Okay. We'll now move over to Canadian Tire, with its unique business model. It has especially close views to Canadian consumers, and right on time for our conference, just announced another strategic loyalty partnership between Triangle and Tim Hortons. Please join me in welcoming President and CEO Greg Hicks and EVP and CFO Darren Myers.
Thank you.
Thank you.
Good to hear it.
Very nice.
Thank you.
Thank you.
Okay. Thank you both for joining us. I'm glad everyone has had the opportunity to fully read and understand what is in the forward-looking slide and contemplate everything that entails. So let's get to our questions. Theme of the day is state of the consumer. So let's start there. You've got some momentum from the Q2 sales results. How are you feeling about second half of the year, especially given recent tariff changes and any regional variations that you're seeing either in your business or through the credit card data?
Sure. Thanks, John. Thanks for having us. Excited to have Darren here as our new Chief Financial Officer for the first time at the conference. Yeah. I mean, still resilient, right? It's a little bit surprising, but I'd say overall, we're still seeing signs of a very scrappy and resilient Canadian consumer. I think there are a lot of reasons for that. I think certainly interest rates are helping, gas prices, carbon tax cancellation. I think that will continue as we get to home heating here in the winter. For us, you think about the aging vehicle fleet. Good for our business from a spend perspective and our key automotive business. I think certainly more Canadians are here from a vacationing standpoint. Less travel to the U.S., a little bit of Buy Canadian sentiment. I heard the conversation earlier with Michael and team.
I think I'd agree it's somewhat waning, I think. It was always tough to really decipher. But overall, very good resiliency. For the first six months of the year, that resiliency showed up similarly across all regions in Canada. I think more importantly, from our perspective, all income-level households. We've seen in 2025 a nice improvement in spend in lower-income, higher-indebted households, which is a nice reversal of trends dating back for many, many quarters. So I think resiliency at the income household level as well. I think when we move past Q2 into Q3 here, I would also say for us as a discretionary focus retailer, a good portion of our products discretionary, like every season you move away from COVID, the replacement cycle starts to come into view. So that's a good thing.
I would say in Q3, we're starting to see a little bit of softness in terms of the categories that really fired for us in Q2, which is, I think, natural. The West had very unseasonable weather in Q3, but our back-to-school business was quite strong, so I think overall, we still are feeling good about that resiliency, and our playbook for the balance of year is the same for the first seven or eight months here. We're buying for growth, and that's served us well in the top line so far year to date, and we see really no evidence of that changing in the core business. The financial services business is something that we watch really closely. We're watching, obviously, insolvencies and payment rates, and there's no material changes there relative to the way the book was performing pre-2025.
Continue to watch it very closely and stay on top of anything that starts to emerge. But right now, the overall theme continues to be resiliency, John.
It's wild to think we're already in replacement cycle of COVID goods. Perhaps another spending on the home sales. And I'll park that thought for now. Let's get to True North. So you announced this strategy earlier this year. It includes an ambitious reorganization. What's the strategic rationale on True North? Why is it different this time around? How has it gone so far?
Yeah. It's big change. It's big change. There are a lot of elements to it. You rightfully point out that it is a systematic and structural change. And I think the strategic rationale is probably simple but important. And that is we do believe that we're operating in one of the most disruptive times in our industry. When you look at fierce global scale competitors, when you look at rapidly emerging technology, I mean, my God, the pace of change with AI, more specifically agentic AI, and what that will do to key consumer behavior like browse and shop is mind-boggling. And that's going to put even more pressure on consumer demands in terms of what their expectations of retailers are going forward. So you put all of those forces together.
And we've been in a period of deep introspection as a management team and as a board, probably for the better part of 12 months-15 months, really thinking about how we as a subscale player compete in this industry medium to long term. And the reality and confronting some harsh realities. And I think the reality is when you look at the way Canadian Tire has traditionally gone to market, we haven't even aggregated the scale that we've created for ourselves. And so when you think about the way the business has gone to market, it's kind of 8 customer-10 customer-facing banners for the most part, those businesses going to market unto themselves. And over the last few years, we've built this strong enterprise-wide loyalty program and an enterprise-wide digital platform. And we've structured our customer data in meaningful ways to plug into key retailing capabilities like personalization.
