1、Canadian Tire Corporation2016 Report to ShareholdersCanadian Tire Corporation 2016 Report to ShareholdersMaureen J.Sabia,Chairman of the Board 1/Stephen G.Wetmore,President and Chief Executive Officer 2/Managements Discussion and Analysis 3/Consolidated Financial Statements 58/Board of Directors 114
2、/Executive Leadership Team 114For a full update of 2016 business highlights,community investments and video messages from the executive team,please visit our Year in Review website at yearinreview.canadiantirecorporation.caOur Triangle represents the most iconic brand in the marketplace and for 95 y
3、ears,we have been providing customers with everything they need for the Jobs and Joys of Life in Canada.CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERS YEARINREVIEW.CANADIANTIRECORPORATION.CA 1Maureen J.Sabia Chairman of the BoardThe Board of Directors took a bold decision in July of 2016 to c
4、hange the leadership of Canadian Tire and appointed Stephen Wetmore as President and CEO.My colleagues and I felt strongly that we had the responsibility for the long-term success of the Tire and we were unanimous in our belief that a transformational leader was needed to lead the Company at this ti
5、me of unprecedented change in the retail industry.Moreover,we firmly believed that Stephen would take the Tires iconic brand to the next level,a strategic imperative for us.That decision marked the beginning of an energetic journey towards creating at the Tire a unique marketplace of innovative prod
6、ucts to serve Canadians for the Jobs and Joys of Life in Canada.Great people,great products and a great customer experience have become our watchwords.The rapidly changing world of retail makes it imperative that Canadian Tire have the best possible talent,so we are making talent management a priori
7、ty.We are focusing on enhanced operational excellence.We are determined to unlock the power of the Canadian Tire family of companies and brands.Moreover,we have become unceasing in our efforts to provide our customers with an omni-channel shopping opportunity that exceeds their expectations.In the s
8、ummer of 2016,I posed a question to our Management and our Board:What is our vision for the Tire as we approach our centenary in 2022?Under Stephen Wetmores leadership we have set out with relentless determination to become the undisputed#1 retail brand in Canada.We are in a strong position today to
9、 achieve that goal,but it will require us to make substantial changes to meet our customers evolving demands.We must continue to foster a test-and-learn culture and encourage innovative thinking and prudent risk taking.Much will be demanded of all of us.But most of all it will require that we be ope
10、n to doing things in a different way in the interests of making our vision a reality.The Board of Directors has also looked at how it must work differently.We have revised the mandates of the Board and its Committees to ensure their appropriateness for the journey upon which we have embarked,to ensu
11、re that they continue to be aligned with our view of best practices in governance and that they properly reflect the dynamic that in todays world must exist between the Board and its Committees.We have examined our relationship with Management and we are seeking even better ways of making sure that
12、the flow of information to the Board is as effective as possible to facilitate better decision making in order to achieve our 2022 goal.In todays fast-changing world,it is not enough for us to be at the leading edge of good governance,disclosure and oversight.We must be very good at working together
13、 with Management to achieve our goals.There is a school of thought that believes the fundamental flaw in corporate governance is the asymmetry of information between the Board and Management.While there can be no doubt that Managements will always have(and should have)more information than Boards of
14、 Directors,much can be done to redress the balance.At Canadian Tire,the CEO and his Management team are working diligently with the Board to ensure a more robust analytical flow of information between Management and the Board.At Canadian Tire,both Management and the Board agree that Boards of Direct
15、ors should not be content with simply an oversight function.We believe that Boards have a responsibility to lead and that leadership should be shared between the Board and Management.This is a more activist model for governance and it is a change that is both necessary and desirable.We have added tw
16、o new Directors whose experience and wisdom are adding considerable value to our deliberations as we face and overcome the challenges in the business and retail environment in which we live.They are:Pat Connolly,a long-time and recently retired veteran of Williams-Sonoma and a leader in e-commerce;a
17、nd Dr.Eric Anderson,a leading data analytics scientist and academic at the Kellogg School of Management.Indeed,the Board of Directors has set aside a day to learn from data scientists on how best to understand the complexities of data-driven decision making.An understanding of these complexities by
18、Management and the Board will be needed if we are to stay at the forefront of retailing.Never before have we been as sophisticated in data analytics as we are today.Sadly,in May of 2017,the Board will say goodbye to George Vallance,a valuable member of our Board of Directors.George decided to retire
19、 as an Associate Dealer in January 2017 and Don Murray,a highly experienced Associate Dealer,has been nominated in Georges stead.With shareholder approval,Don will assume his duties in May.George made significant contributions to our deliberations during the course of his six-year tenure on the Boar
20、d and he will be greatly missed.On behalf of my fellow Directors,I want to say a special thank you to Stephen for once again accepting the heavy responsibilities implicit in assuming the office of CEO.And,very importantly,I want to thank the Management for the hard work ethic they have demonstrated
21、while being innovative and disciplined as they set about implementing Stephens vision for the Tire.Together,Stephen and his team have made significant progress.Canadian Tires shareholders could not be better served by their Board of Directors.Our Directors act with courage.They understand the challe
22、nges and issues the Corporation faces.They never fail to assist Management when their experience and expertise can be helpful.They never shrink from challenging Management,and they work hard at their relationships with their fellow Directors.Finally,I cannot adequately express my appreciation to my
23、fellow Directors for the support they have given me in a year that taxed us all.They never hesitated to be there when I needed them for advice and counsel.I am optimistic about the future for Canadian Tire.My expectations are high,but I recognize that achievement is but the reward of struggle and ha
24、rd work.Fortunately,hard work is one of the hallmarks of the culture at the Tire.I hope that our shareholders share my optimism.Sincerely,Maureen J.Sabia Chairman of the Board Canadian Tire Corporation,LimitedStephen G.Wetmore President and Chief Executive Officer2016 was an incredibly successful ye
25、ar for our Company.A year that illustrated the character of our brand.Our strong performance was the outcome of our Companys ability to understand how to prepare Canadians for the Jobs and Joys of Life in Canada.A phrase that is easily stated but extremely difficult to execute.It has taken us 95 yea
26、rs of learning,its why we come to work each day and its why we will continue to be successful,and relevant,to our customers as we approach our centenary in 2022.We have created a great platform for growth and we will continue to adapt and evolve to address our changing marketplace.Being an omni-chan
27、nel retailer has resulted in a major shift in our culture.Attracting great talent and cultivating our current talent is critical in driving our creativity and performance.Our investment in our new Consumer Brands Division will be a significant differentiator and driver for growth as we develop and a
28、cquire products and brands that enable our customers to get their jobs done and to experience the joys of life in Canada.It will also equip us with a pipeline of innovative products for both Canadian and international markets.In 2016,we also made significant investments to strengthen our ability to
29、deliver exceptional customer experience through all our digital communication channels.Our website traffic has continued to grow and we have one of the most visited websites in Canada with over 300 million visits annually across all our banners.Our merchandising,marketing and store operations teams
30、are on the leading edge of digital innovation.Our focus for 2017 is to continue to increase our knowledge in understanding and executing to meet our customers expectations in a rapidly changing digital world.While our retail banners and our financial services operations have worked independently to
31、meet their customers expectations over the years,our next evolution will see us combining our strengths and product offerings to keep a customer for a lifetime in Canada.A common view of our customers enables our retail and financial services offerings to be uniquely adapted to the needs of our high
32、-value customers.This One Company,multi-channel approach is designed for todays marketplace and increases our ability to drive operational efficiencies.Community continues to be a cornerstone of our Company and 2016 was another great year for our Jumpstart charity which has helped kids from coast to
33、 coast participate in organized sports.We have received tremendous support from our customers,partner athletes,Jumpstart Ambassadors,and from our Associate Dealers whose involvement in their local communities and commitment to the Canadian Tire brand make an enormous difference in the lives of kids
34、across Canada.We look forward to continuing our efforts to provide many more Canadians with access to sport and recreation in the years ahead.We are on a journey to become the foremost retail brand in Canada together with our Associate Dealers,our franchise owners,our leadership team and the thousan
35、ds of employees who support them across the network.I thank each of them for their hard work and enthusiasm their accomplishments are what drive our success and elevate our game.Thank you to Maureen Sabia and the Board of Directors for their leadership,their commitment and support as we face an ever
36、-evolving world of retail and conclude 95 years of business.Sincerely,Stephen G.Wetmore President and Chief Executive Officer Canadian Tire Corporation,Limited2 YEARINREVIEW.CANADIANTIRECORPORATION.CA CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSWe are on a journey to become the foremost ret
37、ail brand in Canada together with our Associate Dealers,our franchise owners,our leadership team and the thousands of employees who support them across the network.Managements Discussion and AnalysisCanadian Tire Corporation,LimitedFourth Quarter and Full Year 2016Table of Contents1.0PREFACE42.0COMP
38、ANY AND INDUSTRY OVERVIEW53.0CORE CAPABILITIES84.0HISTORICAL PERFORMANCE HIGHLIGHTS125.0THREE-YEAR(2015 TO 2017)FINANCIAL ASPIRATIONS146.02015 AND 2016 STRATEGIC IMPERATIVES167.0FINANCIAL PERFORMANCE207.1Consolidated financial performance207.2Retail segment performance237.3CT REIT segment performanc
39、e287.4Financial Services segment performance308.0BALANCE SHEET ANALYSIS,LIQUIDITY,AND CAPITAL RESOURCES329.0EQUITY3810.0TAX MATTERS3911.0ACCOUNTING POLICIES,ESTIMATES,AND NON-GAAP MEASURES3912.0ENTERPRISE RISK MANAGEMENT4513.0CONTROLS AND PROCEDURES5014.0SOCIAL AND ENVIRONMENTAL RESPONSIBILITY5115.0
40、RELATED PARTIES5216.0FORWARD-LOOKING STATEMENTS AND OTHER INVESTOR COMMUNICATION53CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA3MANAGEMENTS DISCUSSION AND ANALYSIS1.0 Preface1.1 DefinitionsIn this document,the terms“we”,“us”,“our”,“Company”,“Canadian Ti
41、re Corporation”,“CTC”,and“Corporation”refer to Canadian Tire Corporation,Limited,on a consolidated basis.This document also refers to the Corporations three reportable operating segments:the“Retail segment”,the“CT REITsegment”,and the“Financial Services segment”.The financial results for the Retail
42、segment are delivered by the businesses operated by the Company under the Companys retail banners,which includeCanadian Tire,PartSource,Petroleum,Marks,Sport Chek,Sports Experts,Atmosphere,and Pro Hockey Life(“PHL”).In this document:“Canadian Tire”refers to the general merchandise retail and service
43、s businesses carried on under the Canadian Tire and PartSource names andtrademarks and the retail petroleum business carried on by Petroleum.“Canadian Tire stores”and“Canadian Tire gas bars”refer to stores and gas bars(which may include convenience stores,car washes,and propanestations)operated unde
44、r the Canadian Tire and Gas+names and trademarks.“CT REIT”refers to the business carried on by CT Real Estate Investment Trust and its subsidiaries,including CT REIT Limited Partnership(“CT REIT LP”).“Financial Services”refers to the business carried on by the Companys Financial Services subsidiarie
45、s,namely Canadian Tire Bank(“CTB”or“theBank”)and CTFS Bermuda Ltd.(“CTFS Bermuda”).“FGL Sports”refers to the retail business carried on by FGL Sports Ltd.,and“FGL Sportsstores”includes stores operated under the Sport Chek,Sports Experts,Atmosphere,PHL,National Sports,and Hockey Experts,names and tra
46、demarks.“Marks”refers to the retail business carried on by Marks Work Wearhouse Ltd.,and“Marks stores”including stores operated under the Marks,Marks Work Wearhouse,and Lquipeurnames and trademarks.“PartSource stores”refers to stores operated under the PartSource name and trademarks.“Petroleum”refer
47、s to the retail petroleum business carried on under the Canadian Tire and Gas+names and trademarks.Other terms that are capitalized in this document are defined the first time they are used.1.2 Forward-looking statementsThis Managements Discussion and Analysis(“MD&A”)contains statements that are for
