On Thursday, Canadian Tire Corp (TSX:CTC) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Canadian Tire Corp reported a 10% increase in EPS to $3.94, with consolidated retail sales growth despite challenging weather conditions and soft consumer sentiment.
Strategic initiatives included growth in loyalty programs and digital sales, with Triangle Loyalty members driving increased sales and engagement.
Future outlook remains cautiously optimistic, with plans to continue leveraging AI tools for pricing and customer engagement, and a focus on the True North strategy to enhance omnichannel retail experiences.
Notable operational highlights include strong performance in Mark's and SportChek, particularly with new store formats and strategic inventory investments ahead of major sporting events.
Management emphasized disciplined execution in cost management and capital allocation, with a reduction in SG&A and a focus on maintaining strong margins despite external pressures.
Full Transcript
Rivka, Operator
Thank you for standing by. My name is Rivka and I'll be your conference operator today. Welcome to the Canadian Tire Corp earnings call. All lines have been placed on mute to prevent any background noise. Following today's presentation, there will be a question and answer period. If you'd like to ask a question, simply press star 11 on your telephone keypad. To withdraw your question, please press star 11 again. Now I will pass along to Karen Keyes, Head of Investor Relations for Canadian Tire Corp.
Karen Keyes, Head of Investor Relations
Thank you, Rivka, and good morning, everyone. Welcome to Canadian Tire Corp's second quarter 2026 results conference call. With me today are President and CEO Greg Hicks, Executive Vice President and CFO Darren Myers, and Executive Vice President and Chief Operating Officer T.J. Flood. Before we begin, I'd like to remind you that today's discussion contains information that may constitute forward-looking information within the meaning of applicable securities laws, including management's current expectations regarding future events and the Company's True North strategy.
Although the Company believes that the forward-looking information in today's discussion is based on information, estimates, and assumptions that are reasonable, such information is necessarily subject to a number of risks and uncertainties and other factors that could cause actual results to differ from those expressed or implied in such forward-looking information. For information on material risks, uncertainties, factors, and assumptions, please see the Company's MD&A, which is available on our website and filed on SEDAR+.
The Company does not undertake to update any forward-looking information, whether written or oral, except as required by applicable securities laws. I'd also like to highlight that because last year had 53 weeks, comparable sales for Q2 are presented on a shifted basis comparing weeks 14 to 26 of this year to weeks 15 to 27 of last year. After our remarks today, the team will be happy to take your questions. We'll try to get in as many questions as possible, but ask that you limit your time to one question plus a follow-up before stepping back into the queue.
And please contact Investor Relations if we don't get through all the questions today. With that, I'll turn the call over to Greg.
Greg Hicks, President and CEO
Thank you, Karen, and good morning, everyone. The agility and discipline of our team continued to be tested in Q2 in an operating environment that was substantially similar to Q1. Yet again, we faced uncooperative weather, with CTR hampered by wet spring and summer days, and consumer sentiment remains soft. Ultimately, we demonstrated our ability to deliver for discerning customers and achieve strong financial results. Consolidated retail sales increased while EPS jumped 10%, coming in at $3.94.
Importantly, we advanced in areas that matter to us strategically as we build a stronger retail system, with growth in loyalty, digital, and new concept stores all outpacing our broader retail sales. Both Mark's and SportChek delivered impressive comp sales, amplified by new and modern stores that are outperforming on all metrics and benefiting as Triangle Loyalty members move around our enterprise retail system. Mark's grew with existing and new customers, with NPS and sales up, including a record Father's Day, and our World Cup fan gear performance proved once again that SportChek is the undisputed destination for athletes and enthusiasts, with one store manager literally selling the Canada jersey right off his back. Shifting gears to customer sentiment: For a long while now, consumers have been living with the threat of trade wars and tariffs and managing the day-to-day pressure of higher food and gas prices. This was evident in Q2 as we saw our credit card holders spending significantly more on gas than they did last year, putting correlating pressure on our business. However, our best customers, Triangle members, showed up, with sales, spend, and trips per member all outpacing non-loyalty equivalents.
And more broadly, we saw continued spending across all cohorts, led by value-oriented and higher-debt members. To the extent that Q2 was a weather story, declines in major outdoor categories at CTR accounted for more than 100% of our sales challenge. Many other categories performed well, and even in our weather-challenged categories we continue to see discretionary dollars in the market, with strong sales of our new barbecue lines and innovative patio designs.
So as I reflect on Q2, the conclusion is clear: weather pressured CTR, balanced by great sales at Mark's and SportChek in an environment where customers are spending carefully. For our part, we continue to double down on strategies that work in a value-driven environment. We kept our value proposition sharp, using our David AI analysis to drop prices on more than 5,000 products, and we saw strong customer response to lower prices on essentials like cleaning and storage.
We issued significantly more Canadian Tire Money through Triangle bonuses and our growing list of partnerships. Personalized loyalty promotions hit the mark, attracting and re-engaging more Triangle members, driving loyalty sales up 3.5%, and exclusive offers for credit card holders gained traction, driving higher ECTM issuance at the bank. On average this year, credit card holders who activate offers are not only visiting us more, they are buying baskets that are 5% larger than non-credit customers.
