CANADIAN TIRE CORPORATION 2018 REPORT TO SHAREHOLDERS Hockey Stick Artwork, South Edmonton Canadian Tire store Concept by: TAXI Canada, Dave Watson and Stephen Tasker; Construction by: Rhoddy CONTENTS Contents 1 Our Three-Year Financial Aspirations 3 Message from the Chairman of the Board 4 Message from the President and CEO 5 Canadian Tire Corporation Today 7 Preparing Our Customers for the Jobs and Joys of a Lifetime in Canada 9 Our Core Business Is Retail 11 Our Banners 17 Our Owned Brands 19 Our Loyalty Program 21 Our Talent 23 Our Contribution to a Healthy Planet 25 Canadian Tire Jumpstart Charities 27 Management’s Discussion and Analysis and Consolidated Financial Statements Our Three-Year Financial Aspirations (2018–2020) 10%+ CONSOLIDATED AVERAGE ANNUAL DILUTED EPS GROWTH ONE 10%+ RETAIL RETURN ON INVESTED CAPITAL 3%+ CONSOLIDATED COMPARABLE SALES GROWTH OUR THREE - YEAR FINANCIAL ASPIRATIONS NORMALIZED DILUTED EPS (C$)1 11.95 12.00 10.67 11.00 10.00 9.22 9.00 8.00 7.00 6.00 5.00 2016 2017 2018 RETAIL RETURN ON INVESTED CAPITAL (ROIC) (%) TWO 12.0 11.0 10.0 9.2 9.2 9.0 8.3 8.0 7.0 6.0 5.0 2016 2017 2018 CONSOLIDATED COMPARABLE SALES GROWTH (%) 10.0 8.0 6.0 4.7 4.0 2.7 2.2 1. Refer to section 7.1.1 of the Q4 2.0 2018 MD&A for a description of 0.0 normalizing items. 2016 2017 2018 Message from Maureen J. Sabia, Chairman of the Board Dear Shareholders, Canadian Tire holds a unique place in the hearts and minds strategy, its implementation and our accomplishments, as well of Canadians and we do not take our customers’ trust for as any risks that might impact our strategy, are well known. granted. As we approach Canadian Tire’s centenary in 2022, While management is working hard to ensure the Corporation we continue to work hard toward our ambitious goal of functions as efficiently as possible, the Board has embarked becoming Canada’s #1 retail brand by 2022. on some initiatives that will improve its own productivity Canadian Tire continues to face head on the challenges and efficiency. For example, we are revising our committee and opportunities of a rapidly changing retail landscape. mandates to make them more laser-focused, while also Technological innovations and the entrance of disruptive slimming down the composition of our committees. In competitors continue to drive unprecedented change within our fast-moving world we must be as nimble, focused our retail environment. I’m proud to report, however, that and productive as we can be. Canadian Tire had another successful year. You will see in our Proxy Circular that we have revised We have taken important steps to position Canadian Tire the mandates of both the Management Resources and at the forefront of retail innovation. We have evaluated and Compensation Committee and the Governance Committee. taken appropriate steps to mitigate the risks of a dynamic and We are revising the mandates of the Audit Committee and evolving marketplace. We have developed winning strategies the Brand and Community Committee, which we expect to while keeping in the forefront of our minds what matters complete later this year. most – the loyalty and trust of our customers. We continue to think very hard about the experience My colleagues on the Board and I believe that to keep that and skill-sets required on our Board of Directors that will trust and loyalty, Canadian Tire needs to keep a focus on four enable us to meet the challenges of today’s dynamic and major areas – innovation, digital, e-commerce, and talent on disruptive environment. both the Board and in management. Moreover, we need to be We have already made one change, appointing Norman Jaskolka sure that we never lose sight of the continual need to transform to fill the vacancy created by the retirement of Timothy Price the Company to meet current challenges. While success in the after more than 11 years of invaluable service to Canadian future must respect and maintain the values that have served Tire. Norman’s experience in driving Aldo’s international us well for nearly 100 years, we must be courageous, smart and expansion will be of great benefit to Canadian Tire. nimble enough to embrace the changes that will define success THREE in the future. I want to say a few words about Tim Price’s enormous contribution to the Board. Tim was always our elder I would like to share two thoughts with you. The first is that statesman, providing us with wisdom, ideas, and solutions. He to have a vibrant economy, businesses must be successful in never said “no” when asked for his help. Tim will be missed by order to provide the jobs, products and services that Canadians both management and the Board. need. I believe that business should be more proactive and vocal in encouraging policies that support business growth Also, Anatol