Operator: Good morning. My name is Valerie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Tire Corporation, Limited First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

We ask that you limit your time to one question, plus a follow-up question before cycling back into the queue. This morning, Canadian Tire Corporation, Limited released their financial results for the first quarter of 2021. A copy of the earnings disclosure is available on their website and includes cautionary language about forward-looking statements, risks and uncertainties, which also apply to the discussion during today's conference call.

Greg Hicks: Thank you, operator. Good morning and welcome everyone.

I'm joined today by our CFO, Gregory Craig; and by TJ Flood, President of Canadian Tire Retail, who will be participating in the Q&A portion of the call. As we continue to navigate the COVID=19 pandemic, Q1 once again brought its share of unique challenges, including significant restrictions across our store network. A mere 40% of our CTR and SportChek stores and only 60% of our Mark stores were open at the start of the year. Although we returned to full operations across the business in March, we still face strict restrictions today across many parts of Canada. But relentlessness COVID-19 maybe we keep overcoming the ongoing hurdles, as proven by the sustained momentum of all of our businesses and unprecedented results in the first quarter, including over $3 billion in retail sales, and consolidated comparable sales up more than 19% across our banners.

Normalized income before taxes was up more than $200 million in retail, and $56 million in financial services. As a result, we delivered first quarter normalized diluted earnings per share of $2.57. Equally important to what we achieved in the first quarter is how we achieved it. Over the past year, I've often referenced our purpose of being there for life in Canada, and how that has served as our North Star throughout COVID-19. And as the pandemic persists, so too does our purpose.

And that is thanks to our people. I want to thank all our team members for their unwavering efforts and helping foster our culture of connection, our incredible results would not be possible without our distribution center and contact center teams, along with our store staff, associate dealers and corporate employees who continue to be there for each other, our customers and our communities. Together, we are making life in Canada better for our customers. Our multi-category assortment across all banners continues to prove integral to meeting the demand for products and backyard living, outdoor activities and home projects. By continuing to grow our digital capabilities, we are enabling customers to shop with us in the ways that work best for them from ship to home, to buy online, pick up in store to curbside pickup.

But as you've heard me say before, being there for Canadians is a bit more than the products we sell or services we provide. It means supporting our communities when they need us most. Through Jumpstart, we've accelerated our efforts to help kids reconnect with sport, once it's safe for them to do so.

Gregory Craig: Thanks, Greg. Good morning, everyone.

As Greg has said it was a great quarter for CTC, both from a sales and profitability perspective. We were pleased with the reported diluted EPS of $2.47 compared to the $0.22 per share loss from Q1 a year ago. And after normalizing for $9 million in operational efficiency charges, our normalized diluted EPS was $2.57 in the quarter. As a reminder, last year, the COVID-19 pandemic and related market disruptions had significant impacts on our business, affecting our consolidate earnings by $94 million and our EPS by approximately $0.96 in Q1 2020. In addition, 2020 was a 53-week year, consistent with our past practices and to ensure better compatibility, we have provided comp sales growth on a time shifted basis.

This means that sales from week one this year are compared to sales from week two in the prior year. In contrast, retail sales growth is calculated without any adjustments. This drives some difference between retail sales and comp sales results in the quarter, particularly at Marks in SportChek banners.

Greg Hicks: Thanks, Gregory. Before I close, I want to give you some insight into what we're seeing so far in Q2, and how we're thinking about the balance of the year.

In April, we continue to see strong demand in some of the categories that drove our results in Q1. Quarter-to-date, sales at CTR are up double-digit, and revenue is strong. We are seeing solid topline momentum in all corporate banners, as they lap more significant closures in the comparable weeks of Q2 last year. And as Gregory mentioned, we have robust inventory levels in place to meet the current demand. We expect spending in some categories to ease, as we move through the third and fourth quarters and as we cycle a very robust Q3 and the highest Christmas on record in Q4.