As I turn it over to Darren to dig into our numbers, it's clear our Q2 results did not come easily. They are a reflection of our discipline and a credit to our team. We have our hands firmly on the wheel, managing the right price, margin, balance, and in-year OPEX, and wise investments for the future of our retail and bank businesses. Over to Darren, and I will return in a few minutes for a quick update on exciting True North advancements.
Darren Myers, CFO
Thank you, Greg, and good morning, everyone. Delivered a strong financial quarter in Q2, disciplined execution helping offset demand headwinds. Diluted normalized earnings per share was $3.94, up 10% year over year. This reflected higher retail segment IBT, a lower share count, and a favorable blended tax rate. CTF was in line with last year as strong top-line growth offset planned investments. Let me walk you through the quarter starting with retail.
Retail sales and revenue were up in the quarter, supported by petroleum where higher gas prices more than offset lower volumes. Excluding petroleum, retail sales were up 2.5%. Retail revenue was down 1.1% as growth at SportChek and Mark's was more than offset by lower sell-through and dealer restocking. At CTR, comparable sales were up 0.7% overall despite a tough prior-year comparison that benefited from favorable weather and patriotic purchasing.
SportChek's 8% comparable sales increase was a very strong result, supported by strategic inventory investments ahead of major sporting events. World Cup sales accounted for roughly half of the growth, with Montreal Canadiens fanwear sales also contributing. Outside fanwear, athletic footwear performed well while categories like cycling were more muted. At Mark's, comparable sales were up 4.2%, benefiting from a rainier spring. Industrial footwear and workwear led the growth.
Newer format BBB stores outperformed, led by strong denim sales and strong sales in casual wear categories. At CTR, comparable sales were down 0.8% versus 2025 while up 5.5% on a two-year stack basis. Despite a tough prior-year comparison, there were several positive highlights in the quarter. Promotional offers resonated well with consumers. Seasonal categories such as patio and barbecue were up, and tire change activity picked up early in the quarter, supporting the 24th consecutive quarter of growth in Automotive.
Fixing and playing also outperformed overall CTR sales. These gains were offset by softer performance in gardening and summer climate control, particularly in Alberta and Ontario, where weather was inconsistent through the quarter. Slower sell-through had a knock-down effect on dealer restocking and CTR revenue, which was down 3.5% in the quarter. Although CTR revenue has outpaced sales over the last 12 months, the two are broadly aligned year to date with sales slightly ahead of revenue and up 1% against strong 2025 comparatives.
As you know, these metrics tend to converge over time. At the end of Q2, CTR dealer inventory was up 1%, mainly in seasonal categories. Sell-through has improved since quarter end as summer weather arrived more broadly across the country. Across the banners, corporate inventory was up 7%. About one-third was in CTR seasonal categories, with the balance supporting growth at SportChek and Mark's, including World Cup sales demand that extended into July.
Turning to margin now, excluding petroleum, our gross margin rate was 35.1%. Our rate improved 33 basis points over last year, driven by positive contributions from SportChek and Mark's. We also continue to leverage our margin tools, including David, to target promotional investments. Turning to operating costs, we are seeing the benefits of stronger performance management and tighter cost discipline while continuing to invest in the business. While some quarter-to-quarter variability is inevitable, we were pleased with how this came together in Q2.
Retail SG&A was $10 million lower year over year. Excuse me. SG&A as a percentage of revenue excluding petroleum was stable at 23.3%. Supply chain execution was solid and savings from last year's restructuring, lower variable compensation, and the shift of some marketing expense to Q3 helped offset higher real estate and store operations costs. Depreciation and amortization costs were up 4% year over year, driven by lease renewals in our Vancouver-area DC.
Despite these factors and certain insurance recoveries last year, retail IBT was up 1.2% at $201 million. Normalized retail EBITDA increased 2.2% to $498 million. Retail ROIC was 11.1%, an improvement of 80 basis points year over year. Moving to Financial Services, we continue to deliver strong GAR growth with a 4.2% increase in the quarter. Improved cardholder retention helped grow active accounts, and average balances were up reflecting higher card spend.
SG&A was up as planned, trending at a rate of approximately 28% where we expect it to stay through the second half. The spend is supporting account acquisition, engagement, and ongoing project investments. Key risk metrics remained stable with aging flat year over year at 3.3%. The net write-off rate held at around 7.2% despite elevated insolvencies. This remains consistent with industry trends and we continue to monitor closely. The allowance remained unchanged at $935 million and the allowance rate was 11.8%, reflecting higher ending receivables.
Turning to capital allocation, our store refresh program continues to advance with 30 projects completed in the first half. We expect that number to more than double by year end, modestly below our original plan of 70 projects. Due to some shifts in timing, our pipeline remains strong and vacancies created by HBC exits are creating attractive future opportunities for our destination sport and BBB concepts. Reflecting the change in phasing and continued focus on capital discipline, we now expect CapEx to fall into the range of 450 to 500 million in 2026.
Our buyback program is ongoing with an additional $85 million of shares repurchased in Q2. Before I wrap up, let me spend a moment on what we're seeing in Q3 and the balance of 2026. We're encouraged by the early Q3 sales growth as summer weather has arrived. That said, there's still more than half of the quarter to go, and as it's been all year, the consumer environment remains dynamic. We continue to plan for growth in the back half of the year on a 52-week basis.