48、ward looking and may constitute“forward looking information”withinthe meaning of applicable securities legislation.Actual results or events may differ materially from those forecast and from statements of the Companysplans or aspirations that are made in this MD&A because of the risks and uncertaint
49、ies associated with the Corporations businesses and the generaleconomic environment.The Company cannot provide any assurance that any forecast financial or operational performance,plans,or financial aspirationswill actually be achieved or,if achieved,will result in an increase in the Companys share
50、price.Refer to section 16.0 in this MD&A for a more detaileddiscussion of the Companys use of forward-looking statements.1.3 Review and approval by the Board of DirectorsThe Board of Directors,on the recommendation of its Audit Committee,approved the contents of this MD&A on February 15,2017.1.4 Qua
51、rterly and annual comparisons in the MD&AUnless otherwise indicated,all comparisons of results for Q4 2016(13 weeks ended December 31,2016)are compared against results for Q4 2015(13 weeks ended January 2,2016)and all comparisons of results for the full year 2016(52 weeks ended December 31,2016)are
52、compared against resultsfor the full year 2015(52 weeks ended January 2,2016).1.5 Accounting frameworkThe annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(“IFRS”),also referred toas Generally Accepted Accounting Principles(“GA
53、AP”),using the accounting policies described in Note 3 of the annual consolidated financial statements.1.6 Accounting estimates and assumptionsThe preparation of consolidated financial statements that conform to IFRS requires Management to make estimates and assumptions that affect thereported amoun
54、ts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reportedamounts of revenue and expenses during the reporting period.Refer to section 11.1 in this MD&A for further information.4YEARINREVIEW.CANADIANTIRECORPORATION.CAC
55、ANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSIS1.7 Key operating performance measures and additional GAAP and non-GAAP financial measuresThe Company has identified several key operating performance measures and non-GAAP financial measures which Management beli
56、eves are useful inassessing the performance of the Company;however,readers are cautioned that some of these measures may not have standardized meanings underIFRS and,therefore,may not be comparable to similar terms used by other companies.Retail sales is one of these key operating performance measur
57、es and refers to the Point of Sale(“POS”i.e.cash register)value of all goods and services soldto retail customers at stores operated by Canadian Tire Associate Dealers(“Dealers”),Marks and FGL Sports franchisees,and Petroleum retailers,atcorporately owned stores across all retail banners,of services
58、 provided as part of the Home Services offering,and of goods sold through the Companysonline sales channels,and in aggregate does not form part of the Companys consolidated financial statements.Management believes that retail sales andrelated year-over-year comparisons provide meaningful information
59、 to investors and are expected and valued by them to help assess the size and financialhealth of the Companys retail network of stores.These measures also serve as an indicator of the strength of the Companys brand,which ultimatelyimpacts its consolidated financial performance.Refer to section 11.3.
60、1 for additional information on retail sales.Revenue,as reported in the Companys consolidated financial statements,comprises primarily the sale of goods to Dealers and to franchisees of Marksand FGL Sports,the sale of gasoline through Petroleum retailers,the sale of goods to retail customers by stor
61、es that are corporately owned under theMarks,PartSource,and FGL Sports banners,the sale of services through the Home Services business,the sale of goods to customers through INAInternational Ltd.(“INA”),a business-to-business operation,and through the Companys online sales channels,as well as revenu
62、e generated from interest,service charges,interchange and other fees,and from insurance products sold to credit card holders in the Financial Services segment,and rent paid bythird-party tenants in the CT REIT segment.The Company also evaluates performance based on the effective utilization of its a
63、ssets.A common metric used to evaluate the performance of core retailassets is average sales per square foot.Comparison of sales per square foot over several periods will identify whether existing assets are more productiveby the retail businesses introduction of new store layouts and merchandising
64、strategies.In addition,Management believes that return on invested capital(“ROIC”),analyzed on a rolling 12-month basis,reflects how well the Company allocates capital toward profitable retail investments.Retail ROIC can becompared to CTCs cost of capital to determine whether invested capital was us
65、ed effectively.Refer to section 11.3.1 for additional information on RetailROIC.Management calculates and analyzes certain measures to assess the size,profitability,and quality of Financial Services total-managed portfolio ofreceivables.Growth in the total-managed portfolio of receivables is measure
66、d by growth in the average number of accounts and growth in the averageaccount balance.A key profitability measure the Company tracks is the return on the average total-managed portfolio(also referred to as“return onreceivables”or“ROR”).Refer to section 11.3.1 for a definition of ROR.Aspirations wit
67、h respect to retail sales,Retail ROIC,and ROR have been included in our financial aspirations for the three years ending in 2017.Refer tosection 5.0 in this MD&A for the financial aspirations,assumptions,and related risks.Additionally,the Company considers earnings before interest,tax,depreciation a
68、nd amortization,and any change in fair value of the redeemable financialinstrument(“adjusted EBITDA”)to be an effective measure of CTCs profitability on an operational basis.Adjusted EBITDA is a non-GAAP financial metricand is commonly regarded as an indirect measure of operating cash flow,a signifi
69、cant indicator of success for many businesses.Refer to section 11.3.2 fora schedule showing the relationship of the Companys consolidated adjusted EBITDA to the most comparable GAAP measure.In the CT REIT segment,certain income and expense measurements recognized under GAAP are supplemented by Manag
70、ements use of certainnon-GAAP measures when analyzing operating performance.Management believes the non-GAAP measures provide useful information to bothManagement and investors in measuring the financial performance and financial condition of CT REIT.These measures include funds from operations(“FFO
71、”),adjusted funds from operations(“AFFO”),and net operating income(“NOI”).Refer to section 11.3.2 for further information and for a reconciliation ofthese measures to the nearest GAAP measure.1.8 Rounding and percentagesRounded numbers are used throughout the MD&A.All year-over-year percentage chang
72、es are calculated on whole dollar amounts except in thepresentation of basic and diluted earnings per share(“EPS”),in which the year-over-year percentage changes are based on fractional amounts.2.0 Company and industry overview2.1 Overview of the businessCanadian Tire Corporation is a family of busi
73、nesses that includes Canadian Tire,PartSource,Petroleum,FGL Sports,Marks,CT REIT,and a FinancialServices division.The Companys business model results in several distinct sources of revenue,which primarily comprise:shipments to Canadian Tire Dealers and franchisees of FGL Sports and Marks;royalties o
74、n sales made by franchisees of FGL Sports and Marks;CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA5MANAGEMENTS DISCUSSION AND ANALYSIS sales of goods to retail customers of corporately-owned stores and wholesale revenue from sales to business customers;f
75、ranchise rent and Dealer property licence fees;sales of gasoline and convenience items at gas bars;interest income and service charges on credit card loans receivable;merchant and interchange fees on credit card transactions;revenue from insurance products sold to credit card holders;and rental reve
76、nue from third-party tenants leasing space at properties owned by the Company.The Company has three reportable operating segments for financial reporting purposes:Retail,CT REIT,and Financial Services.2.1.1 Retail segmentThe Companys retail business results are delivered through the Companys retail
77、banners:Canadian Tire,PartSource,Petroleum,Marks,and the variousFGL Sports banners.Canadian Tire is one of Canadas most shopped general merchandise retailers.For more than 90 years,Canadian Tire has been Canadians store for life inCanada.Canadian Tire offers products and services in the Living,Playi
78、ng,Fixing,Automotive,and Seasonal categories.Canadian Tire is best known for theiconic red triangle affixed to every Canadian Tire storefront and also operates the specialty automotive hard parts banner PartSource.Canadian Tire aspiresto be identified as“Canadas store”and one of the Canadian consume
79、rs most recognized and trusted brands.One of its strategies to build its brand is toreconnect with customers through renewed marketing campaigns such as Tested for life in CanadaTM.As part of its evolution,Canadian Tire now offersmany of its products and services online for purchase,through its webs
80、ite at www.canadiantire.ca,with in-store pick up across the entire store network.Inaddition to Canadian Tires commitment to strengthening its electronic commerce(“eCommerce”)platform,it is focused on finding ways to use technologyto service and connect with todays customers.Examples include in-aisle
81、 product locator devices,product-selection tools in the Automotive category,andenhancements to the Canadian Tire mobile app.Canadian Tire also offers one of Canadas most beloved loyalty programs,My Canadian Tire Money,which allows customers to choose between paper-based and electronic Money.The 500
82、Canadian Tire stores across Canada,including close to 5,600 automotive service bays,are run by third-party operators known as Dealers,who areindependent business owners.Dealers buy merchandise from CTC and sell it to consumers in Canadian Tire stores or online.Canadian Tire supportsCanadian Tire Dea
83、lers with marketing,supply chain management,and purchasing,administrative,financial,and information technology services.EachDealer owns the fixtures,equipment and inventory of the Canadian Tire store he or she operates and is responsible for the store staff and operatingexpenses for that store.Each
84、Dealer agrees to comply with the policies,marketing plans,and operating standards prescribed by Canadian Tire,includingpurchasing merchandise primarily from Canadian Tire and offering merchandise for sale at prices not exceeding those set by Canadian Tire.In April 2013,the Company and its Dealers ag
85、reed to new contract terms which came into effect on June 30,2013 and generally expire on December 31,2024.Eachcontract includes guidelines for gross margin and cost sharing,simplified processes to achieve efficiencies and reduce costs,and guidelines to improveDealer mobility within the network.Petr
86、oleum is one of Canadas largest independent retailers of gasoline,with a network of 296 retailer-operated gas bars,including 293 convenience storesand 83 car washes.Petroleum operates under the banner Gas+.The majority of Petroleum sites are co-located with a Canadian Tire store as a strategy todriv
87、e traffic to the Companys core retail banner stores.In addition,Petroleum has a contract to build and operate 23 Canadian Tire gas bars in state-of-the-art service centres along major Ontario highways(Highway 400 and Highway 401).The service centres feature a gas bar and an associated conveniencesto
88、re.There were 20 of these locations in operation as at December 31,2016.Marks provides Canadians with apparel and footwear for everyday work and everyday living by focusing its core business on developing durable,high-quality,and comfortable items for casual and industrial use.Marks operates 382 sto
89、res nationwide,including 349 corporate and 33 franchise stores thatoffer industrial wear,mens casual wear,womens casual wear,footwear,and accessories.Marks operates under the banners Marks,Marks WorkWearhouse and,in Quebec,Lquipeur,and offers products for sale through its website at .Marks also cond
90、ucts a business-to-businessoperation under its“Commercial”division.FGL Sports is a national retailer of sporting goods and active wear in Canada,operating 433 stores including 257 corporate and 176 franchise stores fromcoast to coast.FGL Sports offers a comprehensive assortment of brand-name and pri
91、vate-brand products under various banners,with the largest beingSport Chek,Sports Experts and Atmosphere(others include“Intersport”,“National Sports”,“Hockey Experts”and“Pro Hockey Life”).Sport Chek offersproducts for sale through its website at www.sportchek.ca.In addition,the Company operates a Co
92、nsumer Brands Division which focuses on developing and growing its existing private-brand portfolio across theretail banners and also has responsibility for the identification and acquisition of brands that would be a logical complement or extension to the existingproduct portfolio.Certain brands ar
93、e also sold under a business-to-business model under the name INA.2.1.2 CT REIT segmentCT REIT has a geographically-diversified portfolio of properties which comprises 303 properties located across Canada totaling approximately 24.7 millionsquare feet of gross leasable area.The property portfolio in
94、cludes Canadian Tire stores,retail developments anchored by a Canadian Tire store,Canadian6YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISTire distribution centres(“DC“s),a mixed-use commercial property,multi-tenant prop
95、erties not anchored by a Canadian Tire store,and development landsupon which Canadian Tire retail banner stores may be built.CT REITs primary business involves owning,developing,and leasing income-producingcommercial properties.CTC holds an approximate 85.1 percent effective interest in CT REIT.2.1.