But our org structure was getting in the way of our ability to create the most value from that highly privileged first-party data and, I think, world-class and unrivaled understanding of Canadians. And so this is about a structural change in the way we go to market. It's about going to market as an enterprise, rallying around that privileged first-party data to create more value and longer-lasting relationships and stickiness with Canadians. So big, big change. And we've been declarative around the fact that we do believe it's a transformation. We've appointed Susan O'Brien, who's here today as our Chief Transformation Officer. And as you can imagine, as I kind of painted the picture in terms of how we were going to market, when you think about people, process, and technology, tremendous amount of redundancy, inefficiency, etc.
So from a people standpoint, different people doing the same things in banners from a technology standpoint, duplicative technology trying to do the same things and the same with process. So wide-scale people, process, and technology initiatives all in a program managed by Susan, really focused on cost, time, and value creation for the intended outcomes that we have. Also, some pretty significant change at my executive table where we've appointed two new critical roles: Chief Operating Officer, Chief Commercial Officer. So TJ Flood has been appointed our Chief Operating Officer. And he now has the responsibility for going to market across all of our Canadian retail business. And Matt Moore, who just joined us from Tim Hortons a couple of months ago as our Chief Commercial Officer.
John, I think the easiest way to kind of explain the two roles and how they work together is Matt is tasked with developing an excellent go-to-market strategy. And TJ, his responsibility is to go to market excellently. So it's not linear. They obviously collaborate back and forth between strategy and operations, but that's a big change. And then obviously having Darren come in five months ago now, multisector experience, transformative experience, retail experience, he's hit the ground running. And he's going to make sure that all of those initiatives in that program deliver the value that we're looking for. So ultimately, we're trying to create, aggregate our scale, rally around our first-party data, become a more modern and agile retail organization. And ultimately, it's about delivering greater financial outcomes than we have historically. That's what this is all about.
We've announced quite a few growth-building blocks over the course of the last six months- nine months. So that's a critical component of the story. And he's here to make sure that we get value out of the strategy.
Thank you for that. Why don't we dive a bit deeper on that, Darren? So welcome. Glad to have you back to school for the first time in this new role. Second time I've said that. It's not even 10 o'clock yet. What are some of the opportunities you see, some of the observations you've had so far in your early priorities?
Thanks, John, and thanks for having us today. It's great to be back in retail and certainly working with Greg and the team. It's such an iconic Canadian company. As I reflect back, before I started, Greg and I spent a lot of time together, a number of dinners, a number of meetings, and he outlined his vision for the company, outlined True North and the opportunity he saw, and I will say as being here for almost five months now, I actually see more opportunity. I'm more bullish than I was before I started. I think at the core of it is True North, and as Greg said, there's a number of great initiatives in True North, but really, for me, it's changing how we operate that's going to enable this company to improve its performance from the past.
When I look at True North, it's about leveraging our scale, no question. I think we can do a much better job of improving our short-term performance and creating long-term value. Where I've been focused is working with the team. This change, it's very fundamental. Change is difficult in an organization. There's no question about that. The first part is just working with Susan and her team and the entire executive team on just aligning everybody because it is different when you are truly operating as an operating company versus a wholesale. The second is really elevating performance management. The third is just making sure people understand what accountability means and what it means to be held accountable to the numbers that you have put forward. We are making progress on that. As Greg mentioned, Susan and the transformation office driving every single initiative.
