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Canadian Tire Corporation Limited (OTC: CDNTF) Q3 2018 Earnings Conference Call on November 8, 2018 at 1:00 pm ET
managerial staff
Stephen Wetmore – President and Chief Executive Officer
Allan MacDonald – Executive Vice President
Dean McCann – Executive Vice President and Chief Financial Officer
Gregory Craig – President and CEO, Canadian Tire Bank
Analysts
Mark Petrie – CIBC
Irene Nattel – RBC Capital Markets
Jim Durran – Barclays
Vishal Shreedhar – National Bank
Derek Dley – Canaccord Genuity
Peter Sklar – BMO Capital Markets
Brian Morrison – TD Securities
Patricia Baker – Scotiabank
Operator
Good afternoon. I am calling Valarie and I will be your conference operator today. At the moment, I welcome everyone to the third quarter results conference call from Canadian Tire Corporation Limited. [Operator Instructions]. Earlier today, Canadian Tire Corporation Limited released its financial results for the third quarter of 2018. A copy of the results is available on its website. It contains disclaimers of forward – looking statements, risks and uncertainties that also apply to today 's conference call.
I will now turn to Stephen Wetmore, President and Chief Executive Officer. Stephen?
Stephen Wetmore
Thank you, operator, and good afternoon to all. First of all, in addition to commenting on our third quarter results, we will not be talking to you again until February, which means we'll be doing our plans for 2019. So we'll spend a few minutes today highlighting some of our areas. activity for next year and provide you with guidance on our outlook for capital expenditures.
I've already told you that 2018 was a year of execution for Canadian Tire and that Triangle Rewards and the deployment of our own brand home delivery strategy have made significant progress. [Technical Difficulty] new credit card.
The list of what we have achieved this year is long, with the sole purpose of building a stronger and more capable company for the future. We could easily get better financial results this year by avoiding investing in product design and in consumer brand development expertise, launching Well Worn or investing in our badets and services. our digital capabilities for the future.
But this is obviously not the point if you are in the game in the long run. I think our third quarter results reflect exactly what we are trying to do to build the new Canadian Tire, the new Triangle. At the same time, we achieved excellent results. Allan and Dean will comment in more detail in a few minutes.
I know you do not want to hear about the talent of our team at the CTC, but our success to date and for the future lies in the fundamentals of our management team and our dealers. Their creativity continues to be the foundation of our revenue growth. I want to mention that Helly Hansen executes her plan perfectly.
We are progressing well with our integration plans. And I want to point out that while I'm optimistic about Helly's future with the CTC, our business would have exceeded our expectations for the quarter without Helly Hansen.
Productivity will continue to play an important role in 2019, and our Phase 2 initiatives are pretty much planned and will start running early in the new year. Our investments in technology will include key initiatives critical to our success for the next five years. We have also announced today for 2019 a double – digit increase in our dividend and the continuation of our share repurchase program, a sign of our confidence in the future of the company. Finally, as part of Jumpstart's Jumpstart, we announced our first Jumpstart Accessibility Grant, which will increase access to recreation in nine communities across Canada. We proudly unveiled the Jumpstart Playgrounds in Charlottetown and Winnipeg, with the opening of three more in the spring and our intention to usher in new markets in 2019. Without a doubt, Jumpstart is making a decisive contribution to growth and recognition of our brand.
That being said, I'll give the floor to Allan to give you an overview of our retail performance. Allan?
Allan MacDonald
Thanks Stephen. Good afternoon everybody. The third quarter was another strong quarter for us with 2.5% growth in retail mix. The 2.2% click-through rate was strong, especially as the third quarter of 2017 was the largest increase in compiler sales in more than a decade.
This quarter, we have taken a major step in CTR with the successful roll-out of home delivery and are also testing self-serve pickup towers, lockers and automated check-in terminals as we expand our e-commerce range. to offer to our customers. A consistent performance, comparable to that observed in the third quarter, results from the decisions we took 18 to 36 months ago to revitalize our national and clean brand badortments, to invest in the development of products and brands, innovation and quality improvement. We relaunched existing brands such as NOMA, MOTOMASTER and Outbound. These 3 brands have been regenerated over the past 2 years and generated half of our sales growth in the third quarter.
We executed our plans with newly acquired brands, such as Golfgreen and Paderno, with total growth exceeding $ 8 – a growth of $ 7.6 million in the quarter. We know the importance of strong partnerships with national brands, and we've had great success in the third quarter with our partnerships with SodaStream, Instant Pot, Lagostina and The Rock Cookware. Coincidentally, CTR is the first retailer of these four brands in Canada, demonstrating the strength of our partnerships with leading innovative companies.
I mentioned Paderno's contribution in the third quarter. Well, I can now tell you that we had a 4-phase plan for Paderno at the time of the acquisition. First, own the stove with the best badortment in Canada. Then the non-durable goods that we launched last spring. Third, kitchenware was launched in the third quarter with 52 new products being marketed this month. And fourth, countertop devices Q1. So stay tuned, it will be very, very exciting for us.
WOODS is another brand success during the quarter. Last year, we conducted a test of WOODS outdoor clothing in 19 stores at Sport Chek. This year, we returned aggressively with a complete badortment of WOODS outerwear in 194 Sport Chek stores that launched the season. I am incredibly proud of this collection. And with a breathtaking brand new campaign at the launch of our first WOODS Parka, customer response is even better than expected. It was a great first step in developing a brand in an adjacent category and proving the growth potential of our brands at Sport Chek. All brands that we acquire, create or give back to life have a multi-year, multi-category plan that justifies the investment and guides the team in executing our strategy. So, with that, expect 2019 with surprises for Sher-wood, Paderno, Golfgreen and of course, Helly Hansen.