At CTR, the prior-year comparison becomes less of a headwind, while at SportChek, we expect some moderation as we cycle the run-up to the Blue Jays' historic 2025 World Series run and favorable Q4 weather. We're pleased with the Q2 retail gross margin performance, with margin rate excluding petroleum 35.1%. We continue to feel good about our full-year north star target of 35% plus, despite some expected Q3 headwinds from higher transportation fuel surcharges and targeted investments.
We're pleased with the reduction in SG&A in the second quarter as we continue to manage our costs and pace of investments. We do expect some growth in Q3 dollars, in part due to timing shifts from Q2 and to support growth in the business. Overall, we are pleased with the team's execution and we're seeing the benefits of greater discipline, stronger performance management, and a sharper focus on execution. We remain focused on staying agile, putting the customer first, and investing in True North.
We see a clear path to unlocking sustainable sales growth, improving bank profitability, and advancing towards our financial framework over the long term. We look forward to updating you again at our Q3 results call in November. With that, I'll hand things back to Greg.
Greg Hicks, President and CEO
Thanks, Darren. For the past many quarters I've used the term performing while transforming. This is the idea that we have both a day-to-day business and a long-term strategy moving in parallel. In the short term you're seeing evidence of our True North advancements with effective merchandising strategies, AI pricing, OPEX discipline and a sharper operating model. Longer term, we're excited about continued progress across all of the True North cornerstones.
In Retail Forward, we have plans to expand both our enterprise footprint and our reach. With accelerated ambitions for our modern Sport Chek and Mark's stores, this remains a real opportunity for us and our real estate team is actively engaged on sites, including some former HBC leases. Ultimately, True North is about building a long-term omnichannel advantage that gives customers the flexibility to shop with us however they choose. To this end, we are making considerable progress at e-commerce, where our sales growth continues to significantly outpace bricks and mortar.
I know you've been following closely as we have created an increasingly compelling and convenient digital experience recently. That progress has accelerated in several ways, including expanding AI search to become increasingly conversational and smart, adding buy now, pay later options online at Mark's and Sport Chek, and CTR launching free ship-to-home services exclusive to Triangle members, which we are still refining as sales and customer satisfaction scores are climbing.
Now, if you visit any one of Canadian Tire, Mark's, or Sport Chek online, the other banners are not only visible but one click away. While this may seem like a small convenience, it's indicative of a bigger move toward digital harmonization, taking advantage of our scale, showcasing our full multi-banner assortment and moving customers more easily across our enterprise. In fact, early results have shown that CTR's sizable web volumes can generate impressive customer traffic flow to both Mark's and Sport Chek.
Ultimately, this is just the first completed phase of our digital harmonization strategy, with plans for integrated search, cart and payment functions to come. In our Triangle-powered cornerstone, we are making membership more valuable, increasing personalized offers and connecting Triangle to more aspects of everyday life. More than 2 million of our loyalty members are now active with our partners at Petro‑Canada, RBC or WestJet. And when our partnership with Tims Rewards launches in a few weeks, millions more will be able to earn Canadian Tire money with their daily coffee, a major plank of our True North strategy.
These partnerships continue to drive incremental sales. And finally, I'll conclude with a theme you should expect us to return to time and again, which is our customer-centered growth strategy powered by AI. On our last call, I introduced our Mosaic customer intelligence platform and our plan for a fundamental pivot from selling products to serving the occasions of life. With Mosaic, we've analyzed hundreds of millions of customer transactions, Triangle loyalty data and volumes of external insights using bespoke AI to identify where our retail system can show up best in new or existing categories.
And after significant development and work with Microsoft, this platform is ready for prime time. Our major banners, stores and sites are executing a new approach to the Back to School season coordinated enterprise-wide. Using AI intelligence, we have introduced new categories of products, new approaches to merchandising and new price points, and we are coordinating our marketing, loyalty and digital promotions as an enterprise. Canadian Tire, Sport Chek, Mark's and Triangle all combine to create scale together.
We know that the parent buying sneakers also needs crayons and some jeans. We know that the kid moving into a dorm wants a laptop, a fan, furniture and a hoodie. We know how to serve them in each of our banners, but we now have detailed plans to solve more of their Back to School needs by moving them across our enterprise. As an illustration, for the first time ever you will see Mark's and Sport Chek marketing tucked into your Canadian Tire flyer.
I just spoke to the fact that our harmonized websites will encourage customers to shop any of our banners and our combined assortment with just a click. Our sites now have enhanced data like essential shopping lists, FAQs and tips, all designed so AI agents can discover, understand and recommend our Back to School products when customers search the occasion on their favorite LLM. And our Triangle team has created personalized offers designed to both help and reward customers, bespoke for their specific Back to School needs.
When we launched True North, you asked us what we meant when we said we would drive customer-centric growth, and this is a big part of the answer. AI insights are helping us dig deeper into our total addressable markets and to find new ones. Back to School is a $3.4 billion market in Canada. We have low single-digit share, but our insights show us that Canadians believe we have a right to win in this space. It's a small business for us today, but we have a path to meaningful upside and we're going to learn what's possible.
Turning True North theories into action internally, we call this enterprise-wide customer occasion a Customer Lighthouse. Our next lighthouse is Holiday, a much larger business for us with meaningful opportunities to grow share and sales, and I'll look forward to telling you more on our upcoming calls. To close, I feel good about the team's agility in the face of a tough consumer backdrop. At the same time, I'm confident that we are also building for the future.
