And with the majority of our transactions starting online, we continue to explore a variety of enhancements, including leveraging new, AI tools to improve search performance and to identify the triangle offers Canadians need building on Enterprise level customer data.

as we've done over the last many months,

Through true north. We are also continuing to refine our Promotional and digital engagement adapting to changing, customer behaviors, and reducing our Reliance on traditional channels.

Likewise as you saw in our Q3 results, our AI pricing tool, David is helping us analytically, engineer, promotional programs, and optimize regular pricing to provide customers the value. They create all well managing our margins.

In our conversations with globally, scaled, advisors, and partners David has been called out as 1 of the leading North American examples of how retailers are using generative AI at scale.

David Builds on our unique first party data, which remains a key differentiator in our modernization efforts and our deployment of AI.

Also delivers considerable value to our customers.

Our triangle Rewards program is another Cornerstone of our strategy, and by partnering with other strong Canadian Brands. We are driving the scale of both, the triangle brand, and the valuable first-party customer data in generates

Case in point our first partnership with Petra Canada, has been very successful.

growing to nearly 500,000 linked members and over 1 million dollars of incremental sales,

In the quarter, 10% of triangle. Members were active at Petra Canada.

In Q3 we announced our newest loyalty partnership with Tim Hortons. Which in addition to being the nation's largest quikserv restaurant change chain chain is a brand loved by Canadians Coast to Coast.

This partnership feels like a natural fit.

And given their positive response to our announcement. We know that Canadians agree.

At the same time, we continue preparing internally to launch our RBC in WestJet loyalty Partnerships.

With our RBC partnership. Now in the soft launch phase, customers can now link their triangle rewards and RBC payment card to accelerate their earned

The soft launch period will provide us important learnings, as we prepare for a full launch, with RBC in early 2026.

As well as WestJet and Tims, both planned for later next year.

With new Partnerships like these triangle is expanding from a loyalty program into a powerful Canadian Network.

Offering value to the millions of Canadians who engage with these programs every day.

You can expect us to make the most of these iconic Canadian Partnerships, the natural customer engagement and the associated brand awareness in 2026 and Beyond.

And with that, I'll hand it over to Darren to take you through our Q3 results. Thank you Greg and good morning everyone.

Our third quarter performance, reflects continued strong retail execution, delivering improved profitability and higher return on invested Capital. At the same time we continue to build momentum in our true north transformation, making strategic Investments to support long-term growth.

Retail Revenue remained, robust and retail sales came in, at a strong margin rate resulting, meaningful retail IBT performance. Excuse me up. 19% year-over-year.

At the bank customer and risk metrics were generally in line with our expectations.

As prescribed last quarter, we are making Investments to strengthen and grow the business, which contributed to lower IBT.

Lower leverage reduced Finance costs and continued progress against our share repurchase program contributed to the 6.5% year-over-year, increase in normalized earnings per share.

Let me now take you through some of the highlights of the quarter.

Retail Revenue, excluding petroleum was up close to 6% driven by CTR dealer. Restocking ahead of Q4 and solid sales growth across our banners.

Consolidated, comparable, sales grew 1.8%, led by a strong performance at Sport Chek.

Loyalty penetration was up, 117 basis points to 55.2%.

At CTR comparable, sales grew, 1.2% driven by trips, and units per transaction, both which trended higher this quarter.

We experienced weaker sales and essential categories in a decline in the living division, as a result of slower sales of Summer climate control products combined with less flyer distribution. Towards the end of the quarter, due to the Canada, Post strike action,

Sales were up 2 to 3% in our other 4 CTR divisions.

Automotive delivered, a 21st consecutive quarter of growth with auto maintenance, continuing to be a strong performer in Q3

Regionally growth was strongest in Ontario and Quebec. While Alberta was down slightly after a strong performance last year.

While CTR comparable sales are trailing Revenue in a year to date basis, due to strong. And earlier, dealer replenishment, both have been robust with CTR year to date Revenue up 7% in comparable sales up to 4%.

As you know, CTR Revenue growth and sales growth tend to converge over time given our dealer model.

Sport. Chek had another great quarter comparable. Sales were up 4.2% with strong performance and back to school and back to hockey.