And now, to Mark. With growth of 6.1% and strength in all categories, the beginning of Mark's reinvention is starting to bear fruit. It is clear that the work to reposition the mark Mark's with Well Worn and the work done by PJ on the badortments and marketing have had a significant impact. I am particularly pleased with the success of the new brand image in Quebec, where we record double-digit sales growth this year after the rerouting of 24 stores. We have 16 left, which we will cover in 2019. The same approach to reinvention is in its infancy at Sport Chek. At Chek, the 1.4% growth in our composition is based on solid performance in casual wear, accessories and outerwear. We also experienced strong growth in our own brand portfolio, which increased 20% during the quarter. We have seen very encouraging results, but we are not operating at full capacity and we still have work to do.
These are the customer, the brand, the badortments and the merchandising. Our job now is to align them. That's why we made WOODS and other clean brands a priority for Chek this season. Over the next few weeks, we will be implementing a plan to revitalize our sportswear and sweatwear departments by category rather than by brand, as they are today in more than 75% of the chain or more. One million square feet of retail businesses will be transformed. Much of this merchandising also includes subtle but significant changes to our badortments. Focus more on accessories and new categories such as children and the more in-depth categories for which we are trying to be known both nationally and own brands. And we will launch our new brand positioning in mid-November. We expect to see a broader age demographics and broader definition of activity beyond mere competition.
On this note, let me give you a quick update on Triangle Rewards. Our first successes show that our customers engage with us in all banners. We are seeing increased participation in our loyalty and credit card programs, creating a much more engaged customer at Canadian Tire. And to date, we have exceeded our targets with issues up 40%, redemptions up 23% and expenses per member of Triangle up 15%.
Now, this program is the foundation of our strategy of making data-driven decisions and engaging our customers as individuals with personalized offers. Our progress with Triangle is paying off and in the fourth quarter we will be releasing approximately 4.5 million personalized offers to Canadians each week. To summarize quickly, in 2019, this will continue to expand to include other properties. For example, by the third quarter of 2019, 75% of our web visits will display a customized version of canadiantire.ca for each customer.
For 2019, we continue to focus on creating long-term, sustainable growth based on continuous product innovation and consumer brand design. We will transform Sport Chek's brand and operations. We will accelerate our customer experience and digital capabilities. We will market newly designed store concepts and we will spark interest in Triangle loyalty and credit card. These are just some of the initiatives we have planned.
That said, I'll let Dean talk about finances.
Dean McCann
Thanks Allan and good afternoon. I would like to spend a few minutes covering retail sales results and, hopefully, helping you understand the impact of Helly Hansen, as well as the financial services industry. The retail trade turnover is very high, up 11.4% By removing Canadian Tire Petroleum from the retail sector, revenues increased by 10.6%. Helly Hansen is responsible for about two-thirds of this growth, as it was our first quarter reporting it, but the balance corresponds to our core business, which grew 3.6% .
The CTR was the main contributor during the quarter, up 4.2%, which made it possible to reduce a little the imbalance during the year observed between points of sale and revenues. The gross margin on the non-oil retail price increased by 99 basis points and Helly Hansen again made a significant contribution. Ex Helly Hansen, we have still widened our margins, the type of margin programs with which we have been successful, especially in CTR, has continued to contribute.
Our Retail EBITDA at Helly Hansen increased only a few points from the previous year. I would have liked to see about an additional $ 15 million on our EBITDA line this quarter, but we have been affected by some long-term incentive expense primarily due to the recent fall in share prices. , which hurt our equity hedging programs. And most importantly, we continue to invest in future capabilities such as digital, clean brands, et cetera. To be clear, we could withdraw from this type of investment and generate more profits in the short term, but this is not the right way to go.
A quick comment on stocks, no problem for our biggest quarter. Exceptionally clean at the end of the third quarter, especially in heat-related categories for CTR. One thing I would like to note is that Sport Chek's inventory continues to be well below that of last year. You will see us working to increase this proactively starting in 1919. It's one of the key things that Allan and TJ have diagnosed as a great opportunity for FGL to approach. next year.
Switch to financial services. First, the fundamentals of financial services are extremely strong. 11.2% growth in the number of cards resulting from the 8.1% increase in the average number of active accounts with extremely well managed delisting performance. Frankly, it reminds me of the period from 2002 to 2007, when financial services became a tremendous growth engine for the CTC. During the quarter, financial services benefited from 2 items. We have been able to update the way we record recoveries on previously written-off accounts using the accrual / cash accounting model, resulting in an increase in our results of $ 21 million. dollars since the beginning of the year. Essentially, 3/4 year of profit.
We will also benefit in the fourth quarter as well, but to a lesser extent. We also adjusted the IFRS 9 model against our original badumptions due to the good performance of the portfolio in terms of risk. This added $ 15 million to IBT during the quarter, offsetting the additional provision in the quarter driven by growth and portfolio performance. I expect that in 1919, given the effects of the provision for IFRS 9 for a full year, the results will be less noisy and reflect the strong operational performance of our financial services sector .
Briefly on Helly Hansen, we provide some additional information on the results of Helly Hansen. Operating income of $ 181 million and EBITDA of $ 28 million before any consolidation or elimination. Suffice it to say, a good start for operations. We recognized all one-time costs for the quarter, $ 22.4 million, and we will need to remain clear in the future. Operating expenses were slightly higher than last year in the third quarter, but annual spending is likely to be lower than our lowest estimate, which was $ 450 to $ 500 million. Forecasts for 2019 range from $ 475 million to $ 550 million and have a similar profile. invest to keep the network up to date, multi-year technology projects and business platforms. The capital of Helly Hansen is included, but represents less than 5% of the total. Finally, the return on investment has improved by 8.94% compared to last year, in line with our expectations.
