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Good morning. My name is Alana, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Tire Corporation Limited Q3 2020 Earnings Results Conference Call. [Operator Instructions]This morning, Canadian Tire Corporation Limited released their financial results for the third quarter of 2020. A copy of their 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.I would now like to turn the call over to Greg Hicks, President and CEO. Greg?
Thank you, operator. Welcome, everyone, and thank you for participating in this morning's call. I'm joined today by our CFO, Gregory Craig. Before we dive into the specifics, I will start by saying that I am extremely pleased with our results, which are, by virtually any measure, exceptional. I'm so proud of the demonstrated resilience of our business, which is truly a testament to our associate dealers and our employees. I cannot overstate how much I appreciate and I'm grateful for their countless hours of hard work, ongoing flow of innovative solutions and unparalleled collaboration across the enterprise. Our teams continue to prove more agile than ever before, enhancing, expanding our retail capabilities and furthering our positive trajectory.You heard me say that throughout the pandemic, our purpose and North Star has been being there for life in Canada. I think it's fair to say that this quarter, we once again proved that this is not only simply a tagline. It's who we are and what we do. We continue to be there for our customers and our communities when they need us most, as shown by the very busy quarter had by our corporate charity, Jumpstart. As you may know, in September, Jumpstart launched its Sport Relief Fund. COVID-19 has forced many community organizations to close their doors, and Jumpstart has stepped up to ensure that kids will have programming to return to as it becomes safe to do so. They were disbursing $8 million to nearly 700 community sport organizations across Canada. And yet, we know that there's still a significant need for support.In addition to launching the Sport Relief Fund, Jumpstart continued to make impressive progress on its Inclusive Play Project. In Q3 alone, Jumpstart opened new inclusive playgrounds in Winkler, Manitoba; Edmonton, Alberta; and [ Chateauguay ], Québec, bringing the total to 10 inclusive Jumpstart playgrounds across Canada. These types of initiatives aren't easy to pull off at the best of times, not to mention during a pandemic. But that just seems to be our team's MO this year, do whatever it takes to make sure Canadians have the support that they need while also doing whatever it takes to ensure Canadians can access the essential products and services to help them navigate COVID-19.With that, let's dive into the results. Our third quarter was exceptional across a number of key performance indicators. In addition to recording the best comparable sales growth we've ever reported of 18.9%, excluding petroleum, our e-commerce channel year-to-date has now surpassed $1 billion in sales, up 211% from 2019. Both digitally and in-store, our existing Triangle members were key contributors to increases in store transactions and basket size, and the Triangle program acquired approximately 400,000 new members in the quarter.We generated strong operational leverage, enabling us to drop more earnings to the bottom line with a normalized EPS of $4.93, up a remarkable 42.5% versus last year. I'm pleased with where we stand with our profitability and cash generation. And I'm proud to say that earlier this morning, we announced 11 years of consecutive annual dividend increases, a key pillar in our capital allocation priorities.Now I'll move into the results by banner, starting with CTR. Once again, CTR drove our performance in the quarter, delivering exceptional comparable sales growth of 25.1%. In Q3, more than 90% of CTR's 200 categories grew. In fact, 80% of categories achieved double-digit growth. Once again, this quarter and the entire year for that matter has proven that home is where the heart is and where Canadians are choosing to invest. As Canadians continue to adapt to spending much more time at home, the top-selling products in Q3 were within our kitchen assortment, supporting the home cook and at-home dining themes.The DIY home improvement trend has accelerated demand across many home improvement categories, including lawn and garden, tools, paint and hardware. This trend provides opportunities to strengthen these new customer relationships. As an example, the average paint customer is much more lucrative than the average CTR shopper. Not only do they spend 3x more than nonpaint customers, they visit the store more frequently. And with ongoing travel restrictions and limited entertainment options in Q3, families came to us to enable their creative summer vacation plans such as backyard stations, camping and road trips, and this drove sales across all the seasonally-relevant categories.The trend of one-stop shopping continued in Q3, where we maintained solid growth in both average basket size and units per basket. This trend was consistent across all regions with 84% of our store network seeing increased foot traffic. So it should come as no surprise that CTR grew omnishare in all 5 divisions. Living and playing had the strongest performance, both achieving double-digit year-over-year market share growth. In addition to a strong brick-and-mortar performance, CTR experienced continued growth in our e-commerce channel, up 178% in the quarter. E-commerce penetration is now double where it was a year ago.Drilling down in the top online category shows a slightly different profile this quarter, including larger bulky items such as exercise equipment, garage organization, outdoor heating and both indoor and outdoor furniture. We have long said that last mile fulfillment for bulk assortments is one of our core advantages. And although e-commerce demand has stabilized somewhat, we anticipate it to rise once again in Q4. And when it does, we'll be prepared to execute and deliver an enhanced customer experience. To support the digital demand, we continue to evolve our deliver to home, curbside pickup and click & collect processes and continue to add more automated pickup lockers across the CTR network.Moving on to revenue. As I mentioned on our Q2 call, given exceptional consumer demand, it's only a matter of