96、3 Financial Services segmentFinancial Services markets a range of Canadian Tire-branded credit cards,including the Canadian Tire OptionsMasterCard,the Cash AdvantageMasterCard,and the Gas AdvantageMasterCard.Financial Services also markets insurance and warranty products,processes credit card transa
97、ctionsfor purchases made in Canadian Tire stores and Marks stores as well as at Petroleum outlets,and offers financing options to customers on certainpurchases from various retail banners.CTC holds an 80.0 percent interest in the Financial Services business,which includes CTB,a federally-regulatedfi
98、nancial institution that manages and finances the Companys consumer credit card portfolio.The Bank also offers and markets high-interest savingsaccount deposits,tax-free savings account deposits(“TFSA”),and guaranteed investment certificate deposits(“GIC“s),both directly and through third-partybroke
99、rs.The Financial Services segment includes CTFS Bermuda,a Bermuda-based reinsurance company that reinsures the risk of certain insuranceproducts marketed to Canadian Tire customers,and Glacier Credit Card Trust(“GCCT”or“Glacier”),a trust established to purchase co-ownership interestsin the Banks cre
100、dit card loans.Glacier issues debt to third-party investors to fund its purchases.In November 2014,Visa and MasterCard submitted voluntary proposals to reduce interchange fees paid by retailers accepting their credit cards as a form ofpayment for retail sales transactions to an average effective rat
101、e of 1.5 percent for five years.The implementation began prior to April 2015.The reduction ininterchange fees has impacted revenue growth for credit card issuers partnered with these associations,including the Company.The Company is partiallymitigating the impact on its revenue growth with its stron
102、g value proposition and enhanced credit approval and in-store acquisition processes.2.1.4 Foreign operationsThe Retail segment has representative offices in the Pacific Rim that perform activities relating to product sourcing,logistics and vendor management,and asubsidiary that has wholesale operati
103、ons based in the United States(“U.S.”),including warehouse facilities in the state of Washington.The Financial Servicessegment includes a Bermuda-based reinsurance company.2.2 Competitive landscapeNo single retailer(traditional bricks-and-mortar or online)competes directly with Canadian Tire across
104、all its categories of product and service offerings,reflecting Canadian Tires unique position in the Canadian retail marketplace.Canadian Tires Living,Playing,Fixing,and Seasonal categories compete withmass merchants,home improvement warehouses,and specialty retailers across a number of product line
105、s,including kitchen,cleaning,storage andorganization,tools,and online offerings.Canadian Tires Automotive business,including its auto service centres and hard-goods departments,PartSource hard-parts specialty stores and Petroleumretail outlets and gas bars,is one of the Companys core differentiators
106、.The main competition in this category is from independent retailers,including onlineretailers,national and regional parts and tire specialty shops and automotive dealerships.In recent years,mass merchants and online specialty retailers havebecome an increasing source of competition,particularly in
107、the tire market.Marks offers industrial apparel and footwear as well as mens and womens casual apparel and footwear through bricks-and-mortar stores and onlineofferings.Marks has the highest market share in industrial apparel and footwear and is a leader in mens casual apparel in the Canadian retail
108、marketplace.Mass merchants,department stores,specialty retailers,and online retailers compete with Marks product lines.Marks core differentiators areits strong private-brand program which is complemented with select national brands that focuses on quality,comfort,durability and functionality,itswide
109、 assortment of industrial apparel,its casual and industrial-footwear offering,its online retail channel,and the business-to-business operations ofMarks Commercial.FGL Sports is a leading national retailer of sporting goods and active wear,offering a wide assortment of brand-name and private-brand pr
110、oducts through anetwork of corporate and franchise stores and its online retail channels.FGL Sports stores are primarily located in malls,strip malls,and retail powercentres.The majority of the stores operate under the Sport Chek and Sports Experts banners.Each banner is focused on a particular nich
111、e and operates inthe highly fragmented retail marketplace with competitors including independent specialty shops,mass merchants,U.S.-based retailers,and vendor-directonline and outlet-store sales channels.FGL Sports core differentiators are its strong brand equity in core brands,including both priva
112、te-brand and elitenational brands,world-class digital concept and flagship stores,its online retail channel,real estate coverage with high-profile locations in major shoppingcentres,and its strategic sports partnerships and sponsorships.CT REITs primary business involves owning,developing,and leasin
113、g income-producing commercial properties located in Canada.Competitors to CT REITinclude other real estate investors,managers,and developers of commercial properties in the Canadian real estate market.Certain of these competitorsmay have greater financial and other resources and greater operating fl
114、exibility than CT REIT.An increase in the availability of funds for investment or anincrease in interest in real estate property investments may increase the competition for attractive real estate property investments,thereby increasingpurchase prices and reducing yields.CANADIAN TIRE CORPORATION 20
115、16 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA7MANAGEMENTS DISCUSSION AND ANALYSISFinancial Services plays a significant role strengthening and supporting the Companys core retail businesses.The credit card offering of Financial Servicescompetes with those of the major Canadian ban
116、ks and other retail companies financial services arms.Competitors in the financial services industry havebeen creating mobile-enabled solutions that allow customers the choice of doing their banking online using their computer and through mobile devices.Inresponse to the recent trends,in September 2
117、015,Financial Services launched an innovative mobile payments app which is exclusive to Canadian TireOptionsMasterCardmembers.The mobile app is one of several key differentiators for Financial Services as it is the only payment solution in Canada todeliver payment capabilities,gamification features,
118、special offers,and rewards to customers while allowing them to track their credit card information andelectronic Canadian Tire Moneyrewards.In future years,the Company anticipates that it will face increased competition from new entrants for both sales and retail locations and new opportunitiesfrom
119、industry consolidation.These challenges and opportunities include but are not limited to:U.S.or international retailers that do not have bricks-and-mortar stores in Canada but are capturing sales from Canadian customers througheCommerce sites such as Amazon and those belonging to various apparel ret
120、ailers;U.S.-based retailers already in Canada(including Walmart,Costco,Home Depot,Cabelas,Bass Pro Shops,Lowes,and Nordstrom)that are in theprocess of expansion or are expected to further expand their store networks in Canada;new retailers that may enter Canada in the coming years which could includ
121、e Dicks Sporting Goods;vendor-direct online and outlet-store sales channels,including,for example,those operated by Under Armour and Nike;non-traditional market entrants and new technologies such as mobile payments which impact the competitive landscape and credit card industry;and Retailers partner
122、ing with a competing financial institution or negotiating special arrangements with one of the credit card issuers.In addition to the physical and online presence of other competitors in the marketplace,the expectations of retail consumers are also changing rapidly,withretailers modifying how they r
123、each out to customers and encourage them to shop in their stores.The changes include:technology-savvy and better informed customers,due in part to the breadth of information available online for education on specific items and productfeatures;advances in mobile technology,allowing retailers to marke
124、t to customers based on their physical location by sending text and email messages withspecific targeted offers as they come within a specific distance of stores;a changing Canadian demographic,with customers who have different shopping patterns and needs;and customers who are more price sensitive a
125、nd price compare online before making purchases.The Company is well positioned in this competitive environment and has identified core capabilities that differentiate the Company and its businesses andoperations from those of its competitors and that add value for its customers.These core capabiliti
126、es are discussed in further detail in section 3.0 of thisMD&A.3.0 Core capabilitiesManagement has identified several core capabilities that differentiate the Company,and its businesses and operations,from those of its competitors andadd value for its customers.These include:Strong brand equity and i
127、nnovative productsCanadian Tire is committed to preparing Canadians for the jobs and joys for a lifetime in Canada by being a“brand and product-led”organization that offersa portfolio of world-class products and brands that its customers need.The Company has made significant investments in digital t
128、echnology to furtherimprove the retail experience for its customers and thereby further increase the value of its brand.Recognizing that the Companys brand is its mostvaluable asset,Canadian Tire Corporation has established a Brand and Community Committee of the Board.This Committees mandate include
129、s oversightof the effectiveness of strategies to maintain and enhance the brand.Canadian Tire is one of the most recognized and trusted names in the Canadian retail landscape.Canadian Tire stores and gas bars as well as many of theproducts offered by Financial Services all share the Canadian Tire“re
130、d triangle”logo,leveraging the loyalty and trust summoned by the Canadian Tire brand.Part of the Companys brand strategy includes strengthening the existing private-brand portfolio and developing or acquiring new valuable private-brands.In2016,the Consumer Brands Division was launched to create prod
131、ucts that appeal to consumers and will provide a platform for long-term growth for theCompany.The Company plans to build,grow,acquire,and nurture a portfolio of strong national and private-brands that can drive accelerated growth.Canadian Tire made significant progress in its execution of this strat