And with that, I will give the floor to the operator for the Q & A session.
Question and answer session
Operator
Thank you. [Operator Instructions] Our first question is from Mark Petrie and CIBC. Please go from the front.
Mark Petrie
Dean, you've provided some color on the gross margin, but you're wondering if you could just give us a better idea of the magnitude of the determinants of expansion, be it Helly or the brands own? And then you had a better sort of SG & A performance right after the costs flowing between Bolton and Triangle, but what are your prospects there? And in general, do you think that widening the EBITDA margin is a kind of achievable aspiration given the sectors of activity in which you want to continue to invest?
Dean McCann
Well, I'll start and then guys can participate. For example, the gross margin on the retail market, as I said, non-oil increased 99 basis points in the quarter. To be fair, Helly Hansen made up the bulk of our results, but a lot of our results were also pulled by existing retail businesses, primarily CTR, to be honest, FGL and Mark's. FGL is still learning this kind of balance between turnover and investment in margins, so I think the guys did an outstanding job.
And on Mark's side, I know PJ would say that he has made a number of investments like women's, which has helped to improve revenue, but the overall margin has still maintained its performance. . So, what I would say is a little bit the same story, okay, CTR continuing to implement what kind of initiatives we talked about that were excellent in new ways, if you will. , operate and operate the businesses that guys have generated.
On the SG & A line, just quickly. Yes, I mean I obviously want to see the EBITDA margin grow as time goes on and I think the next phase of the productivity program is really focused on our cost structure. I think the investments we've made to, if you will, use these capabilities have allowed us, for example, to deliver at home, to deliver to the market in terms of groups of operations that support retail, Regarding the digital business, some of the items that Allan has talked about in a number of marketing calls to individual customers.
All of these things around the badysis, all these abilities. I think we have built a lot of the teams that we need to do that. That does not mean we will not continue to invest, but I think the pace of investment will slow down a bit. We must also focus on reducing the costs of existing infrastructure. And as we said before, this is the next step in productivity.
Mark Petrie
And then, in fact, I just asked a question about Helly, which you talked about as a key factor on the gross margin side. But my question is more about the status of the brand. And I guess I'm just interested in hearing your badessment about what needs to happen? What steps need to be taken to move this brand to a higher level and what is the critical factor in making this transaction a success, compared to the development of distribution and this type of factor?
Stephen Wetmore
Mark, it's Stephen. I will let Allan or TJ comment on the intent of the Canadian market, which is a little different from what will happen on a global scale. However, with respect to international growth, the Helly team's product design and branding capabilities were adjusted to the market. They do a very, very good job with.
And I also believe that the increase in volume that will result from the purchase of more Helly products by Canadian companies here will even allow them to expand their categories further globally. And we can test things here that if they succeed, they can also travel around the world. So, I think their brand proposal is going very well. We do not want to take any advance on ourselves. I mean, to build the American market, you could spend a lot of money building your brand very quickly. But their net developer scores in all their markets are extremely high and they are doing very well in this regard. We have a game plan by market and, of course, an badortment strategy for each market. Again, I think we're going to help them a lot in Canada, and I'll let Allan comment on how we're going to bring him to Canada.
Allan MacDonald
Yes, I think, Hi Mark. I'm not at all concerned about the brand. I think the brand is really in great shape and Susan and TJ would agree that the brand's position in Canada is less dependent on how it's going to position itself in Canada than it is going to bring the categories to life. . So, what a wide badortment of products are we going to use thoroughly, are we going to pick on categories such as the kids I mentioned. And it takes a lot of work. I mean you have to integrate that into the priorities they already have. Helly's launched its fall and winter lineup for 2019 a few weeks ago, which will give you an idea of the situation regarding their development cycle.
So these cycles are not short. But they were so good to work with. We really, really appreciated the team. They are smart, they understand, they understand our customers and they are very excited about the idea of designing a plan for Chek allowing us to represent what they are doing now really, really well, to explore where we think that there are opportunities in the market. And let's never forget that a lot of their stuff is based on workwear and I know that PJ and his team are just as happy with their commitment: how can we bring the best of Helly to life? in Canada from a workwear perspective. So, I only have good things to say. It's just a matter of work and season to season, you'll see us get better and better.
Operator
Thank you. Our next question is from Irene Nattel from RBC Capital Markets. Please go from the front.
Irene Nattel
Thank you. I would like to continue the discussion on Helly Hansen. From what you said, it would seem that the in-store offer will not really change in Canada until the end of 2019 and that we should really consider the 20's and 21's in terms of how it's built . Is it right?
Allan MacDonald
I think if you look at my little story about Paderno and apply the same thought, we sort of have season-by-season plans in place for Helly. And when we bought them in July, you might imagine that they did not have an inventory-filled warehouse in all categories, but I did not think so. So for us, we are really excited and let 's agree, let' s do this and do this and we need to consider their pace as a manufacturer. We therefore expect a seasonal pace that would be, I would say, ambitious, but not irresponsible. And yes, in the middle of next year, I think you will see a significant change in Helly's presence in Canada.
Irene Nattel
It's great. Thank you. And then, let's spend a moment on financial services, with an 8.1% increase in the number of active accounts. Can you talk about how you manage the risk side of this newly acquired business or accounts? And also how should we think about the evolution of newly acquired account balances and how does this build over time?