Although we all hope the end of COVID-19 is in sight, there is no telling when we'll reach the other side of this crisis. There remains uncertainty around how quickly the current restrictions on retail will be lifted. As part of our ongoing efforts to help mitigate the spread of the virus, we're providing our team members with paid sick leave, and giving all employees paid time-off to be vaccinated. As a company that recognizes widespread vaccination as the best way to reduce virus cases and rebuild our communities and the economy, we are actively supporting community vaccination efforts. For example, we've donated our large exhibition space at play sports Expere to be used as a vaccination site by the Laval region health agency.

And we're committed to working with public health and the provincial government to establish an on-site vaccination clinic in a priority region for our employees and the community. I know everyone feels more than ready to be done with the pandemic. Unfortunately, it's not done with us. Not yet, anyway. Although we continue to find ourselves operating amidst a high degree of uncertainty and volatility and consumer shopping behaviour, what we do know is that our brand is in an extremely strong position.

We have fantastic assets run by great people. We are well positioned to create value over the long-term. No matter how long it takes, we will stay connected to our purpose of being there for Canadians, and protecting the health and safety of our employees and customers will remain our top priority. Trust that we will be there to support Canadians in the rebuilding of our economy, and our communities. With that, I'll pass it over to the operator for questions.

Operator: Thank you. Our first question is from Irene Nattel with RBC Capital Markets. Please go ahead.

Irene Nattel: Thanks. And good morning, everyone.

First of all, thanks for all the color on for the trends in category performance. Just want to drill down a little bit into that, so obviously very strong in Q1. And can you give us some color around the sort of the category performance to quarter two to date, which you compare around double-digit sales growth is really interesting, given the restrictions, particularly in Ontario, so anything you can provide there will be very helpful?

Greg Hicks: Well, maybe I'll take that, Irene. I know, in reading all of the preview reports, we had a pretty good idea that our looking forward expectations was the most topical for everyone. So why don't I spend a little time here.

So everybody can get better - a better sense on how we're feeling about the business and what we're dealing with. And if we need to double click on any, you know, categories, or what have you, between the three of us, I'm sure we can provide more color, if I don't hit the mark. When we think about looking forward Irene, we think about it on two timelines, post-pandemic. And right now while we're still in it. I'll start with how we're feeling post-pandemic because I think it's important.

I mean, look, I feel really good, really good, about the fact that we have a competitive omni-channel offering. I think there was some question about our ability to compete in a digital world pre-pandemic and I don't think anybody should doubt our ability now. We're run rating for an eCommerce business north of $2 billion. We engage customers with many options for fulfillment across all banners, and can offer the customer more control over their online orders. Our digital marketing capabilities are strong.

Our own brand portfolio is strong and growing. We have traction around cost leverage and a more disciplined way about us with regards to expense control. Our customer analytics with Triangle, both credit card and base loyalty are evolving rapidly. And we have tremendous reach with Canadians. I think we're making great strides from a social impact standpoint.

Our culture is in a great spot, as is our relationship with our associate dealers. We're attracting and keeping strong talent and we're in a strong financial position. I mean, there's a lot to like right now. And although there has no doubt been short term tailwinds for the demand side of our business, we do feel confident that some of the trends we're seeing here have staying power. If you look at the strength of the housing market and home turnover, the unprecedented level of household savings, the secular focus on wellness, these should help bolster demand for our categories, even once spending on travel and entertainment starts to bounce back.

We believe we're continuing to build market share, especially as we acquire and engage new customers through Triangle and Canadians are reintroduced to Canadian Tire. So we feel confident in our ability to continue to grow share and the topline in the future and emerge from the pandemic and a stronger earnings position than when we entered it. But as I said in my prepared remarks, COVID-19 is not done with us yet. It's still obviously very difficult to predict the future right now. So lots of uncertainty.