Sport checks, sharpened focus on winning with athletes and being a destination for sport. Continue to drive stronger sales of hard Goods including Golf and hockey, as well as athletic clothing and Footwear

Up 2.5% supported by the continued success of our new bigger better, Bolder stores.

during Q3 we opened our 12th BBB store including the first in the province of Quebec as we continue to expand our presence in Quebec and Ontario

From a category perspective in earlier, start to fall in several provinces contribute to increased sales of casual wear categories, like sweaters, and jeans, and work for sales were also up.

Turning to margin now. A retail gross margin came in strong with solid execution, favorable mix and margin rate increases across all banners.

We continue to build capabilities around promo and pricing through our margin nerve center, and our AI platform David that are helping us manage a dynamic environment.

Better product margins across the businesses and less foreign exchange headwind than we anticipated contributed to an excellent result on margin.

Excluding petroleum, retail gross margin dollars were up nearly 8% and the margin rate improved by 57 basis points year-over-year.

As.

Rsga also included variable cost of support our growth and business as usual inflationary, inflationary pressures.

Initial restructuring, Savers savings and higher vacancies were a small positive contributor to this quarter.

With our restructuring. Largely complete. We expect to realize that full quarter of benefit in the fourth quarter.

Bring it all together, we delivered strong operational results in our retail business normalize, retail epita increased almost 4% to 484 million as revenue and margin strength. More than offset, our investments in the business.

Cash generation from operations was more moderate, this quarter reflecting working capital and Investments ahead of our largest quarter.

Corporate inventory was up 5% as we exited Q3 with increases primarily driven by Sport, Chek, and marks at CTR dealer inventory was up 7% to support Q4 growth,

Moving to financial services.

Customers spend Roma's robust and we continue to deepen engagement with card holders, receivables, grew 2.3%, primarily driven by higher average account. Balances

We continue to leverage loyalty, issuances, as a tool to engage card holders and drive. Retail sales with ectm issuance up close to 8% over the last 12 months.

Increased card, holder, acquisition contributed to a modest increase in active accounts during the quarter.

Ctfs IBT declined 26 million year-over-year primarily reflecting higher sgna as expected driven by infrastructure and growth Investments.

Additionally, gross margin dollars. Decreased 3% driven by increased write offs this quarter.

As we noted last quarter, sgna levels are expected to remain elevated into 2026 as we continue to invest in the business.

Risk metrics remained relatively stable and were in line with expectations, with PD P, Pd2 Plus at 3.5% and the net write-off rate at 7.2%, both up approximately 10 basis points quarter on quarter.

We continue to closely monitor the environment and are prepared to act. Should we see meaningful change?

With no increase in the allowance and an increase in the ending receivables. Balance to 7.7 billion dollars. The allowance rate ended at 12.1% remaining within our targeted range of 11.5 to 13.5%

Before I wrap up and hand the call back to to Greg let me provide color on what we're seeing so far in Q4 and on our Capital allocation priorities for 2026.

Well, September was cool in Parts. This was followed by an unfavorably warm October, most of the country which contributed to Flat to modest sales growth in the early part of Q4,

Earlier restocking including a key winter categories where CTR dealers ended lean last year. Contributed to CTR Revenue outpacing sales in Q3

Being in stock combined with continued customer resilience in an extra week. This year, should position us for sales growth in Q4.

However, sales over the next few months will be dependent on how winter comes to us this year and how quickly Canada posts stabilize.

Strong margin management has led to a year-to-date retail gross margin rate above our Northstar margin based on typical Q4 performance. We are positioned to overachieve our Northstar this year. Of course, keep in mind that mix and other factors can drive variability quarter to quarter.

So, we can proactively adjust should the external environment change.

Finally, let me close by outlining our 2026 Capital allocation priorities.

We are pleased with the position of our balance sheet, following the sale of our healthy Hansen business.

Our approach to Capital allocation continues to be balanced investing in the business for long-term value. While also giving back to our shareholders,

our true north strategy is providing greater Clarity on investment priorities with a continued emphasis on refreshing and enhancing the store digital experience, rolling out, loyalty Partnerships harnessing Ai and advancing our technology and processes to drive scale and operational efficiency.

We expect to spend operating capital in the range of 500 to 500 million in 2026 in line with our long-term historical run rate.

These Investments shaped by our true north. Priorities are purposely designed to improve our long-term financial performance.

We also continue to deliver return to shareholders.

As of last week, we had completed the $400 million of repurchases under our 2025 share repurchase intention.