132、egy in 2016,showcasing its strength in style and design with the evolution of theCANVASTMhome decor line,and its strength-delivering quality and performance with the expansion of the MAXIMUM line of professional-grade tools.Furthermore,the rapid rollout of the WOODSbrand for camping and outdoor enth
133、usiasts delivered innovation and differentiation to the entire outdoor livingbusiness,while the well-received FRANKTMbrand continued its expansion into new household cleaning and food categories winning customer conversionfrom national brands.The Companys private-brand and exclusively licensed brand
134、s such as Motomaster,MasterCraft,NOMA,Denver Hayes,WindRiver,Dakota,Firefly,and McKINLEY have earned a level of credibility that is on par with national brands,and are sought after by consumers fromacross the country.8YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SH
135、AREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISAs a retailer committed to delivering quality products for life in Canada,Canadian Tire continued to expand the Tested for Life in Canada program through2016.Over 1,000 products were tested through a panel of over 15,000 testers,with private-brand product
136、s accounting for over 85 percent of those tested.750 products earned the Tested for LIfe in Canada badge that will serve as a stamp of approval across a myriad of marketing channels,including television,digital,flyer,and in-store.Feedback from products that did not earn the badge of approval is driv
137、ing product improvements,helping Canadians feelconfident that they can count on the products they purchase at Canadian Tire.Marketing expertiseThe Company is engaged in a broad range of marketing activities,which include advertising and promotional programs,customer loyalty programs,marketresearch a
138、nd various ancillary marketing support services.Canadian Tire,in conjunction with Dealers,FGL Sports,and Marks build customer awarenessand traffic in stores by using various methods.Such methods include distributing weekly promotional flyers and/or electronic flyers available over theinternet,catalo
139、gues,advertising through radio,television,digital and social media,newspaper,magazine and internet media,and through community eventsand sports sponsorships.The weekly flyer at Canadian Tire and Marks is a significant sales driver for each banner.Canadian Tires flyer,one of Canadas most read flyers,
140、isdelivered to over 12 million households each week and Marks flyer is delivered to approximately 7.5 million households.Canadian Tires website atwww.canadiantire.ca and its mobile application enable online shopping and have also become primary sources of product information for consumers,providing
141、broad access to information about product assortment,including up-to-date product features,benefits,pricing and customer reviews.During2016,Canadian Tire also launched a new catalogue known as The WOW Guide which uses innovative technology to bring online capabilities to astandard catalogue when use
142、d with the Canadian Tire application for mobile devices.Ongoing customer research and consumer data analytics allow FGLSports to deliver personalized marketing communications to its targeted consumers.The Sport Chek,Sports Experts,Pro Hockey Life and AtmosphereeCommerce sites,located at www.sportche
143、k.ca,www.sportsexperts.ca, and www.atmosphere.ca,respectively,have beendesigned to provide a personalized and inspiring shopping experience in addition to providing up-to-date product information,benefits,pricing,andcustomer reviews.Marks eCommerce websites,and in Quebec,enable online shopping and h
144、ave become aprimary source of product information for consumers,providing up-to-date product features,benefits,pricing and customer reviews.Loyalty programIntroduced in 1958 as an innovative customer traffic-builder for Canadian Tire stores and gas bars,the My Canadian Tire Moneyloyalty program rema
145、insa beloved and nostalgic part of the Companys history.Over two years into the digitized program,which introduced electronic Money as an alternative totraditional paper bills,the My Canadian Tire Money program has over 10 million members,and remains one of Canadas most well-known loyaltyprograms.In
146、 September 2015,Financial Services launched an innovative mobile payments application,the Canadian Tire mPay&Playapp,which offersMasterCard card members bonus rewards,exclusive offers and quick and easy account servicing.The mobile payment solution is available exclusively atCanadian Tire and provid
147、es card members with the convenience of paying for purchases with their Canadian Tire Options MasterCard using a smartphone.Refer to section 6.1 for further information about the evolution of the Companys loyalty program and the Companys co-marketing initiatives in 2016.DealersThe Companys 500 Canad
148、ian Tire stores are operated by dedicated entrepreneurs called Dealers who are the face and the voice of the triangle incommunities from coast to coast.The Canadian Tire Dealer model is unique to the Company and has served both the Dealers and the Company well formore than 80 years by allowing both
149、parties to move forward collaboratively to succeed in rapidly changing environments with increased competition.It isthis relationship and shared purpose of creating a strong enterprise that is a differentiator from other Canadian retailers,and that acts as a strategicadvantage,providing the ability
150、to adapt stores and offerings to the local marketplace.Innovative/digital store layoutsThrough its retail banners,the Company delivers innovative store designs that help customers find what they need,quickly and easily.The store network isregularly refreshed and during 2016,12 former Target location
151、s were renovated to Canadian Tire stores,replacing 10 stores and adding two incrementalstores and 440,000 square feet to the network.These stores reflect the latest layout,assortments,and merchandising concepts and include recent digitalelements that enhance the customer experience in-store.June 201
152、5 marked the opening of Canadian Tires most innovative and digitally enhanced store.At 136,000 square feet,the“Showcase”store in Edmontonboasts over 100 digital screens,a large exterior high-resolution LED screen,digital flyer access,and helpful product selectors in the Living,Playing,Fixing,Seasona
153、l,and Automotive sections.With over 73,000 individual products,the Showcase store has the most extensive assortment of any Canadian Tirestore in Canada,and demonstrates the Companys strategy of offering assortments that are tailored to the local market.At Marks,known as Lquipeur in Quebec,customers
154、continue to respond favourably to an improved customer experience due,in part,to clear andconsistent navigational signage and better in-store merchandising and assortments across the network.The Company launched a new bilingual website forLquipeur in 2015 to focus on in-store digital and eCommerce e
155、xpansion and continued to invest in enhancements to this as well as the Mwebsite.This year,the Company focused on driving growth with further investments in digital and traditional marketing to build the Marks brand and retainits status as a leading retailer for Mens jeans,Casual wear,Footwear,and I
156、ndustrial wear,its key pillars of product growth.Further,Marks continues toexpand its assortment of national brands,evident in the addition of Sperry,Rockport,and Mavi brands in 2016.CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA9MANAGEMENTS DISCUSSION A
157、ND ANALYSISAt FGL Sports,the retailer further strengthened its position as Canadas leading sporting goods retailer while bringing the best sports brands in the world toCanadians from coast to coast.A focus on enhancing the customer experience has led to improved in-store execution and merchandising
158、as well as theinstallation of new in-store digital features to better assist customers to make the right purchasing decisions.Through the six new Sport Chek flagship stores(two have opened per year since 2014),FGL Sports is changing customer expectations with its digitally-advanced and personalized
159、retail experience.In2015,the Company brought a first-of-its-kind live TSN broadcast studio to the Maple Leaf Square store in Toronto,Ontario.In addition,FGL Sportsrelaunched its new eCommerce website at SportChek.ca,in 2015,and launched Atmosphere.ca,in 2016.In 2016,the Company added a seconddistrib
160、ution centre to its fulfillment capacity to support eCommerce sales and the Company expanded its digital footprint through store-based eCommercewhere customers can buy certain items online while in-store for home delivery.Real estate expertiseThe Companys strong in-house real estate team manages the
161、 entire network of owned and leased properties for all of its banners,and manages asignificant portion of CT REITs portfolio pursuant to a property management agreement.The Companys portfolio represents one of Canadas largest retailnetworks,comprising 1,702 locations and over 30 million retail squar
162、e feet.The Companys expertise in real estate enables it to quickly and efficientlyidentify properties that are ideally situated for future development or redevelopment and to secure high-traffic,sought-after locations for its retail outlets.TheCompanys real estate management team also has a strong t
163、rack record of developing commercial and industrial properties.The Company owns the majority of Canadian Tire store properties either directly or indirectly through its majority interest in CT REIT.The balance of itsCanadian Tire stores,as well as almost all Marks and FGL Sports stores,operate in le
164、ased locations.Technology expertiseCanadian Tire is strategically focused on developing technological capabilities that will drive the omni-retail experience for its customers.New digitaltechnologies have been developed and implemented to enhance Canadian Tires eCommerce platforms and in-store exper
165、iences.The Canadian Tireinnovation lab located at Communitech in Kitchener-Waterloo,Ontario contributes to the customer experience by introducing leading edge solutions for fieldtesting.Canadian Tires“Digital Garage”,also located in Kitchener-Waterloo,Ontario,focuses on the creation of new technolog
166、y solutions that support theCompanys digital transformations.CTCs data centre located in Winnipeg,Manitoba serves as the core digital hub for Marks and FGL Sports and alsohouses a digital content warehouse,application lab and high performance data centre.The data centre at the AJ Billes DC serves as
167、 the primary datacentre and digital hub for Canadian Tire retail and CTB,allowing the Company to provide greater digital services to its customers,suppliers,employees andpartners.Canadian Tire continues to make progress in the design and implementation of powerful analytical capabilities that assist