time before shipments caught up with sales. And in Q3, they did at record levels. CTR revenue rose 28%, with strong demand across regions and every division. As unprecedented consumer demand continued to put pressure on global supply chains, the team's outstanding collaboration with our dealers helped prioritize the shipping and receiving of key categories. Our throughput capacity in the quarter was stretched as we process an all-time record of product through our distribution centers.Achieving these results was no small feat. Hats off to TJ Flood and his leadership group for all of their efforts. With strong collaboration and expertise in our supply chain and merchandising teams, we overcame countless challenges in getting product to stores and customers. And we've increased our distribution capacity by leveraging our existing assets, including the reopening of our Airport Road DC facility in September, which is now operational and shipping an average of 175 trailers per week.This facility has traditionally been used for overflow storage, but we have now enabled it for outbound fulfillment to stores. We continue to look for ways to keep up with demand and improve our supply chain flexibility. We're actively managing product flow more efficiently with direct ship, balancing our inbound across all regional DCs as well as the ongoing dynamic prioritization of key categories.I'll now move on to Sport Chek's results. Up against our strongest comparable sales quarter of 2019, comparable sales declined 1.4% in the quarter. Sales momentum in June carry into July with sales up 17% versus 2019. However, it tapered off with softer demand in back-to-school categories, which led to us dialing down our promotional activity to focus on full-price sell through, which improved our gross margins and optimized our profitability. This is in contrast to how we manage the second quarter in which we prioritize top line sales through cash conversion of on-hand inventory. Virtual schooling, the postponement of hockey and cancellation of many organized sports and activities, lower demand for kids footwear, bags, athletic clothing and hockey equipment. You may also recall that we transferred our bicycle inventory from Sport Chek to CTR in Q2, which negatively impacted sales in the quarter. Sales were strong in categories like hiking and camping as well as golf and fitness. It's also important to note that 55% of our Sport Chek stores operate within malls, which we all know continue to be subject to restricted operating hours and less foot traffic. The headwind is likely to remain. We accelerated Sport Chek's engagement with the Triangle program with over 5 million customers receiving unique category-specific offers through the deployment of one-on-one bonus offers sent to Triangle members. Sport Chek e-commerce sales accelerated further, up 90% in the quarter. Our ending inventory in the business is materially lower, which sets us up well to be fresh next year. And the teams have ramped up their purchasing efforts for Q4. Stephen Brinkley has jumped right into the operations of the business, and I'm quite pleased with Sport Chek's performance in the quarter.Now moving on to Mark's. Mark's delivered a great quarter with comparable sales and e-commerce growth of 5.7% and 166%, respectively. Mark's remains highly relevant for Canadians, with industrial as the growth leader in the quarter and workwear proving to be a highly resilient category. In addition, our Levi's denim program resonated very well with our customers in the quarter as did our men's and women's casual footwear assortments. Similar to CTR, sales were driven by both higher traffic and a larger basket size. Mark's continued to shift to a more digital approach throughout the quarter, including efforts to shift from traditional print flyers to digital flyers, launching targeted one-on-one offers to the Triangle member base, offering its first-ever exclusive Triangle member offer on Denver Hayes product and improving the customer experience for curbside pickup. In addition, Mark's achieved a new milestone with owned e-mail audiences reaching over 2 million e-mail subscribers, up 20% from last year. It's quite refreshing to hear PJ Czank talk about experimentation efforts designed to create greater engagement with Triangle members and how these digital marketing efforts will drive the business going forward.Moving on to Helly Hansen. Although external revenue was down 0.9% on a constant currency basis in the quarter, we are seeing encouraging signs of a rebound in key areas of the business. Helly is managing the e-commerce shift effectively, with the business delivering solid results in the direct-to-consumer channel at plus 26%. E-commerce mix within B2C was up 82% in the quarter. Helly Hansen's workwear category, which represents almost 1/4 of their business, continues to be a resilient and strong performer. And the Helly team continues to focus on the future, recently signing partnership agreements to be the official head to toe apparel partner for all Canadian Ski Patrol members and the official supplier of the Norwegian National Alpine ski team. These deals are a testament to Helly's status as the leading apparel brand for ski professionals and their dedication to the development of high-performance apparel.Before I hand the call over to Gregory for the financial remarks, I want to highlight the impressive performance of our owned brands portfolio. With $1.3 billion in sales at CTC, owned brands accounted for an incredible 36% of our retail sales in the quarter, delivering impressive 23% growth over last year. At CTR, owned brands grew 28%, thanks to big names, such as Mastercraft, MotoMaster, NOMA, Woods and Canvas. We're also very pleased with strong growth achieved in newer owned brands, including Vermont Castings, Type A and Raleigh. At Sport Chek, owned brands penetration reached 14%, up from 10% a year ago. Leading owned brands such as Ripzone, Helly Hansen and Woods drove those results, which helped sales and led to meaningful gross margin improvement. Our strong performance in the owned brand portfolio will position us well going forward as we believe that once customers move to trial, that they will be thrilled with our product quality and performance, and hopefully, over time, evolve to coveting and remaining loyal to our owned brands.And with that, I'll pass it over to Gregory.