As we open the call for questions, I'll answer the first one now. We are thrilled that the Heated Rivalry guys like our plaid bag. We did not pay them to carry it and no, I can't get you one, but our stores would be happy to serve you in the coming days. And with that, let's open the line.
Rivka, Operator
To questions at this time I would like to remind everyone that in order to ask a question, please press star then one one on your telephone keypad. To withdraw your question, press star then one one again. We ask that you limit yourself to one question plus one follow-up question before cycling back into the queue. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Irene Nattel of RBC Capital Markets.
Your line is now open.
Irene Nattel, Analyst at RBC Capital Markets
Thanks and good morning, everyone. Now that my hopes are dashed, I'll just have to ask a different question.
Greg Hicks, President and CEO
That was for you, Irene.
Irene Nattel, Analyst at RBC Capital Markets
Thank you. Thank you. Really intrigued by your last comments around the service shift from product to customer-centric, need-centric. What are your early thoughts around the implications with respect to, you know, are you surfacing gaps in your product offering or is this really just about packaging things differently for the consumer? And as you progress down this road, how will we, the investment community, see this reflected in the financials?
Greg Hicks, President and CEO
Yeah, maybe I'll take that, and TJ may want to jump in as well. I think contextually, Irene, if you think about our Lighthouse strategy, it's really just a more modernized approach to traditional category management frameworks. Given our enormous customer data, we're in a great position to integrate our customer insights into the planning and execution of how we go to market and deliver more effectively on full customer shopping occasions. We are prioritizing each occasion for share growth and where we have a right to win.
And typically each occasion is associated with a set of categories across our whole retail portfolio — not always, but often it's a set of categories across our total retail portfolio — with both trip drivers and basket builders. Each occasion would be underpinned by a detailed playbook across the whole organization for required assortment and pricing changes. So yes, we are adding new assortments. I mean, some of the insights — I'm thinking about Holiday specifically — around gaps in our assortment, around things like lower-priced wrapping paper and just how we go to market with wrapping paper, how the customer thinks about us for wrapping paper. And there's four or five other categories within Holiday like that — I'm just using wrapping paper as an example. Back to School, we've introduced from $500 Chromebooks to miniature fans for dorm rooms, all things that were gaps in our assortment. Yes, the playbooks will identify required assortment changes, identify pricing changes, channel strategies and the marketing required to win share in the occasion. It's new, but we're excited. I mean, PJ and the team at Mark's are super excited about Back to School and how that all comes together for Mark's, as an example.
We're engaging the whole organization in a different planning approach that is very, very customer-centric. So I'm feeling good about how we're approaching the early lighthouses, and I think what underpins all of it is just this fantastic data that we have. So, more to come. We'll continue to talk about lighthouses, we'll talk about the postmortem associated with lighthouses. We may stop short about market share in occasions, but you'll be hearing lots more — this is really how we're going to market.
Irene, that's great.
Irene Nattel, Analyst at RBC Capital Markets
Thank you.
Rivka, Operator
One moment for our next question. Our next question comes from the line of Martin Landry of CEPO Canada. Your line is now open.
Martin Landry, Analyst
Hi, good morning. I would like to dig into your e-commerce sales. They were up 14% year over year. You alluded to improvements you've made on your website — the ease of clicking on other brands. Just trying to understand a little bit: 14% growth, how does that compare to the previous quarters, and is there any banners that were the main drivers behind that growth?
Greg Hicks, President and CEO
Yeah, Martin, it's Greg. Welcome to the call. Look forward to working with you. Maybe I'll take that one. Ultimately, the strategy is about giving customer optionality around how to shop us. From an outcome standpoint, we believe there are significant opportunities to increase our total addressable market and market share by removing some of the friction for customers in shopping us across channels. Because, as we've discussed before, we've been working to drive our capabilities and ensure that our customer experiences were strong, and we now feel the time is right, as a big lever — a big example — to use free shipping as an option and demand lever for CTR while continuing to improve our digital experiences across all of our banners. I think, as you point out, I would say what we're doing seems to be working. It's a long game, but we're encouraged that e-com growth continues to significantly outpace bricks-and-mortar growth year to date. As you mentioned, comp e-commerce sales were up 12, backed by 14 in CTR. That is more of a separation, or higher performance, than what we've seen in many, many quarters.
It is coming predominantly on the backs of — well, I should — free shipping certainly, from a growth standpoint at CTR, is a significant driver. But I think making that offering also just brings more visibility to our buy online, pick up in store. We see growth in that channel as well. We continue to benefit from good traffic across the site, so we're seeing those visits translate into more purchases. And we're also getting traction, Martin, on extended online-only assortments, which is, again, fairly new for us.
I think we have about 12,000 items now in online-only, and that's ramped in the first half of 2026. And I think it really gives us a new tool for broadening our assortments in general as we deploy the Lighthouse strategies that I just talked about. So our expectations going forward, Martina, is growth in both channels, but outsized growth in e-commerce. That's the way we're intending to steer and manage the business.
Martina, Analyst
Okay, that's super helpful. Good color.
UNKNOWN Analyst
So it sounds like this was not. It's broadly based across all banners, not Sport Chek, because I would have. I just wanted to see if Sport Chek had a big influence in this quarter.