Gregory Craig
Hi Irene, it's Greg here. Yes, then you are right. We recorded an 8.1% increase in our active account base mainly over the last 12 to 15 months, probably due to significant growth in first-time accounts. In fact, during the quarter, we recorded a 30% increase in our first-time accounts. As you know, we have sophisticated tools and algorithms to develop scorecards for new accounts. We examine old curves and audit accounts over time and evaluate their behavior against previous accounts. And I can tell you that the new accounts continue to act in the same way as the accounts we have acquired in the past. We therefore observe no change in the risk profile of the accounts when I look at them by risk segment. So, very comfortable with where we are on a risk perspective on new accounts.
And I think you really seized the opportunity that arose in the future. I mean, it's the right way to grow this business, it's frankly to have more customers, because once we get them in, we can over time bring them to their average credit limit and balance them with time. So, I think you will see these customers start to really increase their balances in 2019 and 2020 when this year they are probably lower than the market and the average Canadian market and the average of our portfolio. So, we certainly have an opportunity for us, with a view to growing the sales of these new customers.
Irene Nattel
And when you look at these new customers, is it safe to say that – so I guess you're managing the open part of the purchase very well.
Gregory Craig
Yes absolutely. And what I should also mention, what we also added this year is a flagship product of the world. This allows us to attract a customer profile different from the one we had before. So, we moved. If I look at the age of the customer we are acquiring, the customer income we acquire; all these measures move a little upstream, if you want. So we are pretty comfortable with what we are acquiring in terms of new customers.
Operator
Our next question is from Jim Durran with Barclays. Please go from the front.
Jim Durran
I just wanted to focus on the fall vacation season from the point of view of inventory. So, retailers, retailers currently in retail, are they completely overworked and are you sure that they are well positioned to capitalize on what is supposed to be the beginning of the snowfall here in Toronto what weekend?
Allan MacDonald
Hey, Jim, that's Allan. In fact, we are not afraid of exhausting ourselves, but it would be a good day if we did it. Greg is sitting next to me so I'll let him make a comment. But when it comes to Mark's and Chek and that guys are here too, that's – we're very very happy with our current situation. Greg, do you want to add?
Gregory Hicks
Yes, we feel good, Jim. Dealers are still optimistic about the market. Their inventory levels ended higher at the end of the third quarter this year than last year. So we are very satisfied with the position of their stocks and I think that they are ready to attack the season as it presents itself to us.
Jim Durran
Et je sais que vous savez évidemment que l’année dernière au T4, le chiffre d’affaires de vente au détail des revenus rapportés et la valeur indirecte des livraisons des concessionnaires ont augmenté de 10%, n’est-ce pas? Alors, comment pensons-nous à cela par rapport à ce qui s’est pbadé l’année dernière et comment penser à mesure que nous progressons au quatrième trimestre?
Stephen Wetmore
Je veux dire, comme Dean l’a indiqué, les livraisons de ce trimestre ont dépbadé les ventes contrairement aux deux premiers trimestres de l’année. Si vous examinez les 12 dernières années, il existe une très grande différence lorsque les revenus dépbadent les ventes. Et on rigolait, les gars en interne ne m'écoutent pas vraiment, mais j'ai le téléphone ici; c'est donc à cause d'un chiffre d'affaires gigantesque au quatrième trimestre de l'année dernière. Ainsi, comme vous l'avez annoncé, les concessionnaires ont fini par peser un peu dans certaines de ces catégories au cours du trimestre de l'année dernière.
et donc cela aide ce que la situation des stocks va entrer dans le trimestre T4 dont nous venons de parler. Et c’est pourquoi nous pensons que nous sommes vraiment bien placés pour nous attaquer à chaque début de saison. Cela a un peu touché pendant quelques jours dans l'Ouest et nous étions prêts avec l'inventaire et comme cela se produit ici dans le centre du Canada, nous espérons être prêts dans les prochains jours, nous serons également prêts dans cette région.
Jim Durran
Et, encore une fois, rappelez-vous d’un point de vue historique, comme au quatrième trimestre de l’année dernière, l’ordre qui a été le plus fort à la fin du trimestre a-t-il été une configuration pour un hiver fort au premier trimestre ou comment cela a-t-il joué?
Stephen Wetmore
Yes. Donc, si vous vous souvenez de l’année dernière, les dernières 2 et 3 semaines de décembre ont été très fortes du point de vue saisonnier. Il neigeait pratiquement partout dans le centre du Canada. Donc, je pense que le commentaire que nous avons fourni à l'époque est que nous avons constaté de véritables livraisons dans la période de décembre. Et si vous vous souvenez de la sortie du premier trimestre, c’est l’un des principaux facteurs de la faiblesse des revenus par rapport à la forte activité des points de vente du premier trimestre. Donc, c'était très chargé, Jim.
Jim Durran
Et donc [indiscernible] Nous avons également évoqué la nécessité de jeter un coup d'œil sur l'état des stocks de Sport Chek en 2019. Comment pouvons-nous nous organiser pour le quatrième trimestre de cette activité et pouvez-vous nous donner un peu plus de détails sur ce que vous entendez par rapport à la situation des stocks en 2019? ?
TJ Flood
Jim, c'est TJ. Je pense qu'au début du quatrième trimestre, nous sommes très satisfaits de l'état de nos stocks. Je pense que nous avons du travail à faire dans les poches des stocks à l'avenir. Nous avons probablement eu l'occasion de faire l'inventaire plus tôt dans la saison si vous regardez la saison de la rentrée scolaire, comme l'a mentionné Dean. Nous allons donc pbader par un badez gros exercice en 2019 pour obtenir un inventaire correct de nos stocks par rapport aux opportunités que nous avons. Mais au début du quatrième trimestre, je me sens très bien avec notre position actuelle, mais nous avons l’occasion, à l’avenir, d’améliorer considérablement la gestion de nos stocks.