Thanks, Greg, and good morning, everyone. As Greg mentioned, we are very pleased with the results in Q3. We converted our exceptional top line growth into profit while also generating strong operating leverage. On a normalized basis, after adjusting for $8 million of operational efficiency charges in the quarter, diluted earnings per share were $4.93, up 42.5% versus the prior year. This earnings growth was driven by exceptional performance in our retail business, which drove approximately 3/4 of our IBT in the quarter, with positive results across all of our key retail performance metrics.First, with respect to our retail top line. Revenue growth, excluding petroleum, grew 18.6%, and this was closely aligned to the comparable sales trend in the quarter. This performance was driven by significant growth in dealer demand at CTR and at Mark's by strong sales, especially in the industrial category. The growth was only partially offset by softer revenue at Chek and Helly Hansen, which Greg touched on earlier. The retail gross margin rate, excluding petroleum, while down 137 basis points in Q3 improved relative to where it stood last quarter. There are several factors impacting margin rate in the quarter. As a reminder, CTR has the lowest margin rate among the retail banners. And similar to Q2, CTR's significantly higher contributions to revenue weighed down the overall retail margin rate.Additionally, within CTR, there was a business mix impact due to the relatively smaller contributions of our higher-margin automotive business. A final dynamic I would want to highlight is related to foreign exchange. While our currency hedging program typically limits our exposure to the spot rate, the recent significant growth in demand has led us to making more purchases at the spot rate, resulting in a gross margin headwind. Partially offsetting the margin compression in retail was a rate improvement at Sport Chek, attributable to a favorable price impact in what has been a less promotional environment and a more profitable product mix.In light of the strong revenue growth, our corporate revenues -- our corporate inventory is sitting $106 million lower versus prior year. Strong sell through at Mark's and lower purchases at Sport Chek in the first half of the year contributed to the reduction in inventory. Offsetting this, our higher CTR inventory levels in anticipation of our busiest fourth quarter, and we are in a strong position to meet dealer and customer demand. I am pleased with the progress we have made in the quarter, generating operating leverage.Our consolidated normalized OpEx rate, excluding petroleum, improved by 264 basis points. Double-digit revenue growth, our ongoing efforts to control discretionary spend and meaningful progress within our operational efficiency program resulted in a considerable improvement to our operational leverage. I also want to highlight that on a year-to-date basis, our normalized ops ratio was 13 basis points better. And while this figure reflects a more muted revenue growth due to the Q2 store closures, it captures our expense control efforts and the operational efficiency benefits we've realized to date.While I'm covering OpEx, I have 2 COVID-related expense items I'd like to call out. First, we incurred $18 million in costs associated with the enhanced safety protocols at the stores and the Special Support Program for frontline employees. This is less than we saw in Q2's results, partially due to the fact that the support payment came to an end in August. And second, as was the case in Q2, we saw a benefit in our share-based compensation expense of approximately $16 million due to the continuing recovery of the share price, which at the end of Q3 had rebounded to its prepandemic level. This was reflected in personnel costs. The combined impact of these 2 offsetting OpEx items netted out to a $2 million increase in expenses and a $0.07 hit to our diluted EPS.Our balance sheet remains in a healthy position, and we ended the quarter with over $1.7 billion in cash and marketable securities. In addition to our strong cash flow generation, we continue to take actions to prioritize our liquidity and our financial flexibility. Within retail, we repaid $250 million owing on our medium-term notes issued in 2018 in support of the Helly Hansen transaction and continued our focus on prudent management of our operating and capital expenditures. In Q3, our capital spend of $58 million was essentially cut in half relative to the prior year levels as we deferred nonessential projects while still prioritizing investments in our store network and our digital platform.Now I realize this is the time of the year we've typically shared our expected range for capital spend and a forward-looking estimate of our tax rate. In light of the ongoing uncertainty related to the pandemic, we are not in a position to provide either at this time. Also, the pause we took earlier in the year on our share buyback program continues to be in place. And at present, we do not expect to make any further share repurchases other than for anti-dilutive purposes. And we were pleased to announce earlier today a 3.3% increase in our annual dividend from $4.55 to $4.70 per share. This represents the 11th consecutive year that we have increased our dividend.And last but not least, a few comments on our Financial Services business, which continues to deliver strong operational metrics in a challenging environment. Consistent with the second quarter and general industry trends, the ongoing impact of the pandemic has led to lower credit card spending, which has translated into receivables being down 7.1% in the quarter. As a result of this trend, we collected less interest charges and interchange fees in the quarter and our gross margin dollars declined by $21 million versus last year.Our credit card portfolio continue to be operationally strong, ending the quarter with a PD2+ rate of 1.91%, better by 83 basis points compared to Q3 last year as customer payments trends remain strong. If we look at our allowance rate, it was 15.32% in the quarter, slightly higher than where it was in Q2 of this year, as we continue to see a decline in receivables in Q3 as compared to Q2. All in all, in the quarter, the business delivered earnings before taxes of $91 million, which was $18 million below the prior year. And while there's still significant uncertainty looking ahead, we have reasons for cautious optimism.Despite the continuing headwinds impacting our receivables, we were encouraged to see credit card spending trends improve throughout the quarter. And in fact, in September, credit card sales were essentially flat to last year. We are also keeping an eye on some favorable macroeconomic trends related to savings levels and decreasing levels of debt as a percentage of disposable income, both of which may be positive signs as we look forward. Clearly, these are all trends we continue to keep a close eye on. But I do want to remind everyone that we believe our payment trends have been helped by government subsea programs and mortgage interest deferral plans offered by the banks.As it relates to liquidity of Financial Services, we repaid $700 million on our note purchase facility with Scotiabank and also repaid $500 million of Glacier term notes at maturity. We subsequently issued $480 million of Glacier term notes and we're pleased to see investor demand at the high end of our historical experience, oversubscribed on both the senior and subordinated notes. Our success with the Glacier deal was a nod to the strength of the business and a clear signal of investor confidence. Before I hand it back over to Greg, a quick reminder that 2020 has 53 weeks. And as a result, we will have 1 additional week in the fourth quarter. Consistent with our past practices, we will provide you with a comparable sales metric that is based on comparable number of weeks in both years, but we will not try to isolate out its impact on earnings.With that, I'd like to hand the call back over to Greg.
