Canadian Tire’s down year prompts zero bonuses for executives

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Canadian Tire Corp. Ltd. CTC-T gave its top executives no cash bonuses for 2023 – a rarity in corporate Canada – as consumers pulled back on discretionary purchases and the retailer’s results came in well below expectations.

By way of comparison, last year chief executive officer Greg Hicks received $983,974 from the company’s annual incentive plan on top of his $1.25-million salary. In 2021, a year in which Canadian Tire blew through its targets, Mr. Hicks received a $2.6-million bonus.

The decline in bonuses was partly offset by Mr. Hicks’s $50,000 raise last year, as well as a nearly $500,000 increase in the value of his share-based awards and stock options, to $4.55-million. But in total, Mr. Hicks’s compensation fell to $6.04-million in 2023 from $6.49-million the year before.

Few large Canadian companies deem their performance so disappointing as to eschew an annual cash bonus. In The Globe and Mail’s survey of 2022 pay at 100 large S&P/TSX Composite-listed companies, just nine CEOs received no bonus.

Six of them don’t participate in annual cash incentive plans. One, Suncor Energy Inc.’s Mark Little, was terminated halfway through the year. Algonquin Power & Utilities Corp.’s Arun Banskota was eligible for a $1,018,500 bonus but agreed to forfeit it. And Gerald Schwartz of Onex Corp. – that company’s controlling shareholder – received no payment after making a $5-million bonus in 2021.

Loblaw paid new CEO Per Bank $22-million in 2023

As one of the country’s largest retailers, Canadian Tire is highly sensitive to pressure on the consumer economy, as costs for everyday essentials have risen and higher interest rates are making it more expensive for Canadian households to service debts such as mortgage payments. Its stores have seen less foot traffic, and the company is “operating through what I would call structural uncertainty,” Mr. Hicks said in February.

Canadian Tire’s profits declined significantly last year. Excluding some normalizing items, net income attributable to shareholders fell to $585.3-million, or $10.37 per share, in 2023, from $1.1-billion, or $18.75 per share, the year before.

The company’s annual bonus plan uses an adjusted earnings measure, weighted at 75 per cent, and the rate of sales growth in stores open at least one year, weighted at 25 per cent.

It set its 2023 goals slightly below its 2022 results, but the final numbers – $604-million in earnings and same-store sales declines of 2.9 per cent – fell well short of the targets of $1.01-billion in earnings and gains of 2.4 per cent, respectively.

The result was zero funding for the corporate bonus pool and no short-term incentive payment for any Canadian Tire employees, the company said in its proxy circular to shareholders. (The outstanding 2021 paid out at 200 per cent of target, the maximum allowed by the plan.)

For 2023, the company cited “softer consumer demand in a higher inflation environment” as a reason for its declining sales, while increased operating costs were tied to continued investment in its Better Connected strategy, as well as to operating inefficiencies owing to a March fire at one of its largest distribution centres.

Canadian Tire spokesperson Stephanie Nadalin declined to comment on the company’s bonus decision beyond the proxy disclosure.

Retailers across the industry felt the pressure in 2023, but Canadian Tire’s year was worse than expected. While shoppers are still spending money on essentials such as cleaning products, automotive services and pet food – all of which the flagship Canadian Tire stores sell – discretionary items are not selling as well. Mild winter weather did not help, cutting into sales of items such as skis and winter coats at the company’s Sport Chek chain and boots at its Mark’s stores. Canadian Tire and its competitors have been offering markdowns in an attempt to entice shoppers to pick up non-essential products.

“Even with significantly deeper discounts, we aren’t seeing incremental demand materialize,” Mr. Hicks said during a conference call in February to discuss the company’s fourth-quarter results.

In the face of these challenges, the company has been cutting costs. Last fall, Canadian Tire laid off 3 per cent of its work force – more than 200 corporate “full-time equivalent” positions – and pulled back on hiring plans.

The consumer slump has also thrown a wrench into the company’s ambitious Better Connected investment plan, announced two years ago, that would have amounted to $3.4-billion over four years. The plan included upgrades to its stores, constructing additional warehouse space, launching thousands of new products and expanding the Triangle Rewards loyalty program. The goal was to increase sales and more than double diluted earnings per share by 2025. Canadian Tire withdrew that forecast in August, and by November executives said they no longer expect the investment to reach $3.4-billion.