We meet as an executive team for three hours going through each and every one of them. If we're off, why are we off? What are we doing about it? Where do we need to pivot? Not everything will go as planned. Should we slow something down, stop it, give more to it? We have revamped our monthly performance management system, completely revamped it, and having different conversations about holding executives accountable to their forecasts, so we're making real progress, and the other area that I've been focusing on is aligning the organization on an internal, not for you yet, but an internal financial framework, and what that means is it's focusing on top-line growth, yes, but creating a culture where continuous improvement is expected so that our operating expenses don't grow as quickly as revenue and that we can get more leverage.
That is a different muscle, clearly something I've done in my past roles. If you look at the roles I've been in, I've been in companies that do that well. I think we have a big opportunity in our company to do better on cost productivity.
Okay. We should talk about some of your loyalty partnerships. We mentioned Tims a moment ago, and you've highlighted loyalty and digital as growth drivers for you. How should we think about these? What's the strategic goal of these partnerships?
Sure. Well, I don't see Michael in here now, but I want to thank him for the shout-outs. They were very nice. Yeah. I mean, maybe, John, kind of higher-order contact strategy first. I think if you take the last certainly three, if not five years, a tremendous amount of proliferation and change in the consumer loyalty program landscape here in Canada. And we, as a team, I think we fundamentally believe that two to three loyalty programs in this country will emerge with highly, highly compelling value propositions and durable advantage, creating winners and losers. And we want to be a winner. We think that the playbook, in order to be a winner, is an omni-sector, omni-vertical offering and real everyday relevance. That's the pinnacle. That's kind of the North Star that you're trying to aim for in a loyalty program that provides value to your members.
And so we've been plotting a course with actions and activities to do just that. And so if you think, I guess, chronologically in terms of the partnerships that we've signed, you start with Petro-Canada. This is a big spend vertical in the consumer space here in Canada. Yes, we were participating in that business, but our offering was a fraction of national coverage where we were providing great value to Canadians that could experience our offering, which was driving sales back into our stores. But it wasn't a business that we were going to deploy a pile of capital to get to national coverage. So we partner. We partner for scale with the country's best. And we now have national coverage in this high-spend vertical with great value being delivered to our metrics in the connecting of the two programs.
You move from kind of a gas vertical to the financial services vertical. Most Canadians engage in the financial services sector to some degree. Certainly adults with kind of multiple products, and when you look at our participation in that space, it's essentially a monoline credit card, so we're participating in a very narrow part of the engagement spectrum for the average Canadian, so we partner for scale. We partner with the biggest bank in Canada, then when you look to a more kind of fun or joy spend category, travel, we partner with one of the country's top airlines and WestJet. That was obviously a business we were never going to get into ourselves, so we partner for strength, partner for scale, engagement, etc., and then lastly, as it was mentioned, very excited to announce our new strategic partnership with Tim Hortons.
Again, the QSR vertical, high, high-spend category in the Canadian marketplace, and Tims a beloved brand that allows us to maybe lean into our patriotism even a little bit more, and so all of this is about creating value, everyday relevance, having us show up more in the customer's kind of mindset in terms of the program, and if we can create that value and show up more, then a higher degree and bring in new members and convince existing members to spend more with us or share a shift, then a higher penetration of our total sales will be on loyalty, which generates more first-party data, which allows us to plug in all of the personalization capabilities that we've been building significantly over the course of the last few years and build that sticky relationship with curated offers with Canadians.
And so at the highest level, that's what this is all about. When you drop down, you ask about kind of economics, I think the easiest way to think about it is Canadian Tire Money issuance equals sales for us. In our program, there's very little slippage between a dollar of issuance and a dollar of redemption. And with a dollar of redemption, there is a ratio of incremental sales that comes with that dollar. So we would evaluate our loyalty program in terms of its ability to stimulate demand, generate sales the same way we would with a number of other arrows in our quiver around demand stimulation. And right now, it's very positive in terms of the payback and our ability to really drive growth and, again, like I said, stimulate that demand. So in the essence, this is about sales.