Thanks, Gregory. Before I close, I'll say we've got good momentum heading into our busiest selling season. And I'd love to say more, but Gregory won't let me. And although we've chosen to take a more cautious approach with our Q4 promotional calendar in order to maintain safe levels of traffic at our stores, we feel good about our business as we head into Christmas. Regardless of how COVID-19 progresses, we're confident that Canadians will still find ways to celebrate the seasons, and we expect that decorating their house will be one of our customers' biggest joys this Christmas. Believe it or not, Christmas sales are already quite strong at CTR. And the early snow in the West drove our outerwear business at both Mark's and Sport Chek.When it comes to digital, we are hardening the CTR site to handle what we know will be increased demand during the quarter. We know that having a broader online assortment is critical and a significant opportunity for us given heightened demand to our CTR site. We are currently onboarding new online-only vendors as we look to expand our relevance in key categories. New assortments have already been launched. Baby and furniture are now our top 2 categories in online-only sales and will serve as a template as we work to accelerate the growth of online-only sales in 2021.As I look ahead, I am pleased with the progress we are making on our one digital platform, and we're on track to roll out in 2021. We're continuing to invest in our store network, having opened 3 new concept stores during the pandemic. Our new Liberty Village, Niagara Falls and Fort St. John stores provide seamless shopping experiences, a focus on a community connection and offer highly tailored assortments, led by data analytics and a focus on bringing owned brands to life in an environment that better enables our customers to shop how they choose. Between the proven strength and relevancy of our brand and current momentum, I feel confident about our future. We know what we need to do. As much as our business may be complex, our purpose is simple, continue to be there for Canadians.With that, I'll turn it back over to the operator for questions.
[Operator Instructions] The first question is from Patricia Baker with Scotiabank.
I have one question and then a follow-up. So in the release and in your comments, Greg, and actually you too, Gregory, you really emphasized the fact that Triangle was a big contributor to your success in Q3, and particularly that you saw very strong growth with young families, which is target group that you've been talking about for years that you really wanted to get to with the loyalty program. And I guess it could be fair to say that -- I mean, I think, COVID provided you with an opportunity to really show what you can deliver through Triangle with your 3 banners, but particularly with Canadian Tire. I'm just curious if you can talk a little bit about what specifically in the quarter drove that. With respect to your penetration of young families in Canada, do you still see there's further room to go? And is there anything specific that you're doing with Triangle for the holiday season this year that will differ from what you might have done last year? In other words, are you leveraging the strength of that business and the data analytics further than you might have in the past?
Sure. Thanks, Patricia. I'll try and hit on a few things there. I mean, I think, contextually, I would start by just saying I am so encouraged by the metrics that I'm seeing in terms of customer engagement, and I guess just the adoption of a real understanding of how critical the Triangle program is in creating a differentiated value throughout the organization. In my prepared remarks, I talked about digital acquisition in Mark's as an example. And I think one of the most important things from a metric standpoint is how the program is engaging new members. I quoted 400,000 new customers, but that's not the whole story. We had just under 200,000 customers reengage with us. Meaning they shopped us in the quarter, but have not shopped with us in the last 12 months.So it's 600,000 customers that we now have the chance to build a relationship with going forward. And if you just look at how they spent this quarter, they spent over $125 million with us across the portfolio, which, on an isolated basis, is 3 points of comp when you compare it to last year. So it's an extremely meaningful opportunity for us. If we look at the number inclusive of Q2 and Q3, it's over 1 million new and reengaged customers. And as you point out, it's now up to us to try and build a continued sticky relationship with them and engage them in our program post-COVID. So yes, we believe -- to answer a couple of things in your question, we really believe that we have room to go. I mean, we just have unbelievable opportunity with these new customers. They are over-indexing to young adults and active families, which is right in our sweet spot for CTR and for lifetime value across the portfolio.And in terms of what's different as we head into Q4, I would say the biggest point of difference is our ability to engage Triangle members for Sport Chek and Mark's. We talked to you a little bit about the traction that we made and changes we made in -- with the signing of a new dealer contract, which gives us a little bit more access to the utilization of that customer data for engaging customers. And my prepared remarks would have suggested that we were often running on that in Q3. So you can expect that to be very different on a year-over-year basis in Q4. And our analytics, just in terms of recommended offers, next best offer engines, et cetera, at a personalized basis are just getting stronger. More work to do to really kind of hone in and make it as efficient as possible. But our return on ad spend and a lot of the metrics that we look at from an efficiency standpoint for our one-on-one offers are all going in the right direction.