von Hahn has informed us that he will not and investment, whether these be about taxation, regulation, stand for re-election at our AGM. We will miss Anatol’s education or trade. positivity and perspectives. He made a valuable contribution to our deliberations. The second is about taking the long-term view. We take a long-term view of success and we do not believe that the Since people are our most important asset, with the consent of relentless focus on the short term in today’s capital markets is shareholders, we will be delighted to welcome Cynthia Trudell helpful. Canadian Tire’s resilience and success is a testament to the Board. Cynthia has had a distinguished global career, to the demonstrable value of long-term thinking. Indeed, it is most recently heading up Global Talent at Pepsico. doubtful that Canadian Tire would have grown from a tiny Very importantly, on behalf of the Board of Directors, I want garage tended by the Billes brothers almost 100 years ago to to thank our CEO, Stephen Wetmore, for all that he does to the iconic and sophisticated corporation that it is today in make the Tire as successful as it is. Stephen works tirelessly, the absence of such an approach. Business leaders, investors, always thinking five steps ahead as he leads his executive team analysts and regulators need to come together to encourage to the right choices. a more appropriate balance between accountability to shareholders and the ability to better manage businesses for Also deserving of our thanks are the talented and hard- success over the long term. One way to achieve this balance working members of the senior management team and the would be to eliminate quarterly reporting. Successful businesses truly gifted people they lead. are not managed on a quarterly basis. While companies have Finally, I would be remiss if I did not thank my colleagues on a clear responsibility to report, I question the efficacy of the Board for their wisdom, hard work and commitment to quarterly reporting. the Tire. Their knowledge and understanding of our business During the year, the Board embarked on several initiatives and the challenges we face contributes greatly to our ability to to improve the Corporation’s communications, productivity make informed decisions. and efficiency. Returning to a printed Report to Shareholders, which is also available digitally on our website, is part of a new communications approach to tell our story more boldly. We owe it to our shareholders to make sure that our business Maureen Sabia, Chairman of the Board MESSAGES Message from Stephen G. Wetmore, President and Chief Executive Officer Dear Shareholders, 2018 was an exceptional year for the Triangle. We advanced Thank you to Canadian Tire’s Associate Dealers and critical initiatives and made important investments in our talented team at all levels of our Company for your our future. continued commitment to the Triangle and your contributions The launch of Triangle Rewards has created the fastest to our communities across Canada. Thank you also to our growing loyalty and credit card offerings in Canada. These Chairman, Maureen Sabia, and the entire Board of Directors offerings provide Canadians with added value and convenience for your leadership, guidance and support. Together, we have and enable us to make data-driven decisions to serve our made great progress over the past year and will continue to customers with more relevant offers. A more personalized do so as we work hard to prepare for the future and make and rewarding shopping experience is at the centre of our Canadian Tire Canada’s #1 retail brand in the eyes of our relationship with our customers. customers, our employees and our shareholders. We made it easier for our customers to shop when they want, how they want. We strengthened our online and in-store customer experience with the introduction of first-of-their-kind options in Canada for our customers to collect their online purchases and launched deliver-to-home Stephen G. Wetmore, President and Chief Executive Officer at Canadian Tire Retail. Within a retail environment defined by constant evolution, we set an ambitious goal to become Canada’s #1 retail brand by 2022, the same year our Company will celebrate its 100th anniversary. Such an achievement demands that we remain focused on strengthening our core value proposition with our customers as we prepare them for the Jobs and Joys of Life in Canada. In doing so, we will continue to create a customer experience unlike any other in the Canadian retail market, while also building long-term value for our shareholders. To this end, we have modified our capital allocation strategy, FOUR returning more funds to shareholders with an increased dividend payment for the ninth consecutive year.