Greg Hicks, President and CEO
Yeah, no, not from an e-commerce growth standpoint in terms of driving the overall 12%. Sport Chek has always had a strong and penetrated e-commerce business. But I touched on digital harmonization for a reason. Strategically, this is a signature move of True North around moving from a Holdco to an Opco. You know, True North is about aggregating the scale that we've created for ourselves to better compete with scaled players. And having websites that aren't connected, each having their own digital front door, doesn't really present our scale to the customer.
And so the reality is, you know, we have an unbelievably deep procured product catalog. And it's designed for life in Canada with many products that are exclusive to us. So we need to better expose the assortment to Canadians with less friction. So as I said, the tabs are a first start, but a fully integrated search, cart, and payment experience is the end state that we're building towards. Sport Chek and Mark's, as I alluded to, just given scale and size will likely benefit more from traffic flow from that integrated experience.
I mean, imagine, you know, the breadth of a category like sporting goods when all of our banners are built into an integrated experience for the customer. So like we did for the other analysts on the call, like we did previously with our investment in our One Digital platform, we'll keep you posted ongoing on the progress we're making towards that end state destination.
UNKNOWN Analyst
Super. Thank you and best of luck.
Greg Hicks, President and CEO
Thank you.
Rivka, Operator
Thank you. For our next question, our next question comes from the line of Tammy Chen of BMO Capital Markets. Your line is now open.
Tammy Chen, Analyst at BMO Capital Markets
Hi, good morning. Thanks for the question. Darren, I was wondering if you are able to quantify at all the magnitude of that favorable timing from marketing spend that shifted into Q3.
Darren Myers, CFO
Yeah, I would. Good morning, Tammy, and welcome back. Yeah, I wouldn't say I wanted to give you a little bit of color on it, but it's not, you know, it's not a large enough number that I would, you know, call out the absolute amount. What I would overall tell you is we're pleased with how we're managing SG&A certainly in the quarter and for the first half of the year. You see each quarter we've been holding rate and we've actually made a little bit of improvement in the rate.
I think you should expect the same type of thing in Q3. We'll see some growth in SG&A dollars. We'll have a little bit of timing impact, but I think we'll be focused again on really maintaining that type of rate, maybe with a little bit of pressure. And then just as a reminder for everybody, the restructuring benefits that we had from our actions, they started a little bit in Q3. So there's a small amount in Q3; the lion's share of it starts hitting in Q4.
So just think about that as you're modeling out your numbers.
Tammy Chen, Analyst at BMO Capital Markets
Okay, thank you. And my other question was I see it looks like since the beginning of last year you're disclosing your Canadian Tire, your ECTM growth. It looks like the last, want to say, two quarters, there's a notable year-over-year acceleration in that. Can you talk about that a bit more? Like, I assume the acceleration is just from all these partnerships. Can you talk a little bit about what the growth trend was like for ECTM before 2025? And lastly is, like, I think historically the Triangle credit cards is the main driver of these points.
I assume that's still the case, not so much from the non-credit card Triangle numbers. Thank you.
Greg Hicks, President and CEO
Yeah, maybe I'll take that. Tammy, it's Greg. I think this is a very concerted strategy. Obviously, ECTM is obviously exclusive to us. It's a big part of our Triangle program and a huge part of the value that we're providing to customers in a very difficult environment. And so it's a lever that works very well for us. From a flywheel perspective, more issuance equals more redemption. More redemption equals add-on sales and more first-party data generation.
So that's, you know, that's the strategy behind it. The primary kind of reasons or rationale for a higher issuance rate this year — you pretty much kind of answered your question. Partnerships are an entirely net new lever relative to last year. And then just this value focus. This is a way that we can give very differentiated value to a value-focused consumer and value economy. You know, CTFS continues to be the predominant issuer. And as we work to integrate the bank even more into driving retail value, we are putting, you know, new initiatives in place, as I called out, you know, in my prepared remarks, for issuing more Canadian Tire Money, offering bonus offers, and integrating some of those offers into the online banking platform. So there's a lot of net new initiatives around ECTM and the bank integrating to make retail more successful. So relative from a run-rate perspective, I don't know how to quantify the net difference versus last year. It's elevated for sure this year and we would expect that to continue.
Darren Myers, CFO
Yeah, the only thing I'd maybe add to that, Tammy, is just the way we're managing all this, and with our margin nerve center, we have our hands on all the dials on what's the most effective way to go to the market and to stimulate demand, and still deliver the types of financial metrics that we're looking to deliver.
Rivka, Operator
Great, thank you. One moment for our next question. Our next question comes from the line of Vishal Sridhar of National Bank Financial. Your line is now open.
Vishal Sridhar, Analyst at National Bank Financial
Hi, thanks for taking my question. Can you separate the benefit on gross margin in Retail from banner mix and help me understand the underlying margin performance at CTR, and also as you discuss that, maybe help us understand the outlook for the balance of the year given freight and foreign exchange and promotional activity as we contemplate our models.
TJ Flood, President of Canadian Tire Retail
Hey Vishal, it's TJ. I'll jump in on that one. As Darren talked about earlier, we were very pleased with how the teams managed our margins in Q2. We were up 33 basis points year over year. And as you articulated, banner mix did play a role in that with the growth in Mark's and Sport Chek. And we also, particularly at Sport Chek, with so much fanwear sales, we did benefit from regular sales. From that perspective, we felt pretty good about our margin rates within CTR, not materially off of last year — a little bit below last year, but nothing material.
