Canadian Tire (TSX:CTCa) Corp. Ltd. has regained full ownership of Canadian Tire Financial Services (CTFS), following the buyback of Scotiabank (TSX:BNS)'s 20% share for $895 million. This move included a $328 million charge. CEO Greg Hicks stated that the transaction would bolster control over the company's Triangle Rewards program.
Scotiabank initially acquired its stake in CTFS back in 2014 for C$500 million, aiming to broaden its credit card market and customer base. The conclusion of this partnership, according to Hicks, will enhance control over their loyalty program, where members' spending is twice that of non-members.
The deal's termination will also affect Scotiabank, despite a 3% workforce reduction. The bank highlighted the positive impact on its Common Equity Tier 1 (CET1) ratio, which will increase by 16 basis points. Additionally, Scotiabank has committed a C$1.1 billion credit facility to CTFS for another 18 months.
The transaction-related charge of C$328 million will be reflected as C$5.88 per share in Canadian Tire's Q3 2023 results. Looking forward, Canadian Tire plans to assess strategic alternatives for CTFS under Goldman Sachs (NYSE:GS)' guidance in 2024. This evaluation will contemplate the optimal structure for the business and its credit card portfolio.
InvestingPro Insights
Based on InvestingPro's real-time data and insights, Canadian Tire Corp. Ltd. (CTCa) exhibits a promising outlook for investors. The company's management has been aggressively buying back shares, which is typically a positive sign of confidence in the company's future. Furthermore, the company has maintained dividend payments for an impressive 51 consecutive years, a testament to its financial stability.
On the other hand, the company's earnings per share have been on a declining trend, and three analysts have revised their earnings downwards for the upcoming period. This indicates potential challenges in the company's profitability. Despite trading near its 52-week low, the stock's Relative Strength Index (RSI) suggests it is in oversold territory, which could indicate a potential rebound.
InvestingPro data shows that Canadian Tire Corp. Ltd. has a market cap of $5331.3M (NYSE:MMM) and a P/E ratio of 18.64 as of the last twelve months of Q2 2023. The company's revenue growth has slowed to 1.39%, and its gross profit margin stands at 32.77%. The company's dividend yield as of 2023 is 5.06%, reflecting its commitment to returning capital to shareholders.
InvestingPro offers many more tips and metrics for those interested in gaining a deeper understanding of the company's financial health and future prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.