Canadian Club - Greg Hicks, President and CEO of Canadian Tire

Well thank you Richard for that kind introduction. Good afternoon everyone. Thank you to Canadian Club and sponsors. This is my first appearance here. We are living in challenging times: economic uncertainty, geopolitical unrest, extreme weather. Retailers face three challenges: disruption (shrinking middle, dollar stores, luxury brands, e-commerce), post-pandemic affordability (inflation, interest rates, softened consumer demand), and change (evolving consumer wants, changing weather patterns). Our strategy at Canadian Tire is to control what we can, mitigate what we can't, by balancing short-term challenges with long-term growth through our 'Better Connected' strategy. Taking over as CEO at the onset of COVID-19 cemented our why: to make life in Canada better. We looked 10 years ahead and saw we would be national champions competing against world champions. We can't out-Amazon Amazon, so we differentiate through trust and emotional connection. Canadians trust us: we were named Canada's most trusted brand by Morning Consult. Our strategy is about connecting employees to purpose, physical and digital channels, and investments in communities. Our two keys are capabilities (triangle loyalty program with 11 million active members, first-party data, personalization, and AI infrastructure) and mindset shift from a holding company to an operating company with the customer at the center. We are building the triangle flywheel, a system where trust begets trust and connection begets connection. We launched Triangle Select subscription loyalty with 45,000 members who spent 40% more. We have partnerships like Petro-Canada and retail media network. Since introducing the strategy, we invested $1.4 billion in capital, mostly growth initiatives. In 2021, CTC supported $18 billion in GDP and 160,000 jobs. We invest in communities through Jumpstart (over $100 million in amateur sports, 4 million kids helped) and our women's sport initiative (half our sponsorship dollars to women's professional sports). This is not window dressing; it's who we are. Canada needs businesses to step up investment to improve productivity. Our purpose is to make life in Canada better, and we double down even when times are tough. Thank you and I look forward to your questions.

It's tough. We saw a marked decrease in consumer spending immediately after the surprise interest rate in June 2023. It's impacted every income level, especially highly indebted households in Ontario and BC. The average household is spending on food and shelter and cutting back on everything else. We see a trend to repair versus replacement, trade down in quality, and a performance bifurcation between essential and discretionary businesses. We've been in a discretionary product recession for many quarters. We're waiting for rate cuts to see consumer behavior turn.

Dual focus. Supply chain is a core capability for Canadian Tire. During COVID, we used our capabilities to get products to Canadians, but it brought inefficiency. Now global freight rates are down, factories are below capacity, and we see normalization flowing into cost of goods. At the same time, we're investing in automation and technology in our network, like a 1.3 million square foot automated DC for apparel, and deploying goods-to-person technology. We're now starting to drive leverage in our P&L from supply chain, which will benefit customers. The inflationary impact of supply chain is subsiding.

My father owned a Canadian Tire store, so I understand. Today's stores are fully integrated technological operations, from supply chain visibility to local demand curation using AI. The stores couldn't operate without technology. The key is connecting hundreds of systems that collect customer data – returns, auto service, credit card, website – to get a single customer view. That data structuring is critical for generative AI to create value. We're now in a position to scale value.

I love those personal experience stories. That's the quintessential emotional connection. We curate an assortment for life in Canada. We're like a concierge for the jobs and joys of life in Canada. It's a series of things: community involvement, local dealers, and data-driven insights. We've set up our strategy to accentuate those positives.

Keep it. Actually, you can take it to the store and convert it for goods. It's all Canada.

It's not new for us. We organized an ESG council led by Susan, put out our first ESG report last year with commitments on several fronts. We have a board committee stewarding our brand. ESG is important to our brand, employees, and customers. We're making good progress.

Great question. We see electrification as a structural tailwind. The top five jobs in auto service represent 85% of our business, and most of those jobs still exist with EVs. EVs need tires, suspension, brakes, etc. The weight of EVs drives faster wear. With only 2.5-3% EV penetration, but growing, we have the most service bays in the country and are deploying technology to win as EV penetration increases.

I'll leave you wanting more on Triangle Retail Media. The acquisition of Party City was almost exclusively driven by customer data. We showed the board customer overlays: 80% customer analytics, 20% traditional numerics. The same customer shops Canadian Tire and Party City. Party City gave us access to a younger, more female-oriented demographic. The analytics drove the decision.

No, I'm a little out of practice. I'm flattered you spent time with me. We have an absolutely fantastic team that lives the brand purpose every day. I appreciate your time. Thank you.