And we continue to build and build our capabilities around promo and pricing and our margin nerve center and leveraging our AI tools around David to manage margin rates. And as we've said on previous calls, we feel the capability we've built here is on par with what you can see from some of the best retailers operating at global scale. The other thing I'll highlight is that with the focus that Canadians are putting on value right now, we were able to invest in price where we thought it made sense.
And as Greg mentioned, we had over 5,000 regular price decreases on top of our already sharp promotional activity. So we are really trying to lean into value to help inspire demand. And I guess what I would say as we go forward, as you know and we talk about it a lot, margin rate can be choppy quarter to quarter, but we do remain focused and committed to our North Star from a margin range perspective for the year. We do expect to face some headwind as Darren described on fuel in Q3, but we do have the full-year North Star in mind as we go forward here.
Vishal Sridhar, Analyst at National Bank Financial
Thank you for that perspective. CTR same-store sales declined 0.8%, and that was more than caused by these weather-sensitive categories as I understood it. Maybe you can help us understand, ex-weather categories, what CTR performed at, and I ask in the context of the inventory at corporate increasing 7% and my interpretation of your comments that Q3 at CTR has rebounded as weather returned to more normal patterns.
TJ Flood, President of Canadian Tire Retail
Yeah, maybe I'll take that one again and I'll cut it into two parts. The way we described it in the call, some of our seasonal categories represented two-thirds of our decline year over year. But if you actually unpack some of the other categories that have weather-related activity associated with them, it was more that 100% of our decline was associated with weather. If you aggregate our non-weather businesses we were actually up. So weather obviously played a big role.
And I would also say that patriotic purchasing from last year played a role. And Darren had pointed out that our two-year stack was 5.5% growth at CTR. So we definitely believe weather played a big role. And as we described, as Darren described, we're seeing as weather showed up in Q3, our results have been a little bit better. So as you kind of gravitate or move over to the inventory side of the equation, I'll unpack that a little bit for you. Dealers drew down inventory in Q2.
As you know, our revenue outpaced our POS in Q1 as they prepared for spring, and at the beginning of Q1 dealers were at plus 5% in inventory. And now as we closed Q2 they were only up 1%. So we actually feel pretty good about where the dealers are sitting, and as you know, POS and shipment growth normally converge over time and that's exactly what we're seeing. On a year-to-date basis we are buying for the back half of the year to help support growth for sure.
And as we mentioned in Q1, I did want to highlight that dealers did end a bit heavy on a few fall, winter, and Christmas categories like snow shovels, winter tires, wiper blades, and Christmas lights, which will set them up well if we get an early winter. But on the flip side, it may delay some of their ordering that normally happens in the late summer and they may be a little bit slower to replenish depending on when winter shows up. So we feel very good about our inventory composition and we're well positioned to support sales growth in the back half of the year as the consumption on spring/summer has kicked in.
In Q3, we're also feeling pretty good about our inventory at the corporate level and some of that plus 7% was World Cup at the end of Q2, which obviously straddled the quarter. So overall we're feeling very good about our inventory composition as we head into the back half of the year.
Vishal Sridhar, Analyst at National Bank Financial
Thank you.
Rivka, Operator
One moment for our next question. Our next question comes from the line of John Zamparo of Scotiabank. Your line is now open.
John Zamparo, Analyst at Scotiabank
Thank you. Good morning. I wanted to ask about the Mark's banner. It really seems like you found some momentum here. I wonder if you could talk more about that business. I know you have lots of initiatives underway, but can you talk about what you think is having the greatest impact and, however you measure share in that business, do you think you're taking share and is some of the success steps you're Seeing from the category broadly?
TJ Flood, President of Canadian Tire Retail
Hey John, it's TJ. I'll take that one. I love questions about the Mark's business. We are very, very pleased with the performance and sustained performance of the Mark's business over the past couple years. We are up 4% for the quarter, driven by just amazing assortments and range. When rain shows up, Mark's really shows up well. And I would say the same thing about our industrial assortments. Just fantastic assortments with such significant innovation, I think.
And the other thing I would point out is our new BBB concept is just absolutely firing. It allows us to bring kind of the best of both worlds from Mark's, the casual side of things with such great inventory presence and displays of things like Levi's jeans. And it also allows us to really, really showcase our industrial wear. So we're very bullish about the Mark's business. It's also benefiting greatly from our partnerships and growth in our Triangle ecosystem.
Members are definitely cross-pollinating to Mark's and they're benefiting from that. And as Greg articulated, we're so excited about a harmonized retail approach from a digital perspective because we think that's just going to drive incremental traffic to Mark's as we go forward. It's such a differentiated business for us and couldn't say enough positive things right now. But the Mark's business, PJ and the team have just done a fantastic job.
John Zamparo, Analyst at Scotiabank
Okay, that's good color. Thank you for that. And then my follow-up is on the Capex guide. It sounds like some of the reduction is timing, but some might not be and some might be more structural. And I wonder if you think Canadian Tire Corp can run with a lower Capex intensity relative to sales or EBITDA or whatever measure you use moving forward.
Darren Myers, CFO
Yeah, John, I think it's really more timing and just more discipline in the organization on how do you forecast projects, the timing of projects, how do you align the teams that we need to align? We're improving our muscle in that area. You know, we see lots of good opportunities across all the businesses for investing and we've talked about the HBC sites, sport tech, destination sports and the BBB stores as well as, you know, refreshes and remerches at CTR.