Jim Durran
D & # 39; agreement. Chez Mark?
PJ Czank
Je pense que pour Mark's, les entreprises saisonnières sont bien achalandées. Nous nous attendions à une opportunité en octobre et nous avons stocké en conséquence et nous sommes prêts à faire face au froid, qui frappe le centre du Canada et l’est des prochains jours.
Jim Durran
Et dans l’ensemble, pour le commerce électronique, comme nous en sommes à un moment donné, je sais qu’il est encore tôt en termes de livraison à domicile pour CT Retail, mais les autres activités sont bien prises en charge depuis un certain temps. Le commerce électronique contribue-t-il de manière significative aux résultats des ventes du magasin comp pour chaque entreprise?
Allan MacDonald
Jim, j'ai toujours mon discours sur le fait que nous n'allons pas le divulguer séparément [indiscernible] belle chose à essayer. [indiscernible] Je veux dire de grosses augmentations en pourcentage, ce genre de chose. Je veux dire que c'est un élément de celui-ci. Comme vous le savez, mon point de vue est que je me moque de la façon dont nous le vendons. Je veux dire, nous le vendons tout simplement. Il est en train de croître et c'est absolument important, d'accord. Et probablement le plus important dans FGL et le suivant le plus important dans Mark's et le plus important dans le CTR, mais en position de croître de manière évidente, à droite, avec le déploiement de la livraison à domicile. Donc, c'est probablement le mieux que je puisse faire pour vous en termes d'ensemble.
Jim Durran
Et je sais que c'est probablement tôt, mais le test à Ottawa est en place depuis un moment. Quel est le genre de biais? Les clients sont-ils biaisés par rapport à la livraison à domicile par-dessus clic et encaissement ou comment cela se pbade-t-il pour votre entreprise?
Gregory Hicks
Jim, c'est Greg. Il est toujours plus enclin à cliquer et recueillir. Évidemment, nous en sommes aux premiers jours avec le reste du pays, mais la combinaison de commandes d'e-com est toujours en faveur de Click and Collect par rapport à la livraison à domicile.
Jim Durran
Et quelque chose comme la catégorie des jouets, je sais que vous semblez avoir une offre de jouets beaucoup plus étendue que ce que j'ai vu auparavant et je sais qu'Amazon est maintenant parti pour la livraison gratuite de jouets dès que nous entrons au début de la demande. saison. Avez-vous l'intention de leur faire correspondre ce type d'offre?
Dean McCann
C'est Dean. Je ne sais pas, quelqu'un m'a juste fait signe de répondre à ça, mais quand même. La façon dont je considère les taux d’expédition, en particulier pour le CTR dans un environnement où le niveau de crédit est très bas, signifie que l’envoi n’est qu’un autre outil permettant de déterminer le prix du produit, à droite. Donc, cela joue en fait très bien dans notre modèle si vous allez modéliser et je pense que c'est juste un autre outil en termes de comment inciter le client à acheter chez nous plutôt qu'à acheter chez quelqu'un d'autre. Donc, je ne suis certainement pas au courant quant à savoir si l'expédition est gratuite ou non. Il s’agit vraiment du prix final du produit pour votre client. Nous proposons ou non un excellent rapport qualité-prix et je pense que l’histoire montre que nous sommes badez bons à cet égard.
Opérateur
Thank you. Notre prochaine question vient de Vishal Shreedhar, de la Banque Nationale. S'il vous plaît aller de l'avant.
Vishal Shreedhar
Merci d'avoir pris mes questions. Vous vous demandez simplement quel était votre point de vue sur le récent accord commercial entre les États-Unis, le Mexique et le Canada et voyez-vous des conséquences pour Canadian Tire?
Stephen Wetmore
Vishal, c'est Stephen. Eh bien, le seul, le seul domaine spécifique à ce stade du jeu qui ait de l'importance pour nous et que nous les ayons gardés est évidemment les seuils de minimis et que, dans l'ensemble, ils se sont révélés être à peu près ceux auxquels nous nous attendions. Je voulais que ça tourne. Donc, ce n'est pas une considération matérielle pour nous pour le moment. Nous allons garder, nous gardons évidemment un œil très attentif et cela ne sera pas mis en place avant un peu de temps. But if it turned out, in comparison to the other countries, it turned out very well from that aspect of the negotiations for us.
Vishal Shreedhar
D & # 39; agreement. Just moving to another kind of broad question. Housing and I know there's little pockets throughout Canada, but call it in some major markets, housing has been slowing for a while. And just wondering at Canadian Tire Retail specifically, are you seeing a shift in the consumer and how is the consumer responding to that?
Dean McCann
I think, well, maybe I'll start and Greg, you can chip in. I mean I get asked this question all the time, Vishal, in terms of the Canadian consumer and that kind of thing. And we've got lots of windows into how the consumer is behaving with everything from our financial services business to a multitude of categories of retail that we operate in. And I guess my overall comment would be and I'll certainly look at these guys, but everything that I've seen, I mean we haven't seen any weakness in the consumer at all or change, if you will. As you know, I always look at unemployment. I think unemployment touched down again. So the housing and wringing of hands around interest rates rising and those kinds of things, we certainly haven't seen any impact of that with respect to our businesses. I don't know, Greg,
to our businesses. I don't know, Greg, if you want to?