We aren't a food or drug retailer, so unlike others who are providing visibility, we're dealing with significant restrictions and closures impacting our business right now, today. So I think I would start in the more short term, with the biggest understatement I could deliver, and that it's really hard to forecast the topline looking forward. I wouldn't have forecasted the restrictions we find ourselves in, if you asked me a few weeks or months ago, so asking me to comment on a few months out is near impossible. Look here's what I know. We had a strong April, which we called out in our remarks.

But we have more than two thirds of the second quarter in front of us in terms of sales. And the numerator gets much bigger as we are now comping weeks where stores were reopened and had large sales increases last year. And I don't - I still don't know when our stores are going to open in Ontario, and it's 40% of our revenue. So this is why it's so difficult. You've heard me talk about the fact we plan in seasons, and we're doing the best we can to try and plan as close into customer demand activity as possible.

What I can tell you with certainty is that we are buying inventory to support incremental growth in the business. We're ready and the dealers are ready. And I think that's just what you need to do to be ready for in this type of environment. We're really good at sourcing inventory. We're using all of our capabilities.

We're using our relationships and our track record with vendors to buy and be a strong channel and partner for them. We can give them growth and reliable payments, which is pretty attractive right now. But figuring out the staying power on the topline is the toughest and most critical. When decisions like shutdowns are still in our midst, volatiles sales activity is what results. So hopefully as we move through Q2, here, and we have a few regions, you pick a region like BC as an example, or Ontario, when it reopens where the comparative periods have less noise, we should be in a much better position to glean more insight in terms of customer demand patterns and unpack some of that color for you in our next call.

Irene Nattel: That's really great. And really helpful. Thank you. And just to follow up, if I might, which is obviously now with Triangle and sort of growth through the credit card and membership, you have a lot of very granular data. So what is your granular data showing you about the purchasing patterns of your customer’s year-over-year and also sort of your share of consumer wallet in key categories versus you know, other retailers?

Greg Hicks: I'd say you know, one of the things that we're seeing that is - that's interesting, Irene is the – what is the end of the cup - end of the quarter, the spend heat maps in our credit card by category started to go green in categories that had been read for 12 to 14 months when you look at spend categories like auto, spend categories like travel, spend categories like dining and restaurants, so that is most likely - those are national heat map.

So it's most likely being driven by regions outside of Ontario. But I think those are interesting trends in terms of what we're seeing from a customer pattern standpoint. I think we called out the fact that what's different for us this quarter is we're starting to see a good rebound in the automotive business. It seems to be preparation for travel. Our tire business is strong.

When you think about rooftop carriers, outdoor recreation et cetera, we're seeing good bounce in those categories right now. So those are - would be some of the nuances and some of the windows we would have that would indicate that there are different mindsets emerging with Canadians right now. And as you point out, we do have those nice data windows, with some of them potentially being lead indicators for us as we start to plan the rest of the year.

Irene Nattel: That’s great, thank you.

Operator: Thank you.

Our next question is from Mark Petrie with CIBC. Please go ahead.

Mark Petrie: Yeah, good morning. Greg, I just want to follow up on one of your comments there. Obviously, it's impossible to predict, you know, retail sales patterns, particularly into the second half of the year, given the big comps that you guys are going to be lapping.

But the comment with regard to buying inventory to support growth was that year towards the second half? Is that the sort of timeframe you're talking about?

Greg Hicks: I'd say it's just our overall mindset and approach to the whole business. Mark, it certainly as we talked about before, was the way we - again, we keep talking about planning the business in seven seasons is the way we plan for the first few seasons here that you know, helped here in the first quarter. It's the way we would have planned in terms of our approach for Q2, and it's the way we're planning for Q3 and q4. I mean, as we move forward here, we'll get some indicators from our dealers in terms of how bullish they're believing some of the categories, how bullish they are in some of the categories where they ended up quite lean last year. TJ can probably speak to this.