When you think about kind of the cost economics, obviously, when we were a closed system, just our banners and our own banners and our loyalty program, we incurred 100% of the cost. And as we work through these partnerships, every partnership's a little bit different in terms of its construction, but it's a co-investment on Canadian Tire Money issuance. And it's about creating value for both partners. This isn't a coalition program. This is more of a federated loyalty program with very key exclusive partners in each large spend vertical. So if we can create value together by linking our respective programs, we can, as partners, become better businesses unto ourselves as well. So that's how to think about it. We're really excited about these partnerships and believe that we can create value for ourselves, for our partners, and most importantly, our members.
You answered one of my follow-ups on how that hits the P&L. My other one is it's been a busy year, but do you plan to add more of these partnerships and categories? And I know that saying this as the ink is barely dry on your deal, but do you plan to add more?
Yeah. I think, like I said, we're not building a coalition. So this isn't the drumbeat of announcements has been pretty intense over the course of the last eight months or so. You can imagine these big partnerships take a great amount of time to work through. I was just talking with Scott Thomson quickly in the hall saying that just that, they take time. So given that we're not building a coalition, I think you probably shouldn't expect the same pace of partnership announcement. But as I talk to you and outline the strategy, there are some big spend verticals in the consumer space right now that we don't participate in. So it would stand to reason that we're doing our best to kind of line up partners that could fill some of those voids.
Okay. Darren, let's come back to you for the CTFS strategy. One of the surprises, I would say, last quarter was the level of investment going into the bank. Can you talk about those investments you're making and what role the bank plays in your overall strategy?
Yeah. Listen, I think that was clearly a surprise in the second quarter, and I think when you sit back, you can understand why, not that it makes it okay, but when you go back in time, we went through a lengthy strategic review on deciding what to do with the bank that ended at the end of last year, and at the end of that, we decided we were the best owners of the bank and we can create significant value, and I'll talk about that, but I think the important part for people to realize there's some catch-up investments. Like if you were selling your house or deciding if you're going to sell your house, would you continue to do all the renovations?
And so when you have a long cycle of a strategic review, yes, we're investing in a business where we needed to, but there's other stuff that doesn't make as much sense to do. So we have some catch-up to do. The spend is in the infrastructure side and on the regulatory side, the things you would expect on just hardening the infrastructure, improving the apps, things like due diligence processes on regulatory. So we talked about the fact that our SG&A would be at an elevated rate of 27% for the balance of this year and next year just to make sure we want to tell people what we see when we know it. But when you step back for the bank, we see tremendous opportunity, one, to grow the bank.
We want to start growing again through the strategic review and just where the customer was at the time. We decided not to be active on accounts. We do need to start growing the bank again. And we also see an opportunity through that to get our profitability back to historical levels and some. But I think the bigger opportunity is how does the bank support retail? And using to Greg's point about True North, about operating together, how can we take all that incredible data that we have and make better decisions? I'll give you an example of a pilot we recently did. We used analytics to find a group of bank customers that were good credit customers spending close to their limit, and we decided we would give them a higher credit limit.
We saw a meaningful, meaningful increase in their shopping within our stores by doing so. Before True North, we wouldn't have tried something like that because the bank did stuff for the bank. That's an example where we can take the power of the bank, the power of the data, and do good things on the retail side without increasing the risk for the company. Expect to see more things like that as we further integrate with the bank and our retail business.
Okay. Why don't we move to the digital side of the business? Maybe you could talk about the dealer network's perspective on e-comm, how they've evolved given the past. How do you position against the competition on e-comm currently, and do you need to invest more to get to where you want to be?
Sure. Yeah. I think from a dealer, you're asking specifically relative to CTR and dealers. I think the macro mindset shift, perspective change, and this is kind of 10 years in the making, is the shift from this belief that the digital e-commerce channel is competitive to bricks. I think if you roll back the clock, call it kind of 2013, 2014, 2015, Amazon's on the scene. Everybody's getting into the business in a big way. A lot of retailers in North America specifically are really blowing their brains out from a profitability standpoint, not having kind of an efficient customer experience. And our dealers were kind of watching and pointing and saying, "Don't let that happen to us, and it's competitive to bricks. And our point of difference is bricks, and let's make bricks the best we possibly can.
