Canadian Tire
CorporationA five-year reading of the financial statements of TSX: CTC.A, with the emphasis on fiscal 2025: a divestiture, a restructuring, a 53rd week and a new strategy in one set of numbers.

The Retail segment ($14.7 billion of revenue in 2025) runs Canadian Tire, SportChek, Mark's, PartSource, Party City and the Gas+ petroleum network. Most Canadian Tire stores are operated by independent Dealers who buy their inventory from the corporation, so a large share of consolidated revenue is shipments to Dealers rather than sales to customers. That is why the company reports retail sales of $19.0 billion, what customers paid at the till, alongside revenue of $16.3 billion. Growth in the two can differ, and comparable sales are measured on the former.

Financial Services is Canadian Tire Bank, a federally regulated Schedule I bank that issues the Triangle Mastercard. It earned $1.6 billion of revenue on a $7.5 billion average receivables book and funds itself with $3.5 billion of deposits and a securitization trust, all of which sit on the consolidated balance sheet. CT REIT owns most of the store real estate and leases it back to the retailer; the corporation holds about 68 percent of the units and the public's 32 percent appears as non-controlling interest.

Reading the consolidated numbers without keeping the three apart produces mistakes. The current ratio includes $6.9 billion of credit card receivables. "Debt" includes a bank's deposits unless you take them out. CT REIT's fair-value gains on property are real for its unitholders but are eliminated on consolidation because the parent carries property at cost. I have tried to be explicit about which view each ratio takes.

2023: a hard year that looked worse than it was

Comparable sales fell 2.9 percent as pandemic-era demand normalized, and the $3.2 billion of inventory built for 2022 had to be worked down. On October 31 the company paid $895 million to buy back Scotiabank's 20 percent of the Financial Services business. Because that stake had been carried as a redeemable financial instrument, the increase in its value ran through the income statement as a $328 million charge, and because the charge was not deductible, the effective tax rate reached 41 percent. A fire at the A.J. Billes distribution centre in March cost $11 million net of insurance, plus roughly $32 million of operating inefficiency that the company did not treat as a normalizing item. Reported diluted EPS was $3.78; normalized EPS was $10.37.

2024: stabilization, with a gain that flattered the total

Comparable sales were still down 1.7 percent, but gross margin held, SG&A fell 3.3 percent, and inventory kept coming down. Reported EPS jumped to $15.92 because the sale of the Brampton distribution centre produced a $241 million gain ($222.9 million after an inventory write-down). Normalized EPS was $12.62 as reported at the time, or $11.61 on the continuing-operations basis the company now uses. Operating cash flow of $2.06 billion was the strongest of the five years, helped by $531 million released from working capital.

2025: True North, and a year of moving parts

On March 6 the company announced True North, a four-year strategy built on retail investment, the Triangle Rewards program, first-party data and internal simplification. On May 31 it sold Helly Hansen to Kontoor Brands for $1,313.4 million and re-presented prior years to show the brand as a discontinued operation. It bought Hudson's Bay intellectual property for $30 million, repurchased 2.67 million shares for $442 million, and booked $230.5 million of pre-tax normalizing costs. Underneath that, the retail business had its best year since 2022: comparable sales up 4.1 percent, gross margin rate up 90 basis points to 34.4 percent, normalized EPS up 18.6 percent to $13.77. Reported EPS from continuing operations fell 29 percent to $10.57. Both numbers are true, and which one you lead with is the whole debate about this year. One more caveat: the fiscal year had 53 weeks, so a couple of points of the 5.2 percent revenue growth is calendar rather than demand. Comparable sales are calculated on 52 weeks.

Gross margin is the good news, with a footnote

The consolidated gross margin rate rose to 34.4 percent from 33.5 percent. Within Retail the rate rose 100 basis points to 32.4 percent, but most of that is mix: petroleum revenue, a low-margin business, fell 6.7 percent, which lifts the blended rate on its own. Excluding petroleum the retail rate improved 42 basis points to 35.5 percent, or 27 basis points on a normalized basis, which management attributes to modestly higher margins at Canadian Tire and SportChek. Real, but smaller than the headline.

Operating costs rose faster than revenue

SG&A increased 7.1 percent to $3.47 billion and took 21.3 percent of revenue against 20.9 percent in 2024. The MD&A points to IT spending on True North initiatives, real estate costs and variable compensation. Some of the increase is the extra week, but True North is explicitly a spend-to-grow plan and this is what it looks like in year one. Depreciation was flat at $742 million. Net finance costs fell 14 percent to $296 million as debt was repaid.

The line that swings

"Other expense (income)" went from a $290 million credit in 2024, mostly the Brampton gain, to a $229 million charge in 2025, mostly the transformation costs. That $519 million reversal more than accounts for the $297 million decline in pre-tax income, from $1,175 million to $879 million. Strip both years of their one-offs and pre-tax income rose 14.3 percent, from $970 million to $1,109 million. The effective tax rate moved from 22.1 to 25.0 percent, which the company attributes to lower non-taxable property gains; adjusted for normalizing items it was 24.9 percent against 24.6 percent.

Retail

Revenue rose 5.4 percent to $14.7 billion and comparable sales 4.1 percent, led by SportChek (+6.2 percent) and Mark's (+3.9 percent), with Canadian Tire stores at +3.7 percent. Retail sales excluding petroleum grew 5.9 percent. The store count fell by 14 to 1,690 as standalone Atmosphere locations closed. Reported income before taxes fell 35 percent to $453 million because the restructuring sits in this segment; normalized, it was $684 million. Retail return on invested capital, the company's preferred measure, reached 11.0 percent, up from 7.9 percent at the end of 2023 and most of the way back to the 12.5 percent of 2022.