I would say they have very bullish mindsets. I mean, they're continuing to order and they find themselves as we alluded to in our Q4 call, pretty lean in some important categories for Q3, Q4 businesses as we approach the - as we approach those seasons. So TJ, if you want to add any more color to that.

TJ Flood: Yeah. Hi, Mark.

Its TJ. One other piece, I'd like to just kind of highlight when you're contemplating our investments in inventory is, we had significant growth last year, kind of multiple years of growth happening in one year. And for us whether you look at it from the corporate side, or from the dealer side, effectively, we've had a step function change in terms of the size of our business, and we have to inventory up in order to continue at that pace and grow beyond it. So you're seeing us act accordingly and buying quite aggressively. And you're also seeing the dealers do the exact same thing.

They recognize from a dealer perspective, that inventory is the fuel that drives our growth. And they've been very aggressive. Year-to-date coming up a year in the spring summer categories where we depleted a lot of inventory, the consumer demand last year just far outpaced that, the supply that we had, even despite the fact that we brought in as much as we did last year. So overall, we're kind of in this position of right sizing the business, so to speak from an inventory perspective, and we're going to continue to buy aggressively because what we don't know is what restrictions are going to happen and those types of things. But what we do know so far, is that when we're unfettered, our consumer demand still is strong.

And we want to put ourselves in the best position to deliver against whatever consumer demand is there. So that's the approach we're taking.

Mark Petrie: Okay. That's very helpful. And I guess just to just to clarify, I mean, obviously, there are some categories where inventory is really lean in the market.

But it sounds like you don't expect that to be a material headwind for you, at least in the next or basically through all of this year. Is that a fair statement?

Gregory Craig: Yeah. I would say that there are definitely some categories that we continue to chase. And that there's demand that's outpacing our ability to supply, but we are aggressive on chasing that inventory. We're - a couple categories that have continued to kind of really push hard even into Q2 after strong in Q1 would be like backyard furniture and things like that.

So we're still trying to be aggressive to buy those. So I wouldn't say we're out of the woods on supply entirely. And there is certainly some categories that we're going to be chasing, but we're feeling like we've put our best foot forward in aggregate to drive growth.

Mark Petrie: Thanks. And lots of discussion about higher costs of their - you know, be it commodities, freight, labor.

Obviously, the model gives you a ton of flexibility to navigate that type of volatility across promotions, loyalty, assortment. But where are you seeing the greatest movement in your costs? And obviously, FX, I guess would offset some of this, depending on timing. But generally speaking, is most of that - most of the higher costs being passed through? Are you absorbing it? Or maybe you can just talk about that topic? Thanks.

Greg Hicks: Yeah, why don't I take that, Mark, it's Greg. We certainly, you know, inflation is pretty topical.

You know, right now, I think Greg alluded to it, Gregory alluded to it. In his prepared remarks, there was no – probably to speak about Q1. First, there's no material inflation impact to our COGS in Q1. Nor do we expect any material inflation for our Q2 receipts. The two big drivers right now, commodity inflation, and global supply chain demand driving freight costs.

So I don't think those are new to anybody. But given that, we do expect to see modest impacts in our COGS receipts in the back half varying significantly by category. Products largely comprised of plastics would be the extreme cases. And looking forward, our expectation is, is an expectation that commodity prices will remain elevated through the first half of 2022. And then we'll likely taper-off and retreat, as demand normalizes with changes to consumer behavior and spending patterns.

But there are offsets to the headwinds posed by the commodity inflation. First, the Canadian dollar has appreciated against both the US dollar and the Chinese RMB, which is favorable. Now, as you know, we had so our glide path to benefit here isn't immediate. But we do see our effective hedge rate improving as we move to the back half and into 2022. And on the freight side, even though the ocean freight spot market is setting record highs, a large percentage of our container volume Mark is protected at contracted rates.