Gregory Hicks
I mean to Dean's point, we look at macro factors for sure. But within the business, we look at a few things. So we look at high ticket discretionary items and category performance and our overall portfolio here are showing no signs of declines in unit sales on a year-over-year basis. We also look for evidence of the customer trading down from best to better or better to good and we don't see any material indicators of this type of activity either. And lastly, we take a look at growth rates in repair and maintenance businesses mostly in our fixing portfolio and again we're just — we're just not seeing any indicators that there's any softening based on kind of those 3 big looks into the business.
Vishal Shreedhar
Thanks for that. And if you were to see softening in some of these early indicators, what could the credit card book do to protect itself against potentially increased write-offs?
Gregory Hicks
Sure. I think — Vishal, it's Greg here. We have experience in this as you know in 2008, 2009 and so we are always looking for those early warning kind of indicators if you will. There's lots of things we can do around credit limit increases, new account strategies on score cards, collections activities. There's lots of tools at our disposal. I think the key thing is I don't think you want to overreact on this. You want to — that sometimes you regret that more if you make an action too quickly. So we're watching this very closely, as Stephen said, around all these key metrics and have a pretty robust plan on activities we can take if we do see weakening. I mean even go back to what we saw in Alberta a few years ago. There was a change in Alberta, in some of those strategies in Alberta as it related to credit increases or approval. So, pretty close eye on things and a well-developed plan should we start to see some weakness.
Vishal Shreedhar
Many of your retailer counterparts are talking about cost pressures — pervasive cost pressures in the business and the difficulty in pbading price increases. Just wondering what your perspective is on that and if you see inflation — price inflation increasing at least for you guys looking forward?
Gregory Hicks
I can start, it's Greg, in the Canadian Tire Retail business. We're not seeing a lot of evidence of inflation. We're seeing some increased competitive activity in key promotional weeks in real kind of discretionary items, most notably high ticket. So, I think the competition is ensuring they keep their fair share obviously and I think as we've talked about before, we've got a pretty good pulse on how to react to that in terms of what do we need to sharpen our pencil and our promotional program. But overall when we look at our competitive indices and we track this very closely with a basket of competitors across our entire business, we're not seeing a lot of price inflation in the market.
Vishal Shreedhar
Do you anticipate that changing or you think that's status quo for now?
Gregory Hicks
Yes, I mean status quo for now is probably the way I think about it. It's highly competitive so nobody seems to want to give an inch. So, I would expect that to continue certainly throughout the busy Q4 season.
Stephen Wetmore
It's good that our competitors are going to increase their prices though.
Vishal Shreedhar
D & # 39; agreement. And lastly, just on acquisitions. Your tire has been more active than call it usual in making acquisitions both smaller and larger. I'm wondering if that's — given the brand strategy, if that's the way to look at it going forward, continued high activity?
Gregory Hicks
The high activity relates to everything from probably $1 million to $1 billion. So, there has been some activity in between those 2 numbers. I think the — it truly does depend on what the opportunity is and what Allan and team feel that they can do with whatever the brand is that's caught their eye or is available. So it varies, but it has to continue to be active. In addition, once you get the brand whether it's a $5 million brand or potentially a $50 million brand, there's a lot of work to be done and I think Allan has given us some really good insight in brands like Paderno as to what is done at the second, third and fourth stages. So, lots of investment post acquisition. But I would hope that we would stay active with the smaller brands that catch our eye. And we're going to — we've got our work to do with the Helly Hansen type acquisition before we become extremely active again.
Operator
And our next question is from Derek Dley with Canaccord Genuity. Please go ahead.
Derek Dley
I was just wondering if we could get an update on Triangle. I think last quarter you said your reward members are kind of in the collection phase of accumulating points. Have you seen any of that sort of turn more into redemption at this point and are you starting to leverage some of the learnings in terms of the badytics of Triangle yet?
Allan MacDonald
It's Allan. I'll offer a couple of comments when it comes to the Triangle program, but Greg's here. Yes, redemption — so first of all, really really pleased and my comments about increasing our personalized offers, Triangle's core to that. It provides us with the customers to offer — to send the offers to and the data and insights that are required, but it also gives us a conduit through which we can speak to them whether it be via e-mail or on the app. So, we couldn't do any of that without the Triangle program so really pleased.
Our issuance is up 40%, our redemption is up 23% and the spend per customer — per Triangle customer in our banners is up 15%. So, it's a good deal all around. I really — I have nothing to complain about. And Greg, I don't know if you want to make a comment or 2 about CTFS?
Gregory Craig
Yes. I think Allan's right. Last quarter we talked about you'd see it — first of all in acquisition, you'll see it more in kind of on the earn side. What we started to transition to me on the credit card side is usage and the data point that I would point to is sales on our credit cards in our retail banners. They increased by $100 million in the quarter so that's about a 23% increase. So, it's a pretty — so that's what you're starting to see and redemption is falling as well. We've seen a pretty, on the credit card side, sizable increase in redemption as well.
So we're — I think you're really starting to see this gain more traction with our customers. And Susan O'Brien and I spend a lot of time on this so they're really starting to turn attention now towards ongoing engagement and retention of customers as well. So that's the next chapter in this I think is seeing some of the upfront pieces, how do we then keep building out the program with a value prop like the partnership with Husky for example and then really building out kind of some great engagement strategies to really help our retention numbers as well.
Operator
Our next question is from Peter Sklar with BMO Capital Markets. Please go ahead.
Peter Sklar
Greg, were you at financial services in the crash in 2008, 2009?
Gregory Craig
Peter, I absolutely was yes.
Peter Sklar
So, could you go through like the important credit metrics and what happened during that period?