Today, we announced that we plan to repurchase up to 400 million dollars more by the end of 2026.

Finally, in March, the dividend will increase to $7.20 per share which will be our 16th consecutive year of dividend increase.

As I reflect on the last six months since I joined, I'm pleased with our progress and energized by the opportunity in front of us to deliver improved results. We are building new discipline around planning, performance management, and capital allocation, and we will continue to evaluate the returns that we're getting from our investments.

Importantly, our teams are embracing the need for Change. And for that, I want to thank them. We look forward to updating you on our progress, at our Q4 results in February. And with that, I will hand the call back to Greg

Thanks. Darren I'll conclude today by thanking our team.

Our people continue to reinforce our purpose through actions that demonstrate. We are truly here to make life in Canada better.

Not just for our customers, but also our communities.

For example, in Q3 the Sport Chek and jumpstart teams partner to help Community sport organizations, replenish their outdated equipment.

And in turn offer more programs to more. Participants.

And just last month we expanded our partnership with the Downey wenjack fund through our commitment to revitalize the blanket funded by providing at least 1 million dollars each year for indigenous land initiatives.

This holiday season will Mark our debut stewarding. The Hudsons Bay stripes with products including the iconic Point blanket hitting stores on December 5th.

Step by step. We have taken great care with this brand and we believe wholeheartedly that our curated Stripes holiday capsule. Collection is a sign of that stewardship.

We picked holiday favorite items, working with original vendors to maintain quality and craftsmanship.

And we expect this initial run of products to fly off store shelves.

Our meaningful product presence will roll out in the back half of 2026 and our hope is to continue stories that belong to all Canadians. Honoring our history while driving into the future.

And Canadians are taking notice.

Last week. The 2025 Canadian Harris poll study showed that our already strong reputation with Canadians is improving.

With notable gains and categories like vision and growth.

Like our fellow Canadians. We remain confident. And we are taking the right actions to prosper over the longer term.

Last but not least, I would be remiss if I didn't acknowledge what an exciting few weeks. It's been in the World of Sports.

First, I want to congratulate Martha Bilis on her induction into Canada's Sports Hall of Fame.

Martha received. Canada's. Highest sporting honor.

The order of sport for her work advancing sport Nationwide through JumpStart.

And second, I must extend my congratulations to the Toronto Blue Jays on their Incredible World Series run.

What a thrill that was for the city of Toronto and all of Canada! Not only did this Jays team demonstrate the power sport has to bring a nation together.

But their success fueled sales of fan gear, which has been a nice tailwind for us as we cop last year's strong and early winter sales.

And with that, we can open the call to questions.

Star then 1 1 on your telephone keypad to withdraw your question press star then 1 1 again we ask that you limit yourself to 1 question plus 1, follow-up question, before cycling back into the queue.

We'll pause for just a moment to compile the Q&A roster.

Our first question comes from the line of Irene Natel with RBC Capital Markets. Your line is now open.

Thanks and good morning everyone. Uh, thank you for the for the robust commentary, really helpful. Uh, 1 showing how, you know, you and we are think should be thinking about Q4 and, you know, you've given us your 2026 Capital allocation ncib levels stable despite your your strong balance sheet so wondering about your assumptions and how you're thinking about 2026 um you know and what underpins that th those decisions. Thank you.

Yeah, good, good morning Irene. Um, you know, I think it, I, I'd go back to what Greg said and prepared remarks, which is, you know, we are cautiously optimistic. I mean, if we look at this quarter, we saw, you know, trips up. We saw Vasquez up, we saw lots of positives, we're, we're executing good retail fundamentals, um, and we are still planning for growth and we're positioned for growth, you know? That said, as I mentioned for Q4, you know, we are mindful of 2 2 things. 1 is just how weather is going to show up as well as just stabilization.

Of Canada Post, you know, as we think about next year again, we are positioned and, and, and planning for growth. But as we look at, in a cautiously optimistic view, uh, mindset. We are really watching the the consumer closely. So, you know, there are lots of Dynamics going on right now, we still feel good about the business, but we're watching things closely.

That's really helpful and and just as a follow-up as you sort of, with all your data, when you look at and clear the utility in Q3, as you look at consumer spending. Um, as you look at ctfs, are you seeing red flags? Are you seeing changes what, you know, what are you seeing there?