Okay. Now in your -- this is a related follow-up. In your closing remarks, you talked about your investment in the store network. And I was intrigued to hear you talk about that these stores have highly tailored assortments. Now presumably, the ability to -- I could be wrong, but the ability to have the highly tailored assortments relies on, I guess, the data that you have from customers and goes back to Triangle and another use of it. I'm just curious, do you think there's an opportunity to further tailor assortments and you're -- bring that notion back into your existing, not new store base over time?
Absolutely. We're -- we've engaged externally from artificial intelligence standpoint with some real expertise to completely turn our business processes for planogramming stores upside down to have it very store specific, to utilize big data to really cater and curate assortments at an individual level. So the intent and the kind of the North Star of the work effort is for us to be able to sit down or for the dealer to be able to self serve it on their own. And really optimize assortment in an aisle by a business, by a division, the overall store, et cetera. And quite frankly, if we get the capability to where we would like, we think there's lots of ability in the rest of the retail portfolio as well. So lots of great analytical work going on in our network performance division. And the great news is the dealers are just eating it up. We can't go fast enough. So we think it's a tremendous opportunity going out to the entire network, Patricia.
The next question is from Peter Sklar with BMO Capital Markets.
I'm just wondering if you could give some flavor on how things were looking at the end of the quarter and as you exit the quarter in terms of core Canadian Tire banner and the comp. You indicated that there were some commentary that you're going to be less promotional in the fourth quarter. But you are seeing -- but you have said you're seeing strength pretty well across all categories. It's just not the obvious summer seasonal category. So a bit of a mixed message there. I'm just wondering if you could talk a little bit about what you're seeing as you exit the quarter. And as you get into the fourth quarter, and obviously, there were some weather effects as well. You talked about the weather you've seen out West. We're getting some warm weather in Ontario now. There's a lot of moving parts here. Greg, is there anything you can kind of fill us in on?
Sure. I'll start. Gregory may keep me honest here. Yes, as I mentioned, over 90% of CTR's categories grew in Q3, which just, I think, continues to speak to the relevance of this multi-category assortment. We believe that the macro trend with respect to one-stop shop is here to stay, at least over the winter and while the pandemic is ongoing. And this certainly is a big tailwind for CTR, so you can expect that to continue right into Q4. In terms of what will be different in Q4, we do think that our Christmas categories will be top of mind for customers. We already saw a similar trend play out with our Halloween decor categories in late October.Additionally, we have tremendous ongoing strength in core, very large nonseasonal businesses. The kitchen business, the tools business, the cleaning business are all performing exceptionally well and are top drivers of the overall portfolio. So we don't expect any changes associated with that as the weather turns here. As the cold weather arrives, customers are certainly shifting to restoring the comfort of their home and well-being. So we're seeing fixing projects continue to be critical and maybe even dial up a little bit in businesses like painting, setting up workspaces for a number of family members. And then wellness is just so top of mind across CTR and Sport Chek. So we're seeing continued demand for exercise equipment and then wellness of the mind, I guess, with indoor games.I mean, the search result differences on a year-over-year basis for searches like games rooms, ping pong tables, pool tables, et cetera, winter cycling for indoors and outdoors. So it's really amazing when you think about the breadth of the categories that we offer. It -- just different categories end up being in the mindsets of Canadians at different times. And we've got solutions. And I think you heard us talk about the demand for outerwear and other banners as people get ready for the cold weather. But I also believe that's a nice tailwind just in terms of people wanting to continue to get out of their house, people in walking routines, et cetera. You've got to put different gear on as we move to a different season. So October was strong. But as you know, November and December are huge months. But we feel like the teams are doing everything they can, as are the dealers, and we're certainly better prepared than we were early in the crisis. That's for sure.
And why did you make the commentary then that you're scaling back on your promotional intensity for Q4? Is it just because the sales are there, you don't have the inventory? What's your strategy there?
It's completely from a consumer safety standpoint. And I don't expect you're going to see anything different from our competition. I mean, when -- you've heard us talk about just how much of the business in Q4 travels through the last 5 weeks of the year. And specifically, those 4 or 5 days, at the end of November, Red Thursday through to Cyber Monday, we can't handle the traffic patterns into the store effectively and safely. Even at kind of last year's numbers, without contemplating any growth that will layer on that, the lineups would be completely out the door. So I think you can expect us to be highly competitive and very focused on sharpening our pencil, creating value, extremely relevant for gift-giving and all those things that are important in the last 6 weeks of the year. But I think you'll see our big demand events just stretched out over longer periods of time.
Okay. And then just lastly, just on the Financial Services business. Do you have any thinking on when consumers are going to start -- when you're trying -- your MasterCard consumers are going to start borrowing again on the credit card? And when you hope to see growth in card? Do you have any feeling about that because as you point out, consumers have been busy paying down their balances through COVID?