168、 its buying and logisticsfunctions.Business processes have been examined and redefined to make more efficient use of the information provided from Canadian Tire stores.Modifications to Canadian Tires technology infrastructure continue to be implemented through CTCs internal technology capabilities a
169、s well as throughexternal service providers to achieve the desired functions and processes key to future cost improvements and enhanced customer experiences atCanadian Tire stores.Global supply chain networkThe Companys supply chain is responsible for managing the flow of information and goods among
170、 its suppliers,supply chain partners and retail network ofstores.Supply chain partners include common-carrier trucking companies,third-party logistics companies,ocean carriers,and railways.Most Canadian Tire products are distributed to stores from four DCs across Canada.The two DCs in Brampton,Ontar
171、io(A.J.Billes DC and Brampton DC)are operated by the Company and are staffed primarily by Company employees,while the DCs in Calgary,Alberta and Montreal,Quebec are operated forthe Company by a third-party logistics company.In recent years,the DCs have focused on implementing new technologies aimed
172、at driving efficiencies andimproving operational flexibility.As examples,voice-pick technology that has been implemented is designed to enhance shipment quality and reduce errors,and the utilization of automated-guided vehicle technology at the A.J.Billes DC has replaced conventional lift vehicles a
173、nd operators.The Company has identified the need to replace the aging Brampton DC.Land in Bolton,Ontario was acquired in 2013 to replace this DC and constructionbegan in 2014.The new Bolton DC is expected to be fully operational in 2017,at which time the Brampton DC will be decommissioned.The Compan
174、y also operates three dedicated automotive parts depots which provide overnight parts delivery to Canadian Tire and PartSource stores.Most FGL Sports products are distributed to stores from two DCs,one in Mississauga,Ontario and the other located in Calgary,Alberta.Both are staffedprimarily by Compa
175、ny employees.The Calgary DC opened in 2015 and provided FGL Sports with new distribution capacity in Western Canada andreplaced Marks third-party operated DC in Calgary.These facilities use state-of-the-art warehouse management systems,automated conveyor systems,and light-directed packing systems to
176、 distribute products to both franchise and corporate stores.FGL Sports eCommerce orders are fulfilled from these twoDCs and are supported by distributed order management technology to facilitate timely,cost effective shipping.Marks products are distributed to storesfrom the aforementioned Calgary DC
177、 and a DC in Brampton,Ontario,which is operated for the Company by a third-party logistics company.The Company also operates a third DC in Brampton,Ontario which supports INA wholesale Canadian distribution operations and provides additionalstorage space for FGL Sports.INA has two warehouse faciliti
178、es in the state of Washington.10YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISThe movement of goods from offshore suppliers is managed by the Companys supply chain through a third-party overseas consolidator and network
179、 ofthird-party carrier partners.The Company processes inbound offshore ocean containers through third-party transload facilities in Vancouver,BritishColumbia,Halifax,Nova Scotia,and Montreal,Quebec.The Company employs third-party carriers to move goods inbound from North American-based suppliers and
180、 outbound from all of its DCs to its retailstores.The Companys distribution network at a glance:4 Canadian Tire DCs1 Marks DC1 Joint Marks&FGL Sports DC4 Transload Facilities3 Auto Parts DCs3 INA DCsPrudent credit risk managementFinancial Services has more than 25 years of experience managing credit
181、 card risk and has a professional team of managers,analysts,and statisticians whouse sophisticated industry-standard and proprietary credit-scoring models to manage that risk.As a result,the team is able to make an informedassessment of the credit quality of each customer account and tailor products
182、 to achieve an appropriate balance of risk and return.World-class customer contact centresThe Companys commitment to creating lifelong relationships with its customers is reflected in the success of its customer contact centres at FinancialServices.The contact centres continue to be recognized for t
183、heir commitment to customer service excellence,earning five Contact Centre of the Yearaward titles and nine Customer Satisfaction awards over the past decade.Sport sponsorshipsCanadian Tire is a leading supporter of sport in Canada.The Company believes in the“Power of Sport”to unite families,communi
184、ties,and the nation,andhas relationships with over 50 amateur and professional sports organizations,including partnerships with the Canadian Olympic Committee,CanadianParalympic Committee,Hockey Canada,and Skate Canada.In addition to sport partners,the Company also supports high performance athletes
185、 whorepresent its core values and embody spirit,passion,and excellence within the world of sports.The Companys commitment to sport provides anopportunity to broaden its reach among key consumer groups pursuing sport across a range of disciplines and at all skill levels.In addition,the Companyuses it
186、s sport focus to increase the attractiveness of its brand and products to customers.CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA11MANAGEMENTS DISCUSSION AND ANALYSIS4.0 Historical performance highlights4.1 Selected annual consolidated financial trendsT
187、he following table provides selected annual consolidated financial and non-financial information for the last three fiscal periods.The financial information hasbeen prepared in accordance with IFRS.(C$in millions,except per share amounts and number of retail locations)201620152014Revenue$12,681.0$12
188、,279.6$12,462.9Net income747.5735.9639.3Basic EPS9.258.667.65Diluted EPS9.228.617.59Total assets15,302.814,987.814,553.2Total non-current financial liabilities16,027.25,778.65,473.0Financial Services gross average accounts receivables(total portfolio)4,911.94,838.74,684.6Number of retail locations1,
189、7021,6981,700Cash dividends declared per share$2.3750$2.1500$1.9625Stock price(CTC.A)2139.27118.16122.221Includes short and long-term deposits,long-term debt including the current portion,long-term derivative liabilities included in other long-term liabilities,and the redeemable financial instrument
190、.2Closing share price as of the date closest to the Companys fiscal year-end.The three-year trend chart highlights changes in revenue by banner between 2014 and 2016.Consolidated revenue decreased in 2015 compared to 2014 primarily due to:lower retail sales at Petroleum due to lower gas prices;one l
191、ess week of Retail segment operations in 2015;and a decline in the same-store sales growth at Marks;partially offset by:increased shipments to Dealers relating to same-store sales growth at Canadian Tire;increased retail sales at FGL Sports;and increased revenue in Financial Services primarily due t
192、o new product offerings and processenhancements that increased the average account balance.Consolidated revenue increased in 2016 compared to 2015 primarily due to:higher shipments to Dealers relating to same-store sales growth at Canadian Tire and same-storesales growth across the Marks and FGL Spo
193、rts banners;increased revenue in Financial Services largely attributable to higher credit card charges;partially offset by:lower retail sales at Petroleum due to lower per litre gas prices,offset by higher non-gas sales andhigher gas volume.Store count has increased since 2014.The increase in store
194、count from 2014 is in line with the growthstrategy at FGL Sports to increase the number of Sport Chek and Atmosphere banner stores in thenetwork and continued selective expansion at Canadian Tire.In 2015 this was partially offset by theconversion of eight FGL Sports franchise locations to buying mem
195、bers and a slight decline in thenumber of Marks stores due to the closure of lower performing stores.Retail revenue has increased since 2014 in line with the store count despite lower retail sales atPetroleum due to lower gas prices.REVENUE BY BANNER/UNIT*($millions)02,0004,0006,0008,00010,00012,000
196、14,000201620152014*Excludes CT REITFinancial ServicesMarksFGL SportsPetroleumCanadian TireSTORES AND RETAIL REVENUERetail revenue($billions)Number of stores0246810121,6001,6501,7001,750Store countRetail revenue$11.3$11.1$11.520162015201412YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORAT
197、ION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISFinancial Services gross average accounts receivable(“GAAR”)for the total portfolio has increasedover the past three years.Average account balances increased since 2014 due in part to enhanced in-store financing offers forCanadian Tir
198、e customers and the continued focus on the optimization of approval and credit limitstrategies.Ongoing investment in new account acquisition has also contributed to GAAR growth.The Companys diluted EPS has increased every year since 2014 primarily due to:solid gross margin growth from both the Retai
199、l and Financial Services segments,due to strongrevenue as well as improvement in gross margin rate in both segments;strong retail sales growth at Canadian Tire and FGL Sports(2015)and across all banners(2016);increased credit card charges on increased GAAR in the Financial Services segment;the Compa
200、nys share buy-back program which resulted in a reduction in the weighted averagenumber of shares outstanding;and the impact of after-tax gains on the sale of surplus properties in 2015;partially offset by:an increase in selling,general,and administrative expenses in both years due to increasedinvest
201、ment in the network to support operational efficiencies as well as increased variablecompensation expense across the Company in 2016;and increased investment in the Financial Services segment to invigorate GAAR growth.FINANCIAL SERVICES GROSS AVERAGEACCOUNTS RECEIVABLE($millions)3,9004,0004,1004,300
202、4,5005,0004,9004,2004,4004,6004,7004,800201620152014DILUTED EPS($per share)$0$10$9$8$7$6$5$4$3$2$1201620152014$9.22$8.61$7.59CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA13MANAGEMENTS DISCUSSION AND ANALYSIS5.0 Three-Year(2015 to 2017)financial aspirati
203、onsFinancial aspirations:2015 to 2017The following represents forward-looking information and users are cautioned that actual results may vary.The Company announced its three-year growth strategy and financial aspirations for fiscal years 2015 to 2017 in October 2014.The financial aspirations areout
204、lined below along with our 2016 performance and Managements current view of the key assumptions and significant risks:Financial MeasureAnnualAspiration2016Achieved in 2016?Canadian Tire retail sales annual growth3%+5.6%Marks retail sales annual growth5%+6.0%FGL Sports retail sales annual growth9%+6.