Are it's Greg good morning. I'd say you know, more of the same um and in line with previous commentary in terms of the state of the consumer. Um, I think, you know, we we continue to see similar characteristics in terms of spend regionally, uh, Alberta was down. But that, that was a, that was a weather copy.

No major shifts. In terms of spend by household income.

Um, you know, we're seeing membership spend growth at all income levels and we're actually seeing some real resilience with low income apartment dwellers.

Um, we continue to monitor your communities, hit hardest by tariffs at both Sales and Credit Card metric levels and there's nothing really to call out there either. It's pretty stable. Um and and then I think, you know, when you when you translate that into the performance for us in the quarter, I I think it's similar to year to date Trends. You know it's minimal GDP growth.

But we're growing.

And to Darren's Point. There's, there's no question that the consumer demand landscape remains Dynamic. Um, there are absolutely puts and takes uh, at the at the macro

But Canadian Shoppers just continue to demonstrate admirable resilience. Um, and and again, just to follow up the bridge, the 2 questions. I I totally agree with with Darren, we're we're cautiously uh, optimistic. Um, we're planning in a very similar way right now to the way we thought about planning this year uh at this time last year, but know that there's uh, you know, it's still a good amount of uncertainty. Uh, but I I think the teams are demonstrating their ability to work through that.

That's great. Thank you.

Thanks.

Our next question comes from the line of Christy with Dijon. Your line is now open.

Hi, good morning everyone. Um I first I want to just to to clarify with respect to the CTR, same Source sales. Did I hear you correctly that through the quarter? It kind of slow through the quarter um mainly because of the Canada Post strike and then right now in October, it's kind of flattish. Did I hear that correctly?

Alberta year-over-year. But yes, September definitely was was impacted by the Canada Post disruption, uh, operationally. It's obviously a major challenge for us when we get such late notice of disruption, uh, of of our flyer delivery. So that, that hurt us a little bit. And then, as we get into October, uh, that that's, I think you characterized it, right? And Darren said it, we're we're seeing kind of uh, flat to slightly up uh performance in CTR. Um and uh and we we continue to monitor closely um, how the sales are progressing. We've uh We've certainly positioned ourselves for growth under the right circumstances. When the when the weather shows up, we like the composition of our inventory. We like the newness in our assortment we really like to trajectory of the discretionary side of things and we think that's a little bit attributable to more Canadians being in Canada. If you look at Q3 um travel uh auto travel products were up gardening.

Was up outdoor. Uh, outdoor furniture was up and we think that's a function. Also of the newness, in our assortment um you you may recall coming out of Co, we had high inventory levels and we had kind of older assortments. So we're feeling good about our assortments. So we're we we feel like we've positioned ourselves as well as we can going into the quarter. And, uh, and we're uh, we're cautiously optimistic as we look forward.

Okay, thanks very much. That's very helpful. Are you able to at all quantify, the impact of the Canada Post strike?

On on sales.

Yeah, we're we're not going to. We're not going to do that today. Chris.

Okay no, no problem. And there maybe just a follow-up for you. Just when I look out to next year, in terms of retail SG and expenses, if you assume, let's say that the Top Line, the revenue environment is sort of normal, I call it low single digits and considering you have, you know, 100 million of savings benefits coming your way next year.

In that sort of setup, do you think you there is a potential for some sgna leverage in in 2026?

Well, the way I would think about it. We're not going to give guidance on the on the specific number but we are going to have the Run rate savings, which we talked about, which was 100 million. I think you'll see stability in our, in our investing, in the business. So we won't see the same. It's the same uptick and then of course, you'll have, you know, regular inflation that that that uh, and variable costs that support the growth. So I'll let you kind of put those numbers together, but those are the kind of 3 main components to think through as your model next year.

Okay, great. Thanks very much.

Thank you. Yeah thanks Chris. Our next question comes from the line of vol Street har with National Bank Financial. Your line is now open.

Hi. Uh thanks for taking my question. Um with respect to the gross margin rate, I think you indicated that you'd be above your North Star rate. So is that something we should expect uh going forward as well in 2026 or should we anticipate the gross margin rate to subsequently uh, declined? Back to that, uh, 35% rate. I asked in the context of Canadian Tire has generally been marginally, uh, you know, above that 35 for the last few years.