Yes. Peter, it's Gregory here. Thanks for the question. I think we tried to highlight some of the comments in my commentary, but I'll elaborate a little more. In the month of September, where we saw credit card sales essentially be flat to where it was a year ago, we hadn't seen that since March. So it's the first month out of the last 6 or so where we actually saw sales trends kind of get us back to where they would have been a year ago. I will say the team in over the last 6 months have really been focused on building out kind of digital acquisition tools and methodologies and just building that strength because, as you can imagine, when stores are shut, I mean, you're not acquiring card members in stores. So I think the team has done a really good job kind of really reshaping and rethinking kind of digital experience. And more recently, I know they've been back in the stores testing acquisition in-store that is safe for both the employees and obviously safe for the customers.And I think they've found a methodology and an approach that they think is now scalable. But I mean it's going to just take a little bit of time. You can't turn that. It's not like a light switch where you can turn it kind of on and off that quickly. So it's going to take a little bit more time to go back into the stores. Again, Greg talked about safety. It's just top of our mind, right? And so I think that's -- what we'll just keep an eye on is kind of the sales trends. And I mentioned both those macroeconomic trends as well, that those are making us feel a little bit better than certainly we would have been 3 or 4 months ago. So I think we feel very good about Financial Services. I still think there's a great opportunity to improve integration within retail to add kind of longer-term value as well. But I just think we want to be careful over these next little while to just not -- similar to Greg's point, don't want to drive kind of promotional activity and want to keep everybody safe would be how I would answer.
The next question is from Irene Nattel with RBC Capital Markets.
Just a couple of questions, if I might. You did a great job of talking about the performance of the seasonal and the core categories during Q2 -- Q3 rather. One of the questions I'm getting asked a lot is how much of that might be pulled forward versus incremental demand. And I know that may be hard to tease through, but kind of wondering what your data is showing you and your relative share of consumer wallet and that kind of thing.
Yes. Irene, it's Greg. It is very difficult to ascertain. I mean, we -- in our spring/summer businesses, when you think about businesses like outdoor furniture, outdoor grilling, bicycles, et cetera, I mean, it's extremely difficult to find any inventory across the land. We will certainly need to replenish store inventory and that's the big question for the teams is how we forecast consumer demand heading into last year. We certainly believe through our analytics that we left a lot of business on the table. As happy as we are with the tremendous performance, we could have sold a lot more if we had inventory, and it was not a Canadian Tire unique situation for some of the categories that I just talked about. But the strength is, as I indicated, is not just seasonal. It's nonseasonal as well. And so we know through the research that we conduct externally that we are taking share significantly, both bricks-and-mortar and e-comm. I think I stated that with all of the divisions in which we compete. And it's really crystal ball time in terms of how we think through what was pull forward versus not. I wish I had a better kind of fact-based answer for you, but it's really difficult to figure out what's pulled forward.
Yes. Understood. And just I wanted to ask a follow-up. I have 1 other question -- 2 other questions -- or 1 and a follow-up. So the other question is thinking about automotive in Q4 and Q1. With travel being sharply reduced, there's probably the snow -- a lot of snowbirds who normally would decamp to warmer climes are now, at least for the time being, effectively stuck here and likely to be for a little while. So how are you thinking about that for automotive in addition to seasonal?
Yes. I mean, we called out automotive impacting our overall gross margins because it's not growing at the same rate as the rest of the portfolio, but it's still growing extremely healthy. I think the number was 16% in the quarter. So a much higher clip than we have been accustomed to over the years. And you have to keep in mind, from a travel standpoint, I go -- tires drive so much of the overall automotive service and core kind of front-end suspension, et cetera, businesses. And we only have a 15% market share in tires. So 85% of Canadians buy their tires somewhere else.So when we think about 1 million of new Canadians engaging with the program, when you think about the existing loyalty base and now our ability to engage with them with offers, I think about tires. And early season here. Our tire business is extremely strong. So some of the actual facts defy the subjective odds or logic. But we're feeling very good about our automotive business. It's just not keeping pace with how great the business is in categories like living and playing. But again, our core businesses in automotive are showing up the way we want them to.
That's great. And then just the follow-up question that I had, and it's a follow-up to the conversation you were having with Patricia. How long do you think it will take to kind of tailor the assortments on a store-by-store basis, which could drive some interesting upside to sales?
I mean, we -- every store we open, we get some incremental benefit and -- but data and the capability just gets stronger and stronger, especially as we're starting to engage with much more sophistication from an AI standpoint. So it will never be a light switch. I don't think you'll ever kind of wake up 1 day and have the most sophisticated modeling tools and be able overnight to deploy it to 500 stores unilaterally because you got to get the -- there's a whole kind of back-office that needs to support the delivery of that in front of the customer in terms of the supply chain and stocking levels and changing ordering algorithms, both on our end and working with our vendor forecasts and store forecast, et cetera.But we're getting benefit now, Irene. I mean, we may just not have been talking about it much, but our network performance could show you every intervention -- our network performance team, sorry, could show you every intervention, where they played a data and analytics role with the store, a pre and post benefit relative to a control set. So that testing capability that we have in the organization that we've talked about before is alive and well. And in this area, and we -- it's with one of our most important priorities going forward. And like I said, it's nice when our priorities are 100% and completely aligned with the dealers, which this one is.
The next question is from Mark Petrie with CIBC.
I also wanted to ask about assortment, but maybe a little bit different kind of angle. And I guess, focusing on CTR, but also curious about any comments with regards to the other banners as well. But just sort of going through the pandemic and seeing how consumers are shopping your banners, how does that affect how you think about your assortment categories that you offer, but also depth and breadth of the assortment? And I guess obviously owned brands is a key part of this. You noted the strength that you're seeing there. And I know it's been a long-term focus, but just also interested specifically how all of this fits in with your owned brand strategy.