This is a real benefit for us, relative to smaller importers, as they're dealing with not only massive cost increases, but availability and space issues as well. So given what's going on, we feel like we're in a good - we're in good shape to make it much less material than what it might look like for others. We have solid capabilities and relationships. And we're definitely using them to our advantage right now. The - TJ has talked about the fact that we're not going to give an inch competitively.

So you know, trying to forecast what will maneuver its way through to the customer will kind of be determined by that competitive intensity. But hopefully that gives you some flavor in terms of how we're thinking about dealing with it.

Mark Petrie: Very helpful. Thanks a lot, and all the best.

Operator: Thank you.

Our next question is from Patricia Baker with Scotiabank. Please go ahead.

Patricia Baker: Thank you. And good morning, everyone. I just want to talk a little bit about the strong sales in the quarter, which were phenomenal, and as you noted, unprecedented.

And I guess, you know, in part that's owed to your unique and really, I guess, favorable assortment. And you referenced the fact that you're seeing market share gains. So I’d be curious if you could talk a little bit about where you think those share gains are coming from. And you know, why the primary reasons you think you're gaining share. And then trying to square that a little bit with TJ’s comments around inventory.

It certainly sounds like the corporation and the viewers feel that those share gains based on TJ’s comments are something that is sustainable, and you expect that you'll – you will continue to keep those gains?

TJ Flood: Yeah. Hey, Patricia, its TJ. I'll talk a little bit about share in Q1. Overall, by all measures, and we measure share in various ways with various outside kind of parties, as well as our inside data. We feel like we gained market share in Q1 that despite some significant store closures early in January into mid February.

I think there's a lot of substitution spend that we're benefiting from. As Greg alluded to earlier, a lot of kind of spend that traditionally might have gone into travel or entertainment is heading towards the categories in which we compete, as folks are hunkered down in their homes and looking for ways to entertain themselves and with boredom busters and things like that. I do believe and our dealers do believe as well that, that inventory has helped power a lot of our share gain. We took aggressive stances as we went into Q1, we went back all the way to September of last year, understood where consumer trends were heading. And we bought aggressively knowing as well that we had a bunch of pent-up demand.

So I think there was a lot of kind of executional elements that drove our share gain. And we believe that we have the ability to sustain the share, what we don't have in our control is what restrictions we're going to be up against. What we know is when we're an omni-channel retailer fully open with both our eCom capabilities on our stores, we do extraordinarily well. And we think we have the opportunity to continue there just given the trajectory we've been on. So I do believe we think we can continue to drive those share again.

Patricia Baker: Okay. Thank you for that. And my second question, follow up question is on financial services. So, in the comments on financial services, I think, Gregory, you mentioned the fact that you will continue to work at acquiring new customers, and you had a lot of new Triangle members in the first quarter. Where do you think ultimately, in terms of penetration of Canadian households, you know, membership either in - you know, in Triangle or a customer acquisition or the credit card, is there a limit on where that should net out?

Greg Hicks: Maybe I'll take that, Patricia, because it's wrapped up on Triangle too.

We do believe with our capabilities, and the value proposition that we have a meaningful opportunity to grow the total active file or card base in financial services, where you've heard us talk a lot about integration between the bank and retail being critically important. We believe that wholeheartedly. Moving forward, our best customer acquisition vehicle right now is the stores. So you know, that hampers our ability to grow the card base in a material way. Now, having said that, we're quite happy with card acquisition in the quarter, which was quite strong.

And we set aggressive targets for ourselves in terms of what that looks like for this year. In terms of total household penetration, we're sitting in that kind of 10 to 10.5 range right now, in terms of an active file. I think you heard me talk about own - our owned audience. And we're putting a lot of focus and effort on owned audience. Right now that's a 12 million - that's at 12 million.

So there's more reach in our owned audiences, those are people who have opted into our app or our email from a notification standpoint. So we do believe there's an opportunity for us to grow total household penetration of the Triangle membership program and the more kind of universe of Canadian households that are part of the program, it's a pretty good acquisition lead for the credit card. I know, Gregory wants to weigh in here, too.