Yeah, Michelle I don't want and good morning. Uh, I don't want to get again ahead of ourselves and provide. We're not providing guidance for 2026, but what I would say, you know, as we think about that, Northstar, you know, we're obviously are trending. Well, and we feel good about this year, you know, over overachieving that if all things line up in the fourth quarter and then, you know, we that momentum and the capabilities we're building and, and, you know, David and rolling out David to our to Sport Chek and to Mark's, you know, we, we see lots of opportunity. Of course, the other side of that is you have to look at the the consumer environment and and see how, you know, making sure we're stimulating demand. Um, so we're not going to

Predict what next year's rates going to be? We haven't changed our Northstar but we feel good about where we are right now.

Okay, and I wanted to take uh, you know, a few steps back and just look at tires positioning in the retail Market. There's there's lots of change and and um and wanted to get your thoughts on high, low retailing in a world where e-commerce and and price Discovery. E-commerce is growing rapidly price. Discovery is easier than ever. Uh, can you give me thoughts on high low into the future? Is that a sustainable approach? Do you feel good about it? And um, and how should we think about Tire evolving as as all these uh, tools continue to advance rapidly?

Um well maybe I'll take that Michelle. It's it's Greg. I mean we're

values, much more than

than price. Uh, as you know, we constantly have work. Um, you know, underway with with squads Andor just, uh, retail fundamental practices to try and improve continuously improve on those factors that that, um, you know, the drive the value, uh, equation in in retail, um, you know, Canadians love a good deal. Um, and um, we as we said in the prepared remarks like

The flyer and the high low, uh, incentives that are presented within that flyer.

Are best way right now with the highest degree of household penetration and distribution to get our value messaging to our customer. And so um

you know, we we and we think we're really good at

stimulate demand and manage, uh, a margin profile. Uh, that is I think good for for us at our investors to your, to the

Part of your question. Um, but the world is evolving. Um,

You know, we're we're moving with Pace uh, at a with AI. Um, and the industry is moving with pace around AI especially in genetic Ai and and so, um, you know, we're we're going to continue to to evolve and modernize the way you know, we we we need to in the way we've evolved for decades. Uh but at this point in time we we see

There there's no major strategic pivot on the high low side, um, of uh, of our business.

Thank you.

Thank you. Thanks. Our next question comes from the line of John's Amparo with Scotia Bank. Your line is now open.

Thank you very much. Good morning. Um, I wanted to ask about the gross margin and I was hoping you could unpack the drivers here, a bit more you, you listed a few different sources of the Improvement year-over-year. Can you rank them in order of magnitude? I'm really trying to get a sense of how much of the the Improvement is uh, is organic or recurring.

Hey, John. It's, uh, it's TJ. I I'll, uh, I'll take that 1. I think. Uh, as we've said, numerous times, I think it's important to to point out that our our margin rights can be choppy quarter to quarter. Uh, we're coming off a quarter where, um, where we were, uh, were a little bit below last year in Q2 and we had a very strong quarter in Q3, you know, what I would say is a lot down our way. Uh, we were up about 57 basis points year-over-year as as Darren articulated, but first thing was, we saw improved margin rates across all banners. So that was really good news. Uh, we didn't see any material effect in terms of banner mix. Uh on our margin rates. We did see a little bit of impact, uh, from a product standpoint, uh, at product mix standpoint. And what I mean by that is something like, uh,

Our Automotive division growing faster than our living division to help us a little bit. Um, so we, we're feeling good, uh, about that. And then we got a little bit of currency help too, with the timing. And, and, uh,

Of inventory delivery as well as the businesses that are that are firing a little bit better. Uh gave us a little bit of uh of currency relief. But I think 1 of the things I wanted to point out is that we continue to build capabilities around promo and regular pricing through our margin nerve center, and our pricing AI platform that we've been talking about on the call so far David. And this is really helping us manage, uh, in a very Dynamic cost environment. And it, and it helps us as a high low retailer because David stands for data, AI value, incrementality driver. And, and we use it to help, run our high low business and it optimizes rag pricing, as well as promotional pricing. And it was a pretty significant development, uh, that was required to implement it. We had significant data ingestion, and feature engineering to to build it. Uh we had to establish new forecast models to estimate elasticity unit, demand sales and Market.

as we go forward and and as Greg pointed out, I think it was Greg might have been Darren, uh, we we currently just have it in CTR, but we're about to roll it out in in

Sport Chek um and Mark's going forward. So we're very excited about that and I think that had a big contribution to our our margin uh performance year to date. So and then we continue to to plow forward with other capabilities as well, are triangle, uh membership bases allows us to focus Investments uh at the individual level and our own brand stable helps uh strengthen our margin rates as well. So we're feeling uh, we're feeling very good about how we've been performing and we feel like we've built a lot of capabilities to help manage in a what I would describe. As a dairy Dynamic cost, uh, uh, backdrop as we said right now.