Just trying to think about how to answer that, Mark. It -- we have -- as you know, we -- it's almost 200 categories under the roof of Canadian Tire already. So it's one of the reasons that I felt the need to just call out in prepared remarks this notion of how we extend the relevance of our assortments with online only. We've seen how Canadians have come to, I guess, the front door of all of our stores, which is the website. And our traffic is up exponentially. I mean, tens and tens of millions of incremental visits every quarter. And so how do we capitalize on that knowing that we have a kind of fixed space, et cetera, inside the stores. And so when you think about a business like baby and a business like, what was that, furniture, big queue, require a lot of space to show physically. We're doing our best to deliver an experience online. And it seems to be working. The take-up rate and sales on those new programs are fantastic.So I think that's one way, Mark, is we're really thinking about an online-only assortment. I think we like to think about it right now as an extension to the categories in which we compete today as opposed to net new categories, but that certainly would be an option for us as well. I think the teams are really focused on -- gets back to an earlier question. They're really focused on trying to forecast consumer demand for 2021 as opposed to thinking through -- that's keeping them pretty busy as opposed to thinking through net new assortments. So it is that depth. We're still finding a way, even through work from home, to do as many line reviews and what have you. So we always do breadth and depth reviews as part of that kind of normal process.But I think it's just focused on making sure the businesses that we're in that we're ready for the demand next year, sprinkling in the online only. And Party City is a whole new category that the team has been quite focused on in the party assortment. And we've done a lot of work in Q3 that will manifest in late Q1 and early Q2 next year, which has us rejigging some of the retail floor and the categories, et cetera, and had us onboarding about 50,000 SKUs to our assortment. So it's really about focus, I think, Mark, across the portfolio and keeping the teams focused on executing on that Party City extension to the -- I mean, we -- yes, I mean we -- what's going on from an owned brand standpoint, not only in Canadian Tire, but in Sport Chek. I think that's a meaningful penetration increase that I alluded to in Sport Chek. So you've heard us talk about our targets for our owned portfolio. I've just continued -- I continue to be amazed at how the teams are thinking about driving relevance in those brands.I'll hit a couple of highlights. The Raleigh brand in the bike category and CTR, we had a soft launch this year, where we shipped out about 5,000 units and we had a 95% sell-through. These bikes are higher price point. If you look on the website, you'll see they are glittered with 5 star reviews. So teams have been working really hard. In the spring, you're going to see a more fulsome assortment of bikes and bike accessories. And then they've got a 2022 platform and a 2023 platform. So it's this multiyear platforming capability that the teams have been building. Even smaller brand investments like our acquisition of Musto, where this year, we grew the brand by [ 200 ] of those sales, have paid for over 50% of the acquisition in less than a year. So no fly zone in Mark's, just lots of stuff going on. So that, obviously, is a capability we've been building over the last 2 or 3 years and is a very important part of how we view breadth, depth, architecture, price laddering, all that good stuff of assortment planning.
Okay. And then just quick -- in terms of a follow-up. You touched on online only. Obviously, that is going to play an increasing role. I'm just curious how material that is today. And how does the financial model work for that business?
Yes. It's small today. Like I said, it's just -- it's a few categories here or there, but we think a nice complement. And the model works exactly the way the model works.
The next question is from Vishal Shreedhar with National Bank Financial.
Just on Triangle. Obviously, seeming like that -- Triangle's gaining momentum quarter-by-quarter and gathering a lot of success with that program. Wondering where Canadian Tire is with Triangle with respect to what it envisioned the program could be when it launched it out? For example, are you squeezing -- is it early days for this program? Are there opportunities to maybe sell data to your vendors? Is there opportunity to get more retailers on board with that? Maybe some thoughts on that.
Yes. So I'll take that. Gregory may want to pile on. I -- Vishal, I think we're still early days. I mean, if you think about it in terms of its focus, just kind of building our -- the business that we have today and the engagement that we have with customers, we're -- we feel like we're just getting started. And Mark's and Sport Chek, we're building capabilities to be able to really use data and analytics to determine what the next best offer for, Vishal, might be. That could be anything from a product in Sport Chek to a division you may not have shopped in, in Canadian Tire, like my tires example, where it could be giving you a credit limit increase in the bank.So all of those kind of capabilities with respect to next best offer, we're just getting started. You talked to monetization opportunities. Sure, I mean, lots of retailers are doing that. We have -- you've heard me talk about our belief that we have very rich digital customer platforms. And so I certainly wouldn't be surprised if that's part of our strategy going forward. And then the last piece is you've seen us through the bank with the value proposition on the credit card engage with partners to kind of increase our value proposition, stickier relationships. You've seen us extend that into a relationship with Budget Car Rental and Husky gas, et cetera. So partnerships in the loyalty ecosystem, we believe, is a big opportunity for us, and we're just getting started. So that's a quick summary of where we think we are.
Okay. And just changing topics. Another quick one here. Obviously, very strong same-store sales growth across retail. And presumably -- and you've already indicated this. You're getting new customers coming in, walking into the store and also via Triangle. Wondering to what extent are these new customers in trial, if you have any ability to know what percent of these new customers are sticky and you're able to keep into the system? And what initiatives that Tire has ongoing to identify those customers and keep them in the system, particularly those outside of Triangle?