So lots of opportunity. I wouldn't be changing your forward-looking thinking on the Capex range, but just maybe take the sign that we're just getting tighter on how we manage and run the company.
John Zamparo, Analyst at Scotiabank
Okay, thank you. I'll pass it on.
Rivka, Operator
One moment for our next question. Our next question comes from the line of Jonathan Mataszewski of Jefferies. Your line is now open.
Jonathan Mataszewski, Analyst at Jefferies
Oh great. Good morning and thanks for taking my question. It was on pricing and you've been talking about kind of a value-sensitive consumer for a while now. I think you've been lowering prices for maybe two quarters or so. So my question is, can you help us understand maybe just where pricing gaps stand today versus competition and just trying to parse out kind of where the pricing cuts reactionary to what you're seeing in the market and therefore kind of your spreads versus peers have been maintained, or are these pricing actions more proactive and your goal here and the results you're seeing are to actually expand kind of your pricing gap versus peers? If there's any way to frame that, that'd be interesting. Thank you.
TJ Flood, President of Canadian Tire Retail
Yeah, Jonathan, it's TJ. I'll take that one. So thanks for the question. We've put a lot of effort into building our capabilities around pricing over the past couple of years. And we, as you've articulated, we obviously watch our positioning relative to competition really, really closely. And I think in this consumer environment, we're always looking at different ways that we can provide value to our consumers. And we have various levers at our disposal to do that at Canadian Tire as a high-low retailer.
So obviously regular price is one. How we discount category to category is another. Our Triangle and our Triangle membership base benefits from the value we provide through Canadian Tire money. So I think we use all of those levers to try to deliver value. And most of our price changes are deliberate to try to provide value where we think Canadians want value. And our elasticity curves kind of point us in those directions. And we use our sophisticated AI models to point us in the right direction.
There are times we do have to watch competitive activity and react based on what the competition does. And the Canadian environment has been very dynamic with tariffs and everything that we've been dealing with on the cost side. So we have to watch that very closely. But I would say it's a combination of us being deliberate about how we deliver value as well as keeping an eye on making sure we're price-competitive in the marketplace.
Jonathan Mataszewski, Analyst at Jefferies
Okay, thanks. And that's helpful. And just a quick follow-up, maybe just to dovetail off of the topic of e-commerce growth from before. How should we think about the cost associated with free ship-to-home for your Triangle membership base? Fourteen percent e-commerce growth is a big number. So is it fair to say you feel pretty satisfied with the trade-off in terms of some cost there in exchange for what appears to be pretty solid growth coming from that?
TJ Flood, President of Canadian Tire Retail
Yeah, I can take that one as well. I think we are quite pleased. And I would say we just started this in May, right? So we're learning a lot. And today what we've done is we have offered free shipping to our Triangle members at a $99 threshold. And what we've seen so far is very promising. Our conversion rates have increased. Our AOV has been almost double what we see in bricks, which is really important because, as you point out, this is an investment in value.
And as I pointed out earlier, we have several arrows in our quiver to invest in value, and this is just one more of them. So we're watching it really closely and we're learning, but our AI tools are going to help us manage the tightrope we're always walking, which is managing demand creation with margin management. But I would also say that our consumers are gravitating to some of our other e-commerce offerings really strongly as well, which have less investment impact.
Our Click and Collect growth has been really strong. Our dealer turnaround time on Click and Collect orders has dramatically improved year over year, which has inspired consumers to use Click and Collect. Our same-day service, which is paid, has been really, really strong. Our NPS scores on that have been great. And we also, as Greg pointed out earlier, have a really strong endless aisle. So it's a big kind of compilation of a bunch of different initiatives to help drive e-commerce growth, and we're doing that in balance with all of the margin work that we do through our DAVID tools.
So that's how we're managing it going forward here.
Greg Hicks, President and CEO
Jonathan, it's Greg. I would just add, like I talked to in my prepared remarks, we were honing the experiences. We wanted to make sure that we had a ship-to-home experience that could stand up to the expectations of the customer. And that's taken some time, and we've been monitoring NPS and all those good things, and we feel ready from a customer expectation standpoint. The same type of thing I'd like you to think about in terms of just overall margin management capability.
If we turned on free shipping a few years ago, prior to the capability now that we've built through DAVID to be able to manage all of the, as TJ says, the arrows in the quiver to generate demand and manage margin, I think this would have been quite dilutive to us. And so I think it's the combination of the in-store delivery experience, us feeling good about that, us building more capability around margin management that allows us to continue to lock in to our North Star expectation and have this now as a demand lever and optionality for our customer.
And so that's probably the way I'd ask you to think about it.
Jonathan Mataszewski, Analyst at Jefferies
Helpful. Thank you. Best of luck.
Rivka, Operator
Thank you. One moment for our next question. Our next question comes from the line of Chris Lee of Desjardins Securities. Your line is now open.
Chris Lee, Analyst at Desjardins Securities
Good morning everyone. I have a couple of questions about the bank. First is, as you know, insolvencies have ticked up a bit. How does that shape your outlook for the bank in the back half of the year?