And just to add on it, as TJ said began his, you know, things can be choppy. So I don't want people to get too too out of our skis. But, you know, we're certainly pleased with what we've built and and where we are right now.

Understood. I appreciate that color um that that leads to to my follow-up which which is also on your AI efforts and I I wondered you eventually foresee using AI externally. In other words on on a customer-facing basis rather than only internal um I assume you. You've spent some time talking about this, we've seen uh retail banners in the US start to offer this. I wonder how you see this playing out at K5.

John's Greg, absolutely. Um, you know, I think in my previous response I said we're moving at PACE on AI. Um, I've yet to experience the pace of change, you know, in the industry that we're seeing right now with AI in my career.

Uh, and we have many use cases.

Some of them are fairly mature, uh, and some of them scaled like the 1 that TJ just talked.

But from a customer uh, experience point of view, we think gentic AI is the Breakthrough. Uh, we think it's the Breakthrough for scaling and we are absolutely racing towards it in true north. Um and I think

the real potential of a genetic AI is is

Uh and this this does apply to the back office as well but it's not to automate the steps of a workflow but to eliminate the workflow itself. Um and you know it it requires a set of Foundations um

That, that is absolutely a part of the incremental Tech investment. This year, we're we're building for you know, multi-agent, uh, Ai orchestration. And that requires the right standards and protocols, uh, and we're building them with a scaled partner in Microsoft. And so, you know, in, in all true north really, has us working to evolve to be a tech enabled retailer, not just a retailer that uses Tech.

um, and and our operating model, as we've talked about,

Evolving and we're working hard to embrace the potential that AI can bring especially in, in the customer experience. Um, and then organizationally from a change management standpoint. We're moving to a place where Business Leaders identify problems, they need to solve not, uh, not it platforms that we need to buy, uh, and it's it sounds simple but it's, it's a, it's a profound. Uh,

Change. Um, and you know that's why the operating model change in. True, North is so important.

Okay, I appreciate those insights. Thank you very much.

Thank you.

Our next question comes from the line of Mark Petri with CIBC your line is now open.

Yeah, thanks, uh, good morning. Um, I wanted to come back just to the topic of dealer sentiment. Um, obviously, you know, consumers are sort of cautious. Albeit Trends are stable, um, but revenues have been outpacing sales and, and pretty notably in Q3, how would you characterize sort of inventory levels today? I know dealers were light on winter was that addressed in Q3, or do you expect that to continue in Q4 and and what kind of feedback are you just generally getting from dealers with regards to the selling environment?

Hey, Mark. It's, uh, it's TJ. Uh, I I'll take that 1 and I'll, I'll unpack our inventory position a little bit to hopefully, provide a bit of context, um, with the customer as Greg articulated remaining.

Shipped out in Q3 would have been shipped out in Q4 last year, so there was a timing impact, but certainly, they have been very bullish on the Christmas business and they have been very bullish on the revenue, or on the shipment side to restock. Their shelves, coming off of a very strong late, winter last year, um, and like us back to your sentiment. They've been they've been planning, uh, for, for modest growth this year and they've been buying to support it, which is obviously helped, uh, kind of spur our year to date uh, up for percent in, in POS. Um, and from a dealer perspective, obviously kind of seasonal performance is is a Big Driver of of dealer inventory levels in our business and

Q3 marks the end of the spring summer season, so I did want to highlight that. The dealers have slightly elevated inventory levels for spring summer business. Uh and that's in large part to the performance of of climate control categories like air conditioners so they're a little bit heavy on on those categories coming out of out of Q3 um but the winter season is just getting started. And we'll uh we'll report back in in

You want on our q1 call uh on how those categories look uh, from a retail standpoint. Um, so the the situation is dynamic with consumer, uh, Demand right now, I would say the dealers continue to support uh, and buy for growth but they're watching it closely. Just just like we are and and I probably the last thing I would say is as you know

In the long run uh kind of Revenue growth to dealers, usually gets in lock step with PS growth. So um I'll I'll

Leave it. Uh, leave it at that. But they have continued to uh, to to buy for growth and and

their, their cautiously optimistic.