205、9%XFinancial Services return on receivables6%+7.43%FGL Sports did not achieve its annual retail sales growth aspiration of 9+percent in 2016 due to lower than expected growth at its franchise stores andunseasonably warm temperatures in the first half of Q4.Financial MeasureAspiration over3-year peri
206、od2015 to 20172016Tracking toward3-year Aspiration?Average diluted EPS growth18%to 10%7.8%Retail return on invested capital9%+8.34%1Average diluted EPS growth is calculated using normalized diluted EPS.Average diluted EPS growth for 2015 and 2016 was 7.8 percent.Growth was impacted by continued inve
207、stment in the Financial Services segment toreinvigorate GAAR growth,the negative impact of a weaker Canadian dollar on product costs across the Retail banners,and spending to driveoperational efficiencies which are yielding improved margins and lower expenses.The Company continues to track towards i
208、ts average three-year target of8 to 10 percent diluted EPS growth.Economic conditions that affect the Companys performance have changed since the Retail ROIC aspiration was announced.The deterioration of theAlberta economy,resulting from the decline in oil prices,and the decline in the value of the
209、Canadian dollar compared to the U.S.dollar have resulted inchallenges to deliver the growth in earnings required to achieve the Retail ROIC aspiration.Increasing Retail ROIC continues to be a focus for the Company.In addition,the Company previously announced a three-year average annual operating cap
210、ital expenditure investment range of between$600 million and$625 million from 2015 through 2017.The expected three-year average is now$450 million to$500 million given the actual spend for 2015 and 2016 andthe revised forecasts for 2017 operating capital expenditures.The revised forecast excludes sp
211、ending for operational efficiency initiatives that may beidentified.The revised range includes continued investment in the Companys store network,capital spending relating to the acquisition and renovation of12 former Target locations,and significant new investments in digital technology.There have
212、been no other material changes to the key assumptions and significant risks that support the Companys financial aspirations.Based on itsassessment as at the date of this MD&A,Managements current view of these key assumptions and significant risks that support the Companys financialaspirations are ou
213、tlined below:1.Annual retail sales growth of 3+percent at Canadian Tire,5+percent at Marks,and 9+percent at FGL SportsKey assumptions:Strong and consistent same-store sales growth across core retail businesses Retail square footage growth at Canadian Tire and Marks in line with recent years Continue
214、d Sport Chek network expansion Growth in eCommerce sales across all retail banners Positive customer response to brand and product-focused marketing,in-store merchandising,category specific tactical growth initiatives,and digitalinitiatives Effective use of loyalty program customer shopping data to
215、create targeted customer offerings and enhance in-store experienceSignificant risks:Limitations on availability of preferred retail locations due to continued competition and demand for retail space in Canada Increased competition due to expanding and new U.S.retailers,new and existing online compet
216、itors,or a significant change in the Canadian retaillandscape Decline in economic growth,consumer confidence,and household spending The competitiveness of the Companys loyalty programs Customers willingness to participate in and the relative attractiveness of the Companys marketing offers Impact of
217、commodity prices and other factors on the economic condition of various geographic or customer segments14YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSIS2.Average diluted EPS growth of 8 to 10 percent over the three-year
218、periodKey assumptions:Realization of retail sales growth aspirations Increased bottom-line earnings across all businesses through strong margin management,operating expense growth in line with revenue growth,and growth in GAAR in the Financial Services segment Realization of cost savings and benefit
219、s from initiatives aimed at improving gross margin and operating expenses,including Dealer contract initiativesand enterprise-wide operating efficiency initiativesSignificant risks:Revenue growth not achieved;refer to significant risks associated with retail sales aspirations described above Increas
220、ed costs relating to foreign exchange and global sourcing of key products impacting the Companys ability to maintain or reduce operating,supply chain,and/or product costs Inability to achieve enhanced purchasing efficiencies and a reduction of overhead expenses Short-term effect on EPS from the Comp
221、anys capital-allocation initiatives including the potential impact of organic and inorganic growth initiativesdesigned to create long-term growth GAAR growth could be challenged by new regulations and adverse economic conditions3.Financial Services return on receivables of 6+percent annuallyKey assu
222、mptions:Continued GAAR growth Customers respond positively to new marketing initiatives,including enhanced loyalty program and in-store financing across the retail banners Continued prudent expense managementSignificant risks:Decline in economic growth,consumer confidence,and household spending High
223、er credit or default risk resulting in incremental allowance for future write-offs GAAR growth could be challenged by new regulations and adverse economic conditions4.Retail return on invested capital of 9+percent by the end of 2017Key assumptions:Growth in retail earnings due to sales growth and su
224、ccessful execution of operating efficiency initiatives that increase retail gross margin and reduceoperating expense as a percentage of revenue Increased return from existing assets including enhanced same-store productivity and prudent working capital management Continued successful investments in
225、businesses to achieve organic growth and in projects and initiatives to improve returns Average annual operating capital expenditures of$450 million to$500 million over the three-year period(updated from the original assumption of aninvestment between$600 million and$625 million,over the three-year
226、period,given actual spend for 2015 and 2016 and the revised forecasts for2017 operating capital expenditures)Significant risks:Earnings growth not achieved;refer to significant risks associated with retail sales and EPS growth aspirations described above Increased capital investment due to inorganic
227、 growth opportunities that the Company may pursueCANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA15MANAGEMENTS DISCUSSION AND ANALYSIS6.0 2016 and 2017 Strategic imperatives6.1 2016 Strategic imperativesThe following is a summary of the Companys strategic
228、imperatives and initiatives for 2016,along with Managements assessment in achieving these initiatives.1.Strengthen brands and enhance customer experiencesThe Company is committed to being a“brand and product-led”organization and being the conduit between its target customers and the best portfolio o
229、fretail brands.Management believes that the strength and value of the Companys brands are directly correlated to the strength of its business results.Successful achievement of the initiatives within this strategic imperative will ensure that the Companys brands are supported and enhanced in the eyes
230、 ofits customers and other key stakeholders.2016 InitiativesFinal Assessment Continue to keep the Companys brands relevant through innovative marketing campaigns and taking advantage ofopportunities to highlight innovation and digital capabilities to its target customers Continue to build customer c
231、onnections across all banners by offering unparalleled shopping experiences both in-store andonline Activate sports and community partnerships to keep the Companys brand in the minds of Canadians Grow customer-loyalty program through in-store acquisition and through mobile apps and other digital cha
232、nnels Continue to create and offer high-quality,innovative private-brand assortments across the Companys retail banners that willdrive customer loyalty and increase brand awareness Achieved Achieved Achieved Achieved AchievedDuring the year,the Canadian Tire team developed and launched two WOW Guide
233、s,that feature a combination of a paper catalogue and enhanced onlinedigital content.This guide exemplifies the Companys commitment to innovation and delivering results.eCommerce transactions more than doubled wheneach of the guides went live and sales of the 2,000+items included in the Guides excee
234、ded targets.As part of the Companys ongoing commitment to enhancing the online experience for its customers,the Company continued to upgrade its existing onlineand eCommerce presence across its core retail banners.In addition,during the year,Atmosphere.ca was launched along with an expanded digital
235、footprintthrough store based eCommerce kiosks where customers can order and pay for direct to home shipping while in-store.Marks stores continued to be renovated to the latest format and focused on driving growth with investments in digital and traditional marketing to build thebrand.To ensure Marks
236、 was top-of-mind and to create a more authentic connection with consumers,Marks also released video content through its digitaland social channels surrounding Fathers Day,which is typically a major sales event for the business.CTC continues to believe that supporting sports and community partnership
237、s elevates its brand and keeps the Company top-of-mind with Canadiansthroughout the year.As such,the Company continued its partnership with the Canadian Olympic School program and government committees,inspiringkids to get active in school throughout the country.CTB has partnered with Own the Podium
238、 and the Canadian Olympic Committee to provide advancedsports analytics for Canadas athletes.The Company has also partnered with the Canadian Armed Forces to provide military bases across Canada withaccess to sporting equipment to support troops and their families.The customer loyalty program has ov
239、er 10 million members,reflecting the Companys initiatives to stimulate both sales at its retail banners and receivablesgrowth in its credit card portfolio.This was achieved primarily through the continued focus on integration initiatives with the Retail business,for example anexpanded in-store finan
240、cing offer which provides the customers added flexibility when making purchases larger than$200.Private-brands continued to provide the Company with additional sales and competitive advantages,made possible with the Companys expertise indeveloping products,quality management,and direct sourcing.Duri
241、ng 2016,a Consumer Brands Division was created to form a Company-wide strategyand long-term growth platform for CTCs unique products and brands.Brands like NOMA,CANVAS,Mastercraft,and FRANK at Canadian Tire,McKinley atAtmosphere,and Denver Hayes and Dakota at Marks,continue to set the Company apart
242、from the competition whether online or in-store.2.Transition to the new world of omni-retail where digital complements the physicalIn order to compete on a global basis and continue to be relevant and engaged with its customers,the Company must invest in the future of digital retailingto enhance bot
243、h its physical store networks and eCommerce capabilities.The“digitization of retail”requires significant investment in foundationaltechnological platforms in order to continue to successfully transition the Company from traditional bricks-and-mortar to omni-channel retailing.2016 InitiativesFinal As
244、sessment Create world-class digital experiences through digital marketing,in-store technology,eCommerce,and integrated loyaltyprograms that complement physical retail stores Achieved Utilize customer data and shopping insights to personalize and enhance offers,communication and content,and achieveef
245、ficiencies Achieved16YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISFinancial Services continues to support the Retail business through in-store and online offers which serve to drive retail sales growth while adding new
246、accounts and increasing account balances in the credit card portfolio.At Canadian Tire,the banners online and digital presence continued to strengthen as the eCommerce site,canadiantire.ca,was completely redesigned tooffer an improved online experience for customers.More refined search functionality
247、,improved navigation,an expanded digital flyer,and the integration ofthe eTires website into canadiantire.ca were also incorporated following the redesign.The Company offered an increased product assortment in 2016,adding new online only vendors and thousands of online exclusive offers.As well durin
248、g the year,following a successful pilot in the Ottawa market,flyeritems were made available for online purchase for customers to pick up in-store.As mentioned FGL Sports enhanced their online presence with the launch of the Atmosphere.ca website.This site also includes a Facebook messengerchat tool
249、to broaden the communication channels with its customers.FGL Sports also opened two digitally enhanced flagship stores;one on Robson Streetin Vancouver,British Columbia and another at Sherway Gardens in Toronto,Ontario.These stores offer elevated in-store experiences that blend physicaland digital e