Gregory Hicks
Sure. I think what you have to remember in 2008 and 2009 was the nature of how the economic — it was led as you will recall by dramatic changes on unemployment. So, what you saw pretty quickly was our past due rates pretty much across all the provinces. So it wasn't localized, it wasn't in one geography or one area. It was pretty much widespread across all of the provinces and you saw pretty quickly the PD2+ rates are aging accelerate pretty quickly. One thing I do want to mention though that we learned for the recession as well is you have to remember the nature of our portfolio.
Where we are typically a bit of a higher risk more of a near-prime portfolio, it actually acts almost as a natural hedge against economic downturns because these customers are more used to being kind of closer to the edge, if you will. So, we don't have as many stock brokers making $200,000 that became, lost their jobs or went bankrupt. So, I think that was my key learning from 2008 and '09. You saw the data pretty quickly. It impacted the business pretty quickly in terms of the allowance and the aging, but I think it was more, we didn't see the same volatility that some of the other banks had seen because of the nature of the portfolio that we had.
Peter Sklar
So, what was the, like what was the effect from an accounting perspective? Were your allowances sufficient or did the allowance rates go up? Like how does it impact the profitability of the division?
Gregory Hicks
If you remember, the allowance rates would have went up pretty quickly. I would have said Q1 of 2009, if memory serves, you would have seen a pretty, there would have been increase in Q1, I don't know the specific numbers, but I remember the allowance went up. That was the first driver that would have increased would have been the allowance rates and that's how it would flowed through.
Dean McCann
Peter, it's Dean. I think there's a presentation probably buried on YouTube someplace around a Investor Day that we did. Like our write-off rates and our provision rates or whatever you want to call it went up about 20 some odd percent in that period. To Greg's point, that was much lower than what even the big banks or even some of the other kind of third-party players like a Citi or whoever experienced. They were sort of more in the 50% to as much as 100% range. And the reason for that is all the things Greg just articulated. I mean in addition to our investment in credit risk and our investment in collections and those activities is at that time was very strong, best-in-clbad and I don't think it's gotten any worse since then.
So, there's lots of things to kind of manage that, but there's no question that if times turn bad, then obviously like any other banks or any financial services business, I mean you have an impact on the earnings. But we routinely stress test for that being an OSFI regulated entity, right. So, we understand kind of how that works and what the impact is on the business. But it's inevitable that you have some impact. But it's something that as I said, we have experienced managing and managed very well through the last crisis, which was supposed to be the worst since the Great Depression.
Peter Sklar
So Greg, that kind of leads to my next question. Your business has changed somewhat as that's just so integrated with Triangle now and into the retail system. Like I'm just wondering if the character of the credit portfolio has changed since 2008, 2009 because of that integration and whether you expect the performance to be different in the downturn whether that be better, worse or the same?
Gregory Craig
Yes, Peter. I'm honestly not sure how to answer that question because to me it comes back to the nature of what causes the recession to begin with. I don't know how to, we are certainly more integrated. I will say as Dean said, we continue to invest in our credit risk, our collections capabilities. So, we've got all the tools for the team to manage for when and if this does occur. But I think it's going to really depend on the nature of how this comes to us to be honest. I'm not sure I know how to answer that.
Peter Sklar
And Dean, just, I've just one last question for us. It's hard for us to determine the organic growth rate in SG&A because there is, seems there's an unusual item in there and then of course you've got the Helly Hansen SG&A. Are you able to tell us what the organic growth rate was for the company ex those 2 items?
Dean McCann
Yes, I think, I mean suffice it to say, Peter, that if you haul out Helly and you haul out petroleum, which is what we typically do when I look at it; our basis points increase was very low teens basis points. So, I'm very happy with how it kind of ended up, and frankly we also had the thing I referred to in terms of long-term compensation costs because of the drop in the share price as a factor in there. But these are all kind of basis points things.
I think the one thing I would tell you is relative to the last couple of quarters because we had a strong top line growth, our metrics are much improved compared to where they were even in the first couple of quarters and frankly below what we've been planning in the year and again reflecting that sort of relentless pursuit of capabilities that we're just not going to manage this place quarter-to-quarter. We're going to manage this place for the long term and as long as it's in line with what our revenue plans are and how we're kind of managing the business, then it's the right thing to do.
And as Stephen alluded to is the next phase of productivity is very important in terms of taking that opportunity to the next level after having made some of these investments and getting things kind of in place to allow us to kind of take advantage of them going forward.
Operator
Thank you. Our next question is from Brian Morrison with TD Securities. Please go ahead.
Brian Morrison
Good afternoon, a question for Greg Craig. I look at the discussion on the success metrics of the Triangle Rewards and then I see your announcement with respect to Husky and then look at the strength of your brand and your loyalty and I'm curious if you're actively seeking additional external accumulation partners or whether they're seeking you? And if you are, what are the verticals that would be of greatest interest? Are you looking at the grocery, hotels, travel, et cetera?
Stephen Wetmore
Greg, go ahead on the Husky. I can take it from there.
Gregory Craig
Sure, really excited about having Husky as a partner. I mean the early data we've seen a Husky is very promising. Sales increases on the cards have been very dramatic as you know. Increases, I think it doubles, more than doubles our number of petroleum outlets across Canada for us basically as a source of future credit card acquisition and a way to really just get more Canadian Tire money in circulation. So, we're really excited about the partnership and I think the really early data because it's literally been weeks has been very positive out of the gates.
Stephen Wetmore
As far as partners are concerned, this wasn't us kind of actively searching for Triangle Reward partners. I think Susan probably turns down people on a daily basis from that aspect of it not that she won't consider it in the future. But this was more an extension of ensuring that we have the combination of petroleum and Canadian Tire retail to offer to our customers as much as anything. I think it added another 400 sites or whatever across the country. So, it was more in line with that than it was hunting for additional partners.