Okay. That's uh, that's very helpful. Thank you. Um, and and I also wanted to follow up on retail, gross margin, um, just looking at it a little bit different, but picking up, uh, differently and and picking up on your comments, about stimulating demand. Do you view the stronger than, uh, you know, or above Northstar gross margin rate as a as a win because you're able to drop more dollars to the bottom line, or do you feel like maybe you left some sales on the table and you could have taken some more share with a bit more promo investment and still achieved your target?

Yeah, Mark, it's TJ. I I can take that too. I think, I think what you just articulated is the balance. We're always trying to strike, right? We're we're trying to manage our, our margin rates uh, and make sure that we're inspiring consumer demand because at the end of the day, the more margin dollars. We generate the healthier our business is, uh, we've been a bit choppy. This year, quarter to quarter on margin rates, but we still really good about how it Stacks up when you look at it over the long term, um, and we feel like we're tracking really well towards our North Star, but that's what we'll continue to do. We'll continue to try to inspire demand as best we can, um, and manager

Margin rates, uh, all the while so that that that's what we're going to do. And Mark, if I just add, that's why, you know, over the years, you've heard us talk about trying to get more, you know, Fidelity and and and

Understanding around market share. And um, we think that the market share reporting has come a long way we've integrated market share reporting.

To a pile of our Performance Management.

Including, you know, board oversight and and we took share, you know, in the quarter. So that, that teeter, totter balancing act, that, that that TJ's talking about, uh, if we're taking share and dropping more margin to the bottom line. That's, that's the, uh, that's the Happy State. So, when we look to Q3, um, across the businesses but in, but in CTR, I think was where your question was coming from? Um, we, you know, we took share in the quarter, um, and we're able to appreciate margins. Uh, so we, we feel like we got the balance right in the quarter.

Yeah. Okay appreciate all the comments and all the best.

Thanks.

Thank you as a reminder to ask a question. Please press star, then 1 1 1 on your telephone keypad,

Our next question comes from the line of Emily Fu with BMO Capital markets. Your line is now open.

Hi, good morning, thanks for taking my questions. Okay? Um, just wanted to go back to the flyer. Disruptions are there. Any contingencies or actions that you're taking to mitigate for Q4? And um, if so like I have those actions behind

Yeah, Emily. It's uh, it's TJ. Um, maybe I'll take that 1.

From last December. So, this isn't our first disruption with, with Canada Post and we've reinvested and deployed marketing plans, uh, to help mitigate the impact. Um, and

Because it's actually been of of a longer duration so far than, than what we experienced last year. Uh, the teams have been able to Source local distribution alternatives to get our our flyer in as many households as possible. Uh, but relative to Canada post, it is these these actions are are uh are limited and don't have the same efficacy as Canada Post especially when we have to act as quickly as we, as we had to. But what I'd say is, we built so many great capabilities over the past several years. And in digital marketing, our digital flyer, our app and our triangle membership program which which is insulated ourselves. A lot from the downside of Flyers, not arriving at as many homes as is normal practice. Um, so it would have been a much bigger impact for us, uh, a few years ago. Um, but as Greg said, we're, uh, in an environment where consumers are are craving value. We're we're really looking forward to more stability and sustainable stability from Canada Post as we go forward here.

Thank you. Um and also with respect to David. Um, how many quarters which you say that? It's been a significant contributor to your margins.

Yeah, I'd say, uh, we I would probably say we're into our third or fourth quarter of, of kind of, uh, of implementation. It was a, it was a roll out. So I I'd go back to probably Q4 late Q4 of of, uh, of last year when when we would have started developing value from it, and then certainly, uh, throughout this year but on a rolling basis and

it's getting to the point of, uh, of pretty scaled implementation at this point.

At CTR. And as I said, uh, we, uh, we are, uh, we are going to be rolling it out, uh, uh, to support check and marks, uh, in the future here.

Thank you.

Thank you.

This concludes the question and answer session, I would now like to turn it back to Greg for closing remarks.

Thanks, Lauren, and thank you everybody, for your questions. And for joining us today, we look forward.

to you, when we announced our

Q4, and

2.5, full year results.

In February.

Bye for now.

This will conclude today's call. You may now disconnect