250、lements of the shopping experience.For example,motion-triggered content allows for tactical messages to appear on screen when customerswalk by,a stride ID fit lab allows customers to obtain a 3-D foot scan as well as a running gait analysis to provide insights into the most suitable shoe for thatcus
251、tomer,and 3-D product holograms provide an elevated view of key products in stores.With pre-roll videos and engaged social posts on popular social media outlets such as YouTube,Facebook,Twitter,and Instagram,Marks increased itsdigital advertising throughout the year.The digital videos were considere
252、d Best in Class by Google when measuring ad recall,intent to purchase,andincrease in searches among viewers of the video.Marks fall jeans campaign also generated over two million views on both YouTube and Facebook.Marksdigital efforts also included providing an integrated path to purchase and specia
253、l programs or initiatives that are accessible to customers across all channels.During the year,using customer data and shopping insights,Canadian Tire retail deployed one-on-one weekly communications and promotional offers toloyalty members which allowed the Company to engage customers through perso
254、nalized product offers.In addition,a new digital platform was launchedproviding the Company with the capabilities to trigger real-time communications and promotions based on customer behaviour.3.Drive growth and productivity in core businessesThe Company continues to focus on driving organic growth
255、and productivity within its four core banners:Canadian Tire,FGL Sports,Marks,and FinancialServices.It will also pursue inorganic opportunities,including eCommerce and new world omni-retail capabilities to create new growth platforms and bringrequired competencies to the Canadian Tire family of compa
256、nies.2016 InitiativesFinal Assessment Continue to drive sales and revenue across all banners through ongoing category management,innovative marketingcampaigns,new product assortments,and enhanced in-store and digital experiences Achieved Achieve sustainable and profitable growth through productivity
257、 initiatives that target the operating expense structure andgross margins Achieved Continue to increase the retail footprint by adding flagship stores at FGL Sports and building new or expanded Canadian Tireand Marks stores Achieved Pursue selective acquisitions that strengthen and grow our existing
258、 portfolio of brands and bring new-world capabilities Achieved Allocate capital through a balanced approach to maximize growth and long-term shareholder returns Achieved Re-invigorate GAAR growth by investing in in-store financing programs that drive sales at Canadian Tire AchievedIn addition to the
259、 innovative marketing campaigns at Marks and FGL Sports discussed previously,Canadian Tire continued to expand the Tested for Life inCanada program through 2016,a proprietary consumer testing program comprising of over 15,000 Canadians from across the country.An example of thisis the MAXIMUM Tool Dr
260、op campaign that featured hundreds of tools being dropped-off to trade professionals across the country.Over 400 products weretested,with 82 percent earning the Tested for life in Canada badge.Canadian Tire continued to focus on operational effectiveness within the retail banners,the benefits of whi
261、ch have more than offset foreign exchangepressures and have contributed to our improved gross margin rate throughout the year.During 2016,two Marks stores and two Canadian Tire retail stores were opened.Also,12 locations,formerly held by Target Canada and acquired by CTCin 2015,were renovated to the
262、 latest Canadian Tire retail store format and replaced existing locations during the year,adding a net two new locations andan additional 440,000 retail square feet to the network.The Company continues to pursue selective acquisitions to grow its existing portfolio of brands and to support this purs
263、uit created a Consumer BrandsDivision during the year.The mandate of the division is to develop and execute an integrated strategy surrounding the Companys existing portfolio ofprivate-brands.In addition,it will have oversight for the acquisition of brands that have runway for growth and will develo
264、p new brands that logicallycomplement or extend the existing product portfolio as the Company moves forward.CANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA17MANAGEMENTS DISCUSSION AND ANALYSISThe Company is committed to allocating capital through a balanc
265、ed approach.As part of this approach,on November 10,2016,the Board of Directorsannounced an increase to the quarterly dividend rate payable to the holders of its Class A Non-Voting Shares and Common Shares by 13 percent.Also,theCompany fulfilled its stated intention(announced November 12,2015)of rep
266、urchasing$550 million of its outstanding Class A Non-Voting shares throughDecember 31,2016.Further,on November 10,2016,the Company announced its intention to repurchase a further$550 million of its Class A Non-VotingShares,in excess of the amount required for anti-dilutive purposes by the end of 201
267、7.Increased awareness and available options for the Companys in-store financing programs,due in part to investment in key marketing initiatives such as TheWOW Guide,had a favourable impact on GAAR growth by generating nearly twice as many financed sales compared to last year.4.Create an agile and hi
268、gh-performing corporate cultureThe Company believes its success is closely tied to the quality of its leadership and is committed to attracting,developing,and retaining world-class talentthat will drive growth in the business and foster a compelling corporate culture.The Company continues to be focu
269、sed on developing or acquiring talent inkey areas such as digital retailing,marketing,and data analytics in order to drive growth in its core businesses.2016 InitiativesFinal Assessment Attract and develop talent to ensure required capabilities and expertise to bring the Company into the new world o
270、f retail Achieved Engage employees to stimulate innovation and growth Achieved Develop and share capabilities by collaborating across the businesses Achieved Deepen connections in communities across the country AchievedThe organization continued to identify,acquire,and develop resources across all l
271、evels and banners of the Company during 2016.In addition,the Companyimplemented Workplace(essentially Facebook at work)to improve communication and collaboration for its employees.Canadian Tire continues to focus on pursuing opportunities to connect with its customers over their life cycle,across al
272、l banners.During the year,its Brand,Marketing,Corporate Affairs,and Communications teams were centralized under one executive who provides oversight with a company-wide lens,thusfostering collaborations across the business.Canadian Tires Jumpstart charity continued the support of local communities t
273、hroughout 2016,deepening connections throughout the country.During theyear,close to 220,000 Jumpstart children were helped through needs-based programs developed by community partners.During a six-week period,Jumpstart assisted Sport Canada and the Ministry of Canadian Heritage to identify over 4,80
274、0 children of Syrian refugees and new Canadian families toprovide them with access to sports and recreation programming in their communities.As well,the Jumpstart and Hockey Canada Big Play initiative allowedmore than 1,130 kids from 334 local hockey associations to participate in recreational hocke
275、y programs.6.2 2017 Strategic imperativesFor 2017,the Company will pursue the following strategic imperatives and key initiatives which support the achievement of the three-year(2015-2017)financial aspirations.These imperatives and initiatives are aligned with the Companys focus of being the undispu
276、ted number one retail brand in Canada bybuilding strong connections with customers over their lifetime,providing a unique portfolio of world-class products and brands,and offering a uniquecustomer experience while preparing customers for the jobs and joys for a lifetime in Canada.The following repre
277、sents forward-looking information and users are cautioned that actual results may vary.1.Achieve sustainable growth by strengthening the Companys brands and product offerings and enhancing customer experiences(connections)The Company is committed to being a“brand and product-led”organization and bei
278、ng the conduit between customers and the best portfolio of world-classproducts and brands.Management believes that the strength and value of the Companys brands are directly correlated to the strength of its businessresults.Successful achievement of the initiatives within this strategic imperative w
279、ill ensure that the Companys brands are supported and enhanced in theeyes of its customers and other key stakeholders and that the Company offers products that support Canadians throughout their lifetime.2017 Initiatives Continue to drive sales and revenue across all banners through ongoing category
280、 management,new product brands and assortments,andenhanced in-store and digital experiences Continue to evolve the Companys retail eCommerce capabilities to drive sales growth and provide customers with access to the shopping channelsand experiences that they want Pursue additional opportunities to
281、integrate the financial services business with the Companys retail operations driving both retail sales,newaccounts,and increased engagement with the Companys loyalty program Activate sports and community partnerships to keep the Companys brand elevated in the minds of Canadians Through the Consumer
282、 Brands division,continue to develop and offer high-quality,innovative private-brand assortments and pursue selectiveacquisitions that strengthen and grow the existing portfolio of brands across the Companys retail businesses18YEARINREVIEW.CANADIANTIRECORPORATION.CACANADIAN TIRE CORPORATION 2016 REP
283、ORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSIS2.Drive profitability,operational excellence,and increased efficiencies in core businessesThe Company continues to focus on driving organic growth and operational efficiency within its four core banners:Canadian Tire,FGL Sports,Marks,andFinancial
284、 Services.Through various operational excellence initiatives,the Company expects to identify opportunities to implement new processes andtechnology that will drive ongoing operational improvements across the organization as well as drive higher profitability.2017 Initiatives Achieve sustainable and
285、profitable growth through operational efficiency initiatives that target the Companys operating expense structure and grossmargin performance Become a world-class online destination with omni-channel and fulfillment options that meet evolving customer expectations Identify opportunities across the o
286、rganization to consolidate functions and areas of expertise to build centres of excellence that support all thebanners Allocate capital through a balanced approach to maximize growth and long-term shareholder returns Identify opportunities within the current store network to make existing stores mor
287、e profitable Continue to invigorate GAAR growth by investing in in-store financing and offers that drive sales at the Companys physical retail stores and drivenew accounts or increase account balances at Financial Services3.Transform the business by developing a high-performing,talented,and results-
288、oriented corporate cultureThe Company believes its success is closely tied to the quality of its leadership and is committed to attracting,developing,and retaining world-class talentthat will drive growth in the business and foster a compelling corporate culture.The Company will continue to develop
289、or acquire talent in key areas such asdigital retailing,marketing,and data analytics in order to drive growth in its core businesses.2017 Initiatives Attract,develop,and manage future leadership talent to build required capabilities and expertise to bring the Company into the new world of retail Eng
290、age employees to stimulate innovation and growth and collaborate across businesses where relevant Invest in talent to advance eCommerce,fulfillment,data analytics,and predictive marketing capabilities to fulfill customer experience expectationsand to win in omni-channel Deepen customer connections i
291、n communities across the country to focus on and expand customer lifecycle engagementCANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA19MANAGEMENTS DISCUSSION AND ANALYSIS7.0 Financial performance7.1 Consolidated financial performanceNon-operational itemsTh
292、e results of operations in the current and previous quarter and year-to-date ended December 31,2016 and January 2,2016 did not include material non-operational items.As a result,the Company has not included a measure of“normalized”earnings or“normalized”diluted EPS in this MD&A.7.1.1 Consolidated fi
293、nancial results(C$in millions,except where noted)Q4 2016Q4 2015Change20162015ChangeRetail sales1$4,383.5$4,031.08.7%$14,370.6$13,762.04.4%Revenue$3,641.0$3,380.27.7%$12,681.0$12,279.63.3%Gross margin dollars$1,296.7$1,177.610.1%$4,392.5$4,135.36.2%Gross margin as a%of revenue35.6%34.8%78 bps34.6%33.