Financial Services

Revenue grew 2.2 percent to $1.59 billion on a receivables book up 2.0 percent, but income before taxes fell 7.5 percent to $335 million. The net write-off rate was 7.2 percent, against 7.0 percent in 2024, 6.1 percent in 2023 and 4.9 percent in 2022. Over the same period the allowance rate eased from 12.6 to 12.0 percent, which means the bank is holding relatively less against a book that is writing off more. Management's case is that delinquency has stabilized (the past-due rate fell 11 basis points to 3.5 percent) and the $935 million allowance is within its stated range. Return on receivables, at 4.4 percent, is a third lower than the 6.6 percent of 2022. This is the segment where the next surprise is most likely to come from.

CT REIT

Property revenue rose 4.4 percent to $604 million, net operating income 4.6 percent and AFFO per unit 2.8 percent to $1.274. Its reported income before taxes of $517 million includes $195 million of fair-value gains on investment property, which the parent reverses on consolidation; on the corporation's accounting policies the REIT earned $237 million. Roughly $540 million of its $604 million of revenue is rent paid by Canadian Tire itself and eliminated. A steady, bond-like contributor whose value to the parent is the real estate, not the earnings line.

Total assets fell $701 million to $21.5 billion, almost entirely because Helly Hansen left: goodwill and intangibles dropped from $2.18 billion to $1.36 billion. Inventory is the quiet success of the period. At $2.42 billion it is down a quarter from the $3.22 billion peak at the end of 2022, and retail inventory turnover improved from 3.5 to 4.0 times, roughly 105 days of stock to 91. Loans receivable, the credit card book, grew to $6.86 billion and are the largest single asset.

Liquidity looks comfortable on the standard ratios (current ratio 1.83) but the numerator is mostly card receivables, which are funded by deposits and securitization rather than being available to pay suppliers; the cash ratio is 0.11. On leverage I separate three things the balance sheet mixes together. Corporate debt, meaning long-term debt, its current portion and short-term borrowings, was $4.67 billion, down from $4.85 billion. Lease liabilities under IFRS 16 were $2.44 billion. The bank's deposits of $3.54 billion are funding for the card book and I leave them out, as I do the $557 million of Franchise Trust loans, which the MD&A notes are the Dealers' legal liability. On those definitions net debt is 2.1 times EBITDA, or 3.4 times including leases, and interest is covered 4.0 times.

Equity attributable to shareholders fell $299 million to $5.86 billion in a year in which $526 million of net income was attributable to them, because the company paid $362 million in dividends and spent $467 million on buybacks. Capital returned exceeded earnings, and the share count fell 4.8 percent. That is a deliberate choice funded by the divestiture, and it is the reason the return-on-equity figures below are flattered slightly by a shrinking base.

Operating cash flow more than halved, from $2.06 billion to $952 million, and this is the number I would ask management about first. The MD&A attributes it to working capital and higher income taxes paid, and the statement bears that out: working capital swung from a $531 million release to a $148 million build, cash taxes rose from $47 million to $284 million after an unusually light 2024, and the card book absorbed $203 million against $139 million. After $664 million of capital additions and $383 million of lease principal, free cash flow was slightly negative, minus $95 million, against plus $1.1 billion the year before.

The company nonetheless returned $829 million to shareholders ($362 million of dividends and $467 million of buybacks), paid $77 million of distributions to minority interests, mostly CT REIT unitholders, and repaid $180 million of debt net of new issues. The arithmetic works because Helly Hansen brought in $1.29 billion. That is a legitimate use of divestiture proceeds and it is what the company said it would do, but it means the 2025 buyback was funded by selling a business rather than by the retail engine. Operating capital expenditure guidance for 2026 is $500 to $550 million, so operating cash flow needs to recover toward its 2023–2024 range for the strategy to fund itself.

Two longer-run observations. Capital additions in the cash flow statement drifted down from $779 million in 2021 to $628 million in 2024, with a modest rise to $664 million in 2025; on the company's own operating-capex measure, 2025 came in at $502 million against a guided range of $525 to $575 million, which it attributes to tighter project discipline and timing. Either way, spending sits oddly beside a strategy built on store investment, and I would expect the line to turn up. And the dividend has been raised every year, from $4.825 per share in 2021 to $7.125, a 48 percent increase over a period in which normalized EPS fell 27 percent. The payout is 52 percent of normalized earnings, which is sustainable, but the room for further increases is narrower than the streak suggests.

Return on equity was 9.6 percent in 2025, down from 14.2 percent, and 12.5 percent on normalized earnings against 11.1 percent. The decomposition shows why the reported figure moves so much: asset turnover is stable at 0.7 to 0.8 and the equity multiplier drifts down as debt is repaid, so almost all of the movement is net margin, and net margin is where the one-offs land. The multiplier itself, at 3.7, is high for a retailer because a bank's deposits and a REIT's mortgages are consolidated onto the same balance sheet; it is not a sign of an aggressively financed store business. The 2023 figure of 3.8 percent is the $328 million charge showing up one more time.

At the fiscal 2025 year-end price of $175.28 the shares traded at 16.6 times reported continuing EPS and 12.7 times normalized EPS, with a 4.1 percent dividend yield and 1.6 times book value. On normalized earnings the multiple has sat between 12.7 and 13.6 at each of the last three year-ends; the reported multiple swings from 10 to 37 with the one-offs, which is a reminder that a P/E on a single year of a company like this tells you about the year, not the company. The 2025 buyback averaged about $165 per share, well above book value of $111, so it was a bet on earnings power rather than a discount-to-book trade. None of this is a recommendation; it is context for the operating numbers.