Gregory Craig: Yeah. I just wanted - I wanted to emphasize that last point Patricia is, if you think about it, I mean, as you know, the store is the main source of acquisition, it's just such a rich pool of customers for financial services.

And for all intents and purposes, we've been - we haven't really been in the store for the last 12 months in any scalable manner. So when we feel comfortable that we can go back, you know, safely for as I said, customers, employees, I think there's lots of availability to grow. And I just wanted to echo Greg's comment around, a really healthy way to grow the card business is as well to convert loyalty customers to credit card customers. And I think, you know, as we continue to integrate Triangle even more, I just think the pool for the financial services division to continue to bring more customers, other ways are money is even faster. So I think the opportunities are there.

It's just - we just again, I think we want to be careful about not going too quickly with the store acquisition side of it. So it's - I think we're still a little bit away from that Patricia, but once we get through and the world is knock on wood back to some sense of normality. Again, I think we're very optimistic about being able to grow that card file again.

Patricia Baker: Okay. Thank you both.

Operator: Thank you. Our next question is from Brian Morrison with TD Securities. Please go ahead.

Brian Morrison: Yeah. Thanks very much.

Hey, Gregory, could I stick with financial services here, you've got this allowance release again this quarter. You've got commentary on improved savings rates. And I would say with the improved economic outlook, should we expect this release trend to continue throughout the years. The allowance provisions still well above the pre-pandemic levels, and card is lower. And then just following up on that, it's very encouraging to see your 7.1% increase in card spend.

Can you just kind of outline for us where card spend is relative to the - relative to pre-pandemic levels?

Gregory Craig: Yeah. So, Brian, it's Gregory here, let me take that one. I'll start with the allowance first and foremost, and you know, how we do this, which every quarter we take a look at what the allowances and all the factors and make assessments on - you know, as we're looking forward, because it is a lifetime loss estimate, it's not losses in the next 12 months, it's lifetime. And where we ended the quarter, we feel very good and very comfortable. We have - a simple way to look at it is, look at, you know, the allowance dollars, look at your last 12 months of actual write-offs, we have over three years of losses kind of on the balance sheet right now in our allowance.

So we feel pretty good about that from a coverage perspective. And I just want to you know - I know, there's lots of questions about releasing more allowance, et cetera, et cetera. I would just point you back to the data that was just released on unemployment, what about a week and a half ago, where it didn't surprise us where, you know, given the restrictions, the unemployment rate, I think went from 7.5 in March to 8.1 in April. Now, again, given restrictions and what that did to job loss, we weren't surprised, but I just – I think you know, Greg said, I don't think we're through this yet. So we watch the trends very carefully.

The macro economic ones, we're very encouraged by the credit risk metrics, but it is really a quarter-by-quarter assessment on getting through what this data looks like. And that's probably the best I can give you around where we are, we're very comfortable. And we will continue to look every quarter and take the appropriate action, when we get a sense of what that information looks like. In terms of card spend, I think maybe I'll answer the question this way, I was thrilled with 7.1% growth in the first quarter. What the team is focused on is more the active account side of it.

So if you take a look, our active accounts would have been down 4% versus Q1 a year ago. And that gets to what, like Patricia was asking, and you've asked as well previously around, when are we going to start kind of be able to get that acquisition engine humming again. So look, if we could get a 7% growth at card spend per active member, that's pretty strong. It's - the focus, I think really is going to be on again, when can we get that channel, in-store channel opened safely. And I think continued integration with retail will just drive both of those numbers.

I think there's a chance you could see higher in say - certainly an acquisition, and potentially even on the sales per account side.

Brian Morrison: Okay. And then follow up question on the retail maybe for TJ or for Greg. And I'm not sure you can answer this question. But you've talked about how demanded CTR remains off the charts.