294、7%96 bpsOther expense(income)$2.4$(3.9)(162.6)%$(4.3)$(54.9)(92.2)%Selling,general and administrative expenses910.8823.810.6%3,291.93,096.16.3%Net finance costs25.422.313.7%93.992.81.1%Income before income taxes$358.1$335.46.8%$1,011.0$1,001.31.0%Income taxes93.093.9(0.8)%263.5265.4(0.7)%Effective t
295、ax rate26.0%28.0%26.1%26.5%Net income$265.1$241.59.7%$747.5$735.91.6%Net income attributable to:Shareholders of Canadian Tire Corporation$246.8$225.29.6%$669.1$659.41.5%Non-controlling interests18.316.312.2%78.476.52.4%$265.1$241.59.7%$747.5$735.91.6%Basic EPS$3.47$3.0215.0%$9.25$8.666.8%Diluted EPS
296、$3.46$3.0115.1%$9.22$8.617.1%Weighted average number of Common andClass A Non-Voting Shares outstanding:Basic71,101,88774,638,445NM272,360,30376,151,321NM2Diluted71,249,11974,939,608NM272,555,73276,581,602NM21Key operating performance measure.Refer to section 11.3.1 in this MD&A for additional infor
297、mation.2Not meaningful.Non-controlling interestsThe following table outlines the net income attributable to the Companys non-controlling interests.For additional details,refer to Note 14 of the annualconsolidated financial statements contained in the Companys 2016 Report to Shareholders.(C$in millio
298、ns)Q4 2016Q4 201520162015Financial ServicesNon-controlling interest percentage 20.0%(2015 20.0%)$12.2$10.6$52.4$53.0CT REITNon-controlling interest percentage 14.9%(2015 16.2%)5.25.221.420.6Retail segment subsidiaryNon-controlling interest percentage 50.0%(2015 50.0%)0.90.54.62.9Net income attributa
299、ble to non-controlling interests$18.3$16.3$78.4$76.5Consolidated fourth quarter 2016 versus fourth quarter 2015Earnings SummaryDiluted EPS was$3.46 in the quarter,an increase of$0.45 per share,or 15.1 percent,compared to the prior year.The earnings performance reflects strongrevenue growth and impro
300、ved gross margin contribution from the Retail and Financial Services segments,as well as the favourable impact of sharerepurchases and a lower effective tax rate on year-over-year diluted EPS;partially offset by increased selling,general,and administrative expenses.20YEARINREVIEW.CANADIANTIRECORPORA
301、TION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSISRetail salesConsolidated retail sales increased$352.5 million or 8.7 percent;however,this includes a 5.9 percent increase in Petroleum retail sales due to higher perlitre gas prices.Excluding Petroleum,con
302、solidated retail sales increased 9.1 percent reflecting increased sales across the Canadian Tire,FGL Sports,andMarks banners.Refer to sections 7.2.3 for further information regarding Retail segment sales in the quarter.RevenueConsolidated revenue increased$260.8 million,or 7.7 percent,which includes
303、 a$25.1 million increase in Petroleum revenue resulting from higher per litregas prices.Excluding Petroleum,consolidated revenue increased 7.9 percent primarily due to higher shipments at Canadian Tire,increased sales at FGLSports and Marks,and higher revenue in Financial Services.Refer to sections
304、7.2.3 and 7.4.2 for further information regarding Retail and Financial Servicessegment revenue.Gross marginConsolidated gross margin dollars increased$119.1 million,up 10.1 percent driven by increased sales and revenue across all retail banners and increasedrevenue in the Financial Services segment.
305、The gross margin rate increase of 78 basis points is impacted by higher year-over-year per litre gas margins atPetroleum.Excluding Petroleum,the gross margin rate increased 79 basis points reflecting a rate improvement at Canadian Tire and Marks as well as ahigher gross margin rate in the Financial
306、Services segment.Refer to sections 7.2.3 and 7.4.2 for further information regarding Retail and Financial Servicessegment gross margin.Other expense(income)Consolidated other income decreased$6.3 million(from income of$3.9 million to an expense of$2.4 million)primarily due to an increase in year-ove
307、r-yearRetail segment asset impairment charges resulting from the Companys annual review of long-lived assets.Selling,general and administrative expensesConsolidated selling,general and administrative expenses increased$87.0 million,or 10.6 percent,primarily due to:higher operating costs to support t
308、he Companys continued investment in operational effectiveness initiatives;higher variable compensation expense across the Company;increased occupancy costs relating to new stores at Canadian Tire(including Target conversions),new and renovated stores at FGL Sports,and timingof environmental and main
309、tenance and repairs expense at Petroleum;higher store wages to support increase sales volumes at FGL Sports and Marks;increased loyalty costs which are reported within marketing and advertising expense on a consolidated basis;increased depreciation and amortization relating to higher capital spendin
310、g on IT initiatives and increased capital investment in the Retail network;and increased spend to support the Companys information systems.Net finance costsConsolidated net finance costs increased$3.1 million,or 13.7 percent,primarily due to higher interest expense on long-term debt.Income taxesThe
311、effective tax rate decreased to 26.0 percent from 28.0 percent in the prior year.Refer to Tax Matters in section 10.0 of this MD&A for further details.Consolidated full year 2016 versus full year 2015Earnings SummaryDiluted EPS was$9.22,an increase of$0.61 per share,or 7.1 percent,over the prior yea
312、r,which included a$0.33 per share gain from the sale of surplusproperty.Excluding this gain,diluted EPS increased 11.4 percent,year-over-year,driven by strong revenue growth and improved gross margin contributionfrom the Retail and Financial Services segments,Petroleums higher per litre gas margins,
313、and the favourable impact of share repurchases and a lowereffective tax rate on year-over-year diluted EPS;partially offset by increased selling,general,and administrative expenses due,in part,to the Companyscontinued investment in GAAR growth and operational effectiveness initiatives.Retail salesCo
314、nsolidated retail sales increased$608.6 million,or 4.4 percent,over the prior year;however,this includes a 4.2 percent decline in Petroleum retail salesdue to lower per litre gas prices.Excluding Petroleum,consolidated retail sales increased 5.9 percent reflecting higher sales at Canadian Tire,FGL S
315、ports,and Marks.Refer to sections 7.2.3 for further information regarding Retail segment sales in the year.RevenueConsolidated revenue increased$401.4 million,or 3.3 percent,over the prior year,which includes a$100.3 million decline in Petroleum revenue resultingfrom lower per litre gas prices.Exclu
316、ding Petroleum,consolidated revenue increased 4.8 percent due to increased shipments at Canadian Tire,higher salesCANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSYEARINREVIEW.CANADIANTIRECORPORATION.CA21MANAGEMENTS DISCUSSION AND ANALYSISat FGL Sports and Marks,and higher revenue in the Financi
317、al Services segment.Refer to sections 7.2.3 and 7.4.2 for further information regarding Retailand Financial Services segment revenue.Gross marginConsolidated gross margin dollars increased$257.2 million,or 6.2 percent,driven by increased sales and revenue across all retail banners and increasedreven
318、ue in the Financial Services segment.The gross margin rate increase of 96 basis points is positively impacted by the lower year-over-year per litre gasmargins at Petroleum.Excluding Petroleum,the gross margin rate increased 58 basis points reflecting solid growth in the gross margin rate at Canadian
319、 Tireand in the Financial Services segment.Refer to sections 7.2.3 and 7.4.2 for further information regarding Retail and Financial Services segmentgross margin.Other incomeConsolidated other income decreased$50.6 million primarily due to a lower value of Retail segment real estate gains compared to
320、 the prior year,including a$29.2 million gain on the sale of surplus property,as well as an increase in Retail segment asset impairment charges resulting from the Companys annualreview of long-lived assets.Selling,general and administrative expensesConsolidated selling,general,and administrative exp
321、enses increased$195.8 million,or 6.3 percent,compared to the prior year primarily due to:higher operating costs to support the Companys continued investment in operational effectiveness initiatives;higher variable compensation expense across the Company;increased marketing and advertising expenditur
322、es in the Retail segment and higher acquisition costs in the Financial Services segment to support theCompanys continued investment in GAAR growth;increased depreciation and amortization relating to higher capital spending on IT initiatives and increased investment in the Retail network;increased sp
323、end to support the Companys information systems;increased personnel expenses due to severance costs associated with organizational changes that occurred during the year,including a change in theChief Executive Officer of the Company,and due to higher store wages and benefits to support increased sal
324、es volumes at FGL Sports andMarks;and increased occupancy costs relating to new stores at Canadian Tire(including Target conversions)and new and renovated stores at FGL Sports,partially offset by a larger than typical property tax refund.Income taxesThe effective tax rate decreased to 26.1 percent f
325、rom 26.5 percent in the prior year.Refer to Tax Matters in section 10.0 of this MD&A for further details.7.1.2 Consolidated key operating performance measuresKey operating performance measures do not have standard meanings under IFRS and,therefore,may not be comparable to similar terms used by other
326、companies.Refer to section 11.3.1 in this MD&A for definitions and further information.(C$in millions)Q4 2016Q4 2015Change20162015ChangeNet income attributable to Shareholders of Canadian TireCorporation$246.8$225.29.6%$669.1$659.41.5%Adjusted EBITDA1506.6474.06.9%1,561.81,518.82.8%Selling,general a
327、nd administrative expenses(excludingdepreciation and amortization)as a%of revenue221.7%21.0%69 bps22.4%21.8%59 bpsAdjusted EBITDA1as a%of revenue13.9%14.0%(11)bps12.3%12.4%(5)bps1Adjusted EBITDA is a non-GAAP measure;refer to section 11.3.2 in this MD&A for a reconciliation of adjusted EBITDA to net
328、 income attributable to Shareholders of Canadian Tire Corporation and additionalinformation.2Selling,general and administrative expenses exclude depreciation and amortization of$121.2 million in Q4 2016(2015$114.0 million)and$448.9 million Q4 YTD 2016(2015$415.8 million).Adjusted EBITDA has increase
329、d compared to the prior year despite a$29.2 million gain on the sale of surplus property in the prior year,largely due to thestrong performance in the Retail segment.Adjusted EBITDA as a percentage of revenue has decreased slightly compared to the prior year as the rate ofrevenue growth slightly out
330、paced that of Adjusted EBITDA.Selling,general and administrative expenses(excluding depreciation and amortization)as a percentage of revenue increased compared to the prior year.During the full year 2016 and 2015,this metric has been negatively impacted by the significant decline in Petroleum revenu
331、e due to lower gas prices year-over-year.Excluding the decline in Petroleum revenue for the full year,selling,general and administrative expenses(excluding depreciation and amortization)as a percentage of revenue increased 32 basis points in 2016 compared to 2015.This performance measure is impacted
332、 by the increase in variablecompensation across the Company as well as the cost of the Companys continued investment in operational effectiveness initiatives.The majority of thebenefit of the investment in operational effectiveness initiatives is reflected in gross margin.22YEARINREVIEW.CANADIANTIRE
333、CORPORATION.CACANADIAN TIRE CORPORATION 2016 REPORT TO SHAREHOLDERSMANAGEMENTS DISCUSSION AND ANALYSIS7.1.3 Seasonal trend analysisQuarterly operating net income and revenue are affected by seasonality.The fourth quarter typically generates the greatest contribution to revenues andearnings,and the first quarter the least,largely due to the seasonal nature of some merchandise and the timing of ma
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