Darren Myers, CFO
Yeah. Hi Chris. Overall, as we said in the last two quarters, we see lots of stability on our risk metrics. In terms of PD2 and write-off rates, they remain stable despite the insolvencies. We're actually, beneath the covers, seeing good payment patterns from our customers and overall things continue to be quite stable. So as we look forward, we think we're still in that market. Obviously we watch it very, very closely. We are also at, I would call, an inflection point on the profitability.
Definitely was pleased to see this quarter the growth in the revenue that offset the incremental costs we've had in that business. The incremental costs will continue as we've ramped up those investments. We start ramping them in the second half of the year. But it was nice to see that the profit was flat year over year and kind of that inflection point that we call it as we look at the second half of the year.
Chris Lee, Analyst at Desjardins Securities
That's helpful. Yeah, that was sort of my other question. Just on the bank again, the SG&A rate, I think you mentioned in your opening remarks you expect the SG&A rate to be still around 28% in the back half of the year. I know the rate was about 24 to 25% before the investments. I'm just curious to see how much of the increase would you say is more one-time sort of catch-up investment versus structural related to regulatory and other costs that you guys are just bearing in the bank?
Darren Myers, CFO
Yeah, a little hard for me to tease that out and give you precision on that because it's a little bit of both, as well as us being active and adding new accounts, which obviously drives SG&A. So, you know, I don't want to get into 2027 yet on the call, but I would say that generally we're going to be looking to grow the profitability of the bank. And like I said, we're at an inflection point and are expecting to start to see improvements. That'll be our focus.
There may be some SG&A increases as we look to grow the business and of course we're continuing to be laser-focused on the regulatory requirements of that business. But we think we can do all that and grow the earnings. We think there's lots of potential in the bank and integrating the bank better into retail as part of True North. We think there's just tremendous opportunity for us going forward.
Chris Lee, Analyst at Desjardins Securities
That's very helpful and all the best.
Darren Myers, CFO
Thank you. Yep. Thanks, Chris.
Rivka, Operator
One moment for our next question. Our next question comes from the line of Brian Morrison of TD Cowen. Your line is now open.
Brian Morrison, Analyst at TD Cowen
Thank you. Good morning. I have a quick question and a bigger picture follow-up. So, Darren, I just want to follow up on Chris's question because I thought about this a bit more in terms of the allowance rate in dollar terms remaining flat despite a decline in the allowance rate. So is this something that could slip into Q3 or do you feel Canadian consumer payment behavior is improving, or that provision was just more than adequate coming into the quarter?
Darren Myers, CFO
Ultimately, when you do all the math, there's a lot of complexity in ECL calculation. Ultimately, it was an adequate reserve. You know, we generally held the number. We haven't had the number fluctuate quarter to quarter because of the adequacy of the reserve and based on the underlying behavior of the consumer. You know, we definitely feel the reserve is adequate. We're actually seeing good retention on the book, which actually helps because you've got longer-tenured customers whose payment patterns—the newer customers actually tend to drive your ECL higher.
So that's part of it. There's been stronger payment patterns in certain cohorts within the book that goes into the calculation. And then there's all kinds of things like the unemployment rate forecasts from all the various sources that we use. So there's a lot that goes into it. But my long way of saying: yes, the reserve was adequate and we feel we're well covered.
Brian Morrison, Analyst at TD Cowen
Okay, that's helpful. And then bigger picture for Greg. So we've seen a financial transaction with Loblaws and Equitable. We've seen a loyalty transaction now with Aeroplan Air Canada. And I'm curious if these are areas of consideration you may look to surface value, or you're content that you've completed this process over the past year or so.
Greg Hicks, President and CEO
Well, I think there's certainly intrigue. I mean, I want to learn more about the transaction that was announced yesterday with Aeroplan. I mean, they operate their loyalty program quite different than us, from the standpoint of most likely a standalone P&L, the issuance or the selling of points. But I think it's a very clever, interesting transaction. I think invariably, when you start to think holistically and strategically about your business, you tend to really think about how you can grow organically in your core, or inorganically supporting your core.
I think it's quite strategic to think about the capabilities and/or assets that you might have that would be intriguing to others. I just think that's good hygiene, good business, good strategy. But we're, you know, we're busy. As you know, Brian, this is a massive transformation. Ultimately, this True North strategy is about improving our competitive posture and delivering better financial results in the core business. And so our teams have their hands full.
Hopefully you're hearing some excitement about some of the initiatives that we really believe will enable us to deliver those ultimate outcomes. But yeah, I think the news in the marketplace is intriguing to us, and our ears are always open in terms of how we can create more value for shareholders. Thank you very much. Thank you.
Rivka, Operator
I'm showing no further questions at this time. I would now like to turn it back to Greg for closing remarks.
Greg Hicks, President and CEO
Thanks, Rivka. And thank you, everybody, for your questions today. As always, I want to thank Team CTC for a job very well done. There's a stat that we track, and it measures the pride our customers feel when they shop with us. I checked our recent results, and it jumped a remarkable 5%, and that doesn't come easy. It's a telling stat and an endorsement of the team's hard work, always with customers at the core. We're also proud to play a part in our communities—from our flood and wildfire support for the Red Cross—our hearts and minds go out to the communities impacted by those wildfires—to the work of Jumpstart's World Cup Legacy project, building 25 new soccer pitches in neighborhoods that need them. It's our honor. Bye for now.
Rivka, Operator
This will conclude today's call. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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