Q1/26 Results: Progress Taking Hold - Financial Realization Slightly Pushed Out

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Q1/26 Results: Progress Taking Hold - Financial Realization Slightly Pushed Out

TD Cowen Canadian Tire Corporation, Ltd.

Global Research May 14, 2026

Positive Leverage a Positive: As stated, we believe the catalyst to CTC's share price

are its True North initiatives accelerating Retail Sales/Revenue growth at CTR,

sustaining its GM at its North Star (~35.5%), and realizing ex‑Petroleum basis

operating leverage. While CTR Retail sales are not where we would like, we

acknowledge weather and macro factors are current headwinds. The gross margin

has been meeting our expectations for several quarters now, and we are starting to

see leverage within SG&A. The Retail segment realized ~15bps of SG&A leverage y/y,

as they lap the initial elevated IT cost investment, and realize benefits from cost

discipline/restructuring initiatives. "Two out of three ain't bad" but we believe SSSG

>3% at CTR would improve both the financial outlook and applied multiple.

Unfortunately, we don’t see this taking hold in Q2/26 following today's release.

Capital Allocation: We anticipate positive FCF in 2026, that along with its Retail

balance sheet strength, and HH proceeds continue to support an attractive dividend

and active NCIB. CTC repurchased ~353k shares for ~$63mm during the quarter.

Recall the commitment is for $400mm annually (March renewal) so we expect it to be

increasingly active for the remainder of the year, providing a degree of downside to

the share price in our view.

Updated Financial Forecasts: We have made modest revisions to our F2026 and

F2027 financial forecast. For both years we have incorporated higher Petroleum

revenue partially offset by lower Retail revenue, and a slightly lower GM partially

offset by more favourable SG&A leverage.

Figure 4 – Updated Financial Forecasts