“And let's lean in first to a buy-online pickup in store experience.” And so we've done that. I think we've done that really, really well. And as we're building that, we digitize our loyalty program and that data. Michael talking about data, I'm talking about data. It's changing the way we operate because now we can show up without a belly rub and facts, and we can have a good conversation about what's actually happening. And what's actually happening is our best Triangle members participate in both channels. And so that becomes a much easier conversation because the debate, the subjectivity leaves the debate pretty quickly. So now it's, “Okay, let's build this great buy-online pickup in store experience. Let's co-invest together. Let's work on our SLEs, our service level expectations.” And now we have a fantastic experience where you can pick up a product in less than an hour.
You have that trip assurance. We've co-invested in automated lockers. You get an associate basket when the customer comes to the store. Our NPS scores are completely off the roof. We're so happy with the way that experience is showing up, and while we're building that, we're building the requisite capabilities to do same-day delivery. And you probably would have recently, in 2025, start to see us pour some gas on that capability because now we have a customer experience that we're excited about, and the majority of households in Canada now can get same-day delivery from Canadian Tire Retail. And like I say, our NPS scores are quite strong. Our SLEs in terms of how in aggregate the portfolio is standing up that experience in front of the customer is really strong, so this year, I think, is a turning point in terms of how we think about digital.
We've started to more openly disclose our digital performance. For the first six months of the year, our digital business has outperformed our bricks in a material way. There's whatever, 5,600 basis points worth of separation in performance. The lion's share of the growth in digital is coming from Ship- to-H ome. We have or we took share in the digital channel in the first six months of the year. We haven't been able to say that for quite some time. As True North rolls forward, we would expect that to be the case going forward. The magnitude may change a little bit, and it might move quarter- by- quarter. In aggregate, our expectation is that our digital channel will outpace our bricks and that we will take share, ideally in both channels, but that we will take outside share in digital.
That's the plan, and we're quite happy about how that's all standing up right now and more to come as we move forward.
John, I had a three-hour order to delivery the other day. Three hours. So I mean, it's a very good proposition.
Okay. I want to leave time for the new store concepts. So we've got a video queued up. Let's take a look. Can we play that now, please? This was the store we saw in Etobicoke yesterday. That's great. We've just got time for one more. And this is probably a shorter answer than you'd like to give or than is deserved from this question. But what are the returns you're seeing from these so far, and what's the potential upside?
Yeah. I mean, great sporting goods store. Yeah. Each of our concepts, I feel really good about the fact that in this phase of the strategy, we have what we believe to be investable store formats in each of our big banners. And I don't think I can say that for my entire time at Canadian Tire. Each of them are at various stages of deployment. So Concept Connect in Canadian Tire, up and running for two or three years, 25%-30% of the network's done. Feel really good about the returns, hitting the hurdle rates, the delta between top line and Concept Connect, non-Concept Connect, a material delta, strong transaction size, which was the intention of the concept. As it relates to Sport Chek quickly, it's a little early to talk about the returns.
What I can tell you, we just opened a couple of stores this year. We'll have four, I think, in market by the end of this year. What I can tell you is to the top of the charts in terms of volume per store in the chain, feeling amazing about the customer feedback, the NPS scores, et cetera. The cost on a per store base is much less than a Concept Connect store in CTR. And so the teams are getting to the value engineering associated with the fixtures, working with the vendors to understand their investment. The brands are standing up very tall, and we're getting the attention of the U.S. offices to start thinking about Chek and Mark's for that matter, the way they would think about their absolute best customers in the U.S., which should help with the economics as well.
So feel really, really good about all three concepts. And I know we're out of town.
All right. That was great. Thank you very much for joining us.
Okay. Thank you, John.
Yeah. Thank you.