The dealers remain very bullish. You've had this great variability the last several quarters with respect to revenue and retail. When can we expect that this should be back in equilibrium? Like should we expect that in coming quarters? Are we still going to have this revenue growth and excessive retail?

Greg Hicks: Right, so this is Greg. You're right, that is difficult to answer. Listen, I've been around the CTR business for a good amount of time.

And it's tough for me to assess that model in my mind. So I appreciate how difficult it is for you - for your models. I think the most important thing to ground on is what TJ said before, is the fact that we're trying to support a step function change in our revenue. And in order to support a much higher waterline in revenue we need to buy for it. So while the really difficult thing going forward, as I said earlier, is what's going to happen with the customer in terms of demand when we get back to normal.

The one thing I feel strongly about is that we will eventually settle into similar inventory turns profiles. Ideally, we get some efficiency, we're seeing that relative to 2019 right now. But the so called plug in the bottle, if there is one, especially for the dealers are turns. So I think about these factors when you're modeling out revenue. You know, there's certainly what I would call some initial fill requirements this year, given where we ended seasons last year.

So there's buying for a heightened rate of sale, but also to fill the pipeline. And what I know is that this is for sure the case in the short term, this initial fill phenomenon. What I also know is that if we fill the network up, and then sales fall off, that this will impact your modeling for revenue in 2022. So from that standpoint, understanding the model and relationship between sales and revenue is pretty easy. So all that to say, I think, you know, the customer is going to dictate volatility going forward and we're just going to be ready in the short term from a demand standpoint.

So hopefully that's helpful a little bit.

Brian Morrison: All right. Thanks very much for the color.

Operator: Thank you. Our next question is from Peter Sklar with BMO Capital Markets.

Please go ahead.

Peter Sklar: Okay. I'm just wondering if you could talk a little bit about the performance of the Ontario Canadian Tire bannered store. So my understanding during the lockdowns would have been that you would not have allowed store pickup. So the customer was not allowed to come into the store to pick up, so you were limited to curbside.

So earlier in your discussion points you were talking about, how well pickup is doing, so if my description of what was - what you were allowed to do and not allowed to do was correct. Can you talk about how the Ontario stores did given that they were limited to curbside?

TJ Flood: Yeah. Peter, its TJ, I can take that one. You are correct in your assessment for how the Ontario stores had to operate. Pretty much starting Boxing Day, right until mid February, we were only open for curbside service through our eCom channel and also by appointments within auto service.

So during that timeframe, our sales were, I would call them resilient. We were obviously down comping what we would have - when we would have been fully open. But then we also say a kind of pent-up demand phenomenon when we opened back up in March and finished the quarter very strong in Ontario. As you go into Q2, it's a little bit different from a comp perspective, because the restrictions are there. But up until a couple of days ago, we had similar restrictions last year.

So right now as we're sitting in Ontario, we've had quite strong sales in Ontario up until the last couple of days, because now we're starting to comp, being open last year, not only open, but open with massive pent-up demand after being closed for a month. So a lot of variability in performance when you're opening and closing like that. But hopefully that gives you some color on how we performed.

Peter Sklar: Yeah, no, I get that, that was good. And then my follow up question is, like, as you know, due to the generous benefits that are being offered by the federal government in terms of wage, you know, wage supplementation, are the dealer's having any trouble getting people to come into work, is that an issue for them?

TJ Flood: Yeah, Peter, it’s TJ.

Over time since the pandemic started, labor is always something that we're levering up and down. And I think as the demand at Canadian Tire went up extraordinarily in a very short period of time, there definitely were some challenges getting labor across the country. And - but our dealers do an extraordinary job - extraordinarily strong job of managing their business very tightly that way. They've upped their recruiting efforts and those types of things. But I think it's safe to say that labor has been in certain markets, particularly in some of the markets at West and in Ontario, it has been tough at times to get labor.

And it continues to be as we go forward here.

Peter Sklar: Thanks very much.