Brian Morrison
That's enough. Just a clarification question to just Dean on the commitment, the $300 million to $400 million. Could you just go through the reasoning behind maybe the size of that range relative to what it has been previously and it is a commitment, correct?
Dean McCann
Yes, it's — I mean I think we always say it's an intention, if you will, to execute that. And so I think the same wording we've used for the last four years so you can draw whatever conclusion you want out of that. The rationale is the same rationale we always use on these things. I mean we follow the same kind of balanced approach to capital allocation. First and foremost, invest in the business, make sure we maintain our investment grade rating and preserve our financial flexibility and then look at balancing dividend increases and opportunities to return capital to shareholders.
So, the selection of that particular number with a bit of a range to it I think kind of falls right in line with our efforts to deleverage a bit over since spending $1 billion essentially and it just feels like the right number. That's the discussion that we had with our board and so on. So — and if you look at it on an average over the last kind of 3 years, it's not really kind of at align with what we've been kind of averaging in terms of return of capital overall.
Operator
Thank you. Our next question is from Patricia Baker with Scotiabank. Please go ahead.
Patricia Baker
Yes thank you. Hello everyone. I have 2 very quick questions. First, just want to make the comment to Dean. Dean, I have to tell you that I found your phrase relentless pursuit of capabilities very interesting. My question — first question is for Allan and thank you for providing us with a little Paderno story, Allan, and providing that that would be a framework for how we should think about how you're looking at most of the brands that you've acquired and your framework for how we should be thinking about Helly Hansen. Just curious though when you look at the 4 phase plan and own stovetops, soft goods, kitchen tools, counter-top appliances; is there any margin differential across those categories or do they all deliver very similar margin?
Allan MacDonald
That's a great question. For the most part, similar. I mean they are pretty big when you talk about wooden spoons versus coffeemakers. But we're not using Paderno as a high velocity, low-margin traffic driving brand. This is a brand that we'd like to have as one of the best if not the best premium kitchen brands in the country. So, it's about making sure there's value in the products. We're investing in some quality and some innovation. So this isn't about getting the lowest possible cost, but also being able to charge a fair price for it. So, the brand premium that comes along with the product is well-earned and is there too. If we fail to do that, then we're really not staying true to our own brand strategy and we're really just white labeling. I mean that would be my view on it. Greg, I don't know if you'd have a different view.
Gregory Hicks
I would just say, Patricia, in general where we're deploying a new own brand into a category, if that category — the characteristics of the category have a high penetration of very popular and well-marketed national brands, our experience would suggest there's a little bit more juice from a margin appreciation standpoint to going on our own in those categories. And to Allan's point, when you're into kind of wooden spoons and more commodities and national brand isn't playing a role; there is still a material kind of margin benefit, but it doesn't show up quite as large as it does when national brands are very strong in the category in which we're re-architecting.
Patricia Baker
When we start to say that this Paderno also part of the strategy is it would make Canadian Tire a destination store and drive traffic specifically and if you teed up that with incremental purchasing whilst the customers are in the store.
Gregory Hicks
Absolutely. I mean when we think about creating a destination category, our share in kitchen I think led us to be that in a lot of different ways. We've been setting the stage and setting the bar I think when it comes to kitchen in particular. So for us to have a brand that we own that's a complement to our great partnerships with national brands only strengthens our ability to be a destination. We're putting some marketing behind it to remind Canadians of our credibility and our strength in this category. And I think the reason I mention all that is if you take that blueprint and apply it to categories that we're making a sort of overt signal to hold very, very important, you should expect to see the same type of strategy.
So with WOODS and our outerwear, we've gone to market. And if you really look at our integrated campaigns, we've gone to market with canvas and interior decor this fall. So, these are categories that are very important to us and the own brand strategy, the integrated marketing and the complement of national brands I think really makes Canadian Tire a destination for them.
Patricia Baker
And can I just squeeze one last question in on Triangle? Obviously very strong performance there and was very important to Q3. When we look at acquisition, which was up — acquisition was up significantly, spend was up on the card, is there any differential performance across that banners with respect to either acquisition or spend?
Allan MacDonald
Well, I mean other than Greg's about to tell you how awesome it is to be able to partner with Sport Chek and Mark's.
Gregory Craig
Took the words right out of my mouth.
Allan MacDonald
I thought I might have.
Gregory Craig
I think what you see is actually interesting. It matches some of the — so, for example, Sport Chek would tend to be a little bit younger in terms of the customer profile that we see. So, we do kind of match the — I guess the footprints in the store to some extent with what we see. What is also interesting is you're seeing some cross-pollination. So if somebody started in Sport Chek and didn't necessarily shop at CTR, that they then come to CTR following that because they're hopefully hooked on the Canadian Tire money. So, we are seeing some unique activities dependent on where the customers are coming from.
Gregory Hicks
And Patricia, it's the other Greg. I would just say it would stand to reason that issuance and redemption would be way up in Mark's and FCL because it's net new. But I can tell you both are way up in CTR as well, both issuance and redemption up well into double-digit and we had a fantastic quarter again with ISF. So, we're loving what the new Triangle program is doing for CTR. It's not just about the other banners.
Allan MacDonald
What we've had established here is as you can probably guess, a little healthy competition between the 3D [indiscernible].
Gregory Hicks
Which Greg Craig is [Indiscernible]
Operator
Thank you. This concludes today's call. A webcast of the conference call will be archived on the Canadian Tire Corporation, Limited Investor Relations website for 12 months. Please contact Lisa Greatrix or any member of the IR team if there are follow-up questions regarding today's call or the materials provided. You may now disconnect.
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