Yes. Maybe, Vishal, Gregory here. I'll start off, and I'm sure Greg will have a few comments as well. I would give an example of kind of a new credit card customer and the programs that the teams have developed as in terms of there's customer acquisition, there's customer engagement, there's customer retention, all of which are strengths, I think, that we're building across the organization or, as Greg said, capabilities. So I mean, the good news, frankly, is the 400,000 number, I think, is a great start around attraction. But to your point, and to Greg's point, we want to get those loyal Canadian Tire customers. So Susan O'Brien and the team are very much engaged at kind of using all the information we have to understand more about Vishal as a customer and what he may value.So I go back to Greg's last comment. I think we're in the early innings of the game on this still. I think we've got a great asset to build from. We've built a bunch of capabilities in my mind. And now I think it's time to really start to talk more and to take advantage of this. So I really think you're going to see more. So the specifics around those customers you've identified, I think the question to me will be, where are we with them in a year from now? So how many of them were one-and-done and how do we reengage them. So I think -- and that's kind of top of mind, I think, for all of us here on the management team is how do we continue to maintain a relationship with these customers over time. So I think it's a great question. And I think we've got a lot of strengths that we can start to leverage and use now to kind of really build that out even more.
The last question will be from Brian Morrison with TD Securities.
Just a couple of follow-up questions, Greg. First one on loyalty. The 400,000 new members. What's the total members now? Can you just clarify really what drove that increase? Is it your portfolio about one-stop shop? And then what's the average spend of a loyalty member versus a nonloyalty member per purchase?
I -- we may have to get back to you on those stats, Brian. The actual total -- we call them active members. We've got -- sorry, we've quoted 10 million total members before, 9 million active members. If that was the cutoff line prior to Q3, we would have probably 9.6 million active members with the 600,000 I talked about. There could have been some churn in the 9 million. But yes, I don't have it off the top of my head. And in general, it really depends on the segment in terms of spend, but it's roughly double the spend of a nonloyalty member on average and certain segments like active families, which is why we're so attractive and would index much more from a spend standpoint.
Okay. And the increase, is that really just your one-stop shop across the board?
I'll start because I've got -- it's Gregory here. I think that's a piece of it. But Brian, I think it's broader than just the fact of one-stop shop. I think -- I really think it's the value prop that Greg mentioned around customers getting an understand. I think it's product assortment. As you bring customers back to the store to realize it's maybe a bit of a different Canadian Tire than they remembered or kind of the other banners to -- Chek and Mark's as well. So I think that's a big piece of it is the one-stop shop. But I wouldn't discount the other pieces of that is all I'm suggesting. There's more to that puzzle in my mind than just the fact that it's one-stop shop. I think it's all the things we've been working on. It's the owned brand strategies. All these things to me that we've been working on over the past few years are putting them all together, to be honest with you.
Yes, I would agree. I think the -- it may start with the one-stop shop, given the vastness of the portfolio. But if you take the 400,000 new members, as an example, a large percentage of them engage with us online. And so what's great about that is in order to engage with us online, you authenticate almost immediately from an e-mail contactable standpoint information, et cetera. And now we can segment them. And so we think our online capabilities as well are a big driver of this. And to the degree that we get to know these customers, it just sharpens our ability to be able to engage with them and keep them around. So I'd agree with Greg. It's more than one-stop shop. But I think the premise of your question, I think there's a lot there given just how many categories we participate and how many jobs enjoys. We cover off for life in Canada.
Okay. And then follow-up for Gregory quickly. Just confirm, it sounds like your outlook on the card portfolio for Q4 and 2021, it sounds like a focus on aging with some measured growth. You took a pretty prudent provision in Q2. And I'm wondering, there's some uncertainty in the market with COVID right now, but what would be a key indicator we should be looking for a potential release of that provision?
Yes. I think you've maybe jumped to an answer versus a question. Brian, to me, I think we -- there's a number of metrics we look at. I think the one that is publicly shared the most is the aging of the portfolio. As I mentioned, I think there's some macroeconomic trends that we keep an eye on. But I think once some of these mortgage deferral programs and the CERB transitions to the new government program, I think we'll have a clear kind of line of sight as to where things are. But I will tell you, we feel pretty strongly that our payment behavior to date has been helped by some of these programs. And I just think it's prudent to kind of watch these programs roll off or transfer into whatever they're going to transfer into before we kind of jump ahead.So the way I think of it is, we're comfortable with the provision on the balance sheet as of this date. If you look on a historical basis, we roughly have, roughly, about 2.5 years' worth of write-offs in the current allowance. And as you know, the current accounting rules, we'll look at that every quarter and take into consideration the trends we see in, and that will help shape what we think we need to book in the next quarter. So I just want to be careful we don't get -- like, we're really excited about the trends around aging and all the operational metrics, but I still think there's some more data we need to see before we start thinking about releasing at this stage, would be my thoughts.
Thank you. This will conclude today's call. A webcast of the conference call will be archived on Canadian Tire Corporation Limited Investor Relations website for 12 months. Please contact Investor Relations if there are any follow-up questions regarding today's call or the materials provided. You may now disconnect.