Operator: Thank you. Our next question is from Vishal Shreedhar with National Bank. Please go ahead.

Vishal Shreedhar: Hi. Thanks for taking my question. Just wanted to get your perspective on the margin sharing arrangements with the dealers at CTR, given the large comp in Q1, should we expect a favorable true-up in coming quarters related to that agreement? And if so, when should we expect it and can offer us any help on how we should think about that benefit? If it in fact it's expected?

Gregory Craig: Hey, its Gregory here, I'll take that one for Vishal. And you can ask a follow up, hard accounting question for TJ. I think as you know, the complexity with the margin sharing arrangement is when our dealer year ends are right.

So they're not all in one day. So we've got 492 dealers, they kind of vary throughout the year. So to answer your question, when we do the accrual, we're doing it kind of based on year end and projection. So we actually did a true-up this quarter for our estimate from that we made in Q4, because we had some more dealer return year ends come in. And we did actually increase the accrual a little bit.

So we did increase the margin a little bit relative, not anything near what we would have done to Q4. That's why we really didn't call it out because it wasn't nearly as significant as it would have been in the previous quarter. But there'll be an adjustment in Q1 and there might be a small adjustment in Q2, depending on the returns that kind of cascade in. As it relates to what we'll book in Q4 of this year, there's lots of time left. So yes, it's a good start to the dealers with the comp that you've seen.

But there's lots of lots of year left. And I think we'll be in a better position to talk a little bit more about that maybe kind of certainly Q3, Q4, but it's early to talk about kind of the - what we'll think about for MSA in the fourth quarter at this stage, I would say.

Vishal Shreedhar: Okay. And just in terms of heuristic of it. If the retail sales come in stronger than CTR plan then there's a true-up going back to the corporate.

Is that a fair way to think about it?

Gregory Craig: Well, it's broader than just sales, right? Think of dealer profitability. So it's, you know, you got to remember, they've got to manage margins, they've got inventory, they've got personnel costs, et cetera. So you have to look at the overall kind of 4-wall profitability is how I would say it. So the fact that sales were up, let's not kid ourselves, that's a great sign. But there's more to it than just sales being up just so we're all clear.

Vishal Shreedhar: Okay. Thank you for that. In terms of the owned brand strategy, there seems to be continued traction with that. And wondering how management reflects upon that strategy. If anything has changed, and should we expect more acquisitions of brands looking forward?

Greg Hicks: We're really happy, Vishal with performance of own brands, like we call the performance in the quarter.

We saw great penetration rate increases to the tune of, I think, 250 basis points in CTR. We're seeing continued penetration momentum in SportChek. We called out, you know, bikes as a shining own brand example. In SportChek, I think we've talked to you about the fact that we feel good about the national brand, owned brand mix in Marks on an ongoing basis. So the real benefit for accretive penetration is going to come through SportChek and through CTR and we have multi-year plans by category in terms of both of those banners, for further penetration and all levels of architecture, in the assortment.

As it relates to acquisitions, I think you've heard us say before, we've always got our ears open. If you asked me that question, three years ago, I would have identified gaps in the Canadian Tire assortment in categories like bikes, at the good and architecture level, in our kitchen business at the better architecture level. And now, you know those gaps have been plugged by acquisition. So I'll probably stop short of telling you the categories where we believe we have gaps. But suffice it to say we do and we're always on the lookout for fulfilling them and hopefully they end up being screaming successes like Raleigh and Diamondback.

Vishal Shreedhar: Thanks for the color.

Operator: Thank you. That is all the time we have for questions. I will turn the call over to Greg Hicks, President and CEO for any closing remarks.

Greg Hicks: Thanks, Valerie.

And thank you again, everybody for joining us today. I hope the next time we speak we're all well on our way to widespread vaccination, and finally reaching the other side of this pandemic. We’ll speak to you in August. Good-bye.

Operator: Thank you, everyone.

This concludes today's call. You may now disconnect.