Canadian Tire releases third quarter earnings - Retail sales up 7.3%; adjusted net earnings up 12.7%
Consolidated                        2008          2007(2)
    Highlights(1):               3rd Quarter     3rd Quarter          Change
    -------------------------------------------------------------------------
    Retail sales               $2.61 billion   $2.43 billion            7.3%
    Gross operating revenue    $2.26 billion   $2.05 billion           10.2%
    Adjusted earnings before
     income taxes (excludes
     non-operating gains and
     losses)(3)               $158.4 million   $153.2 million           3.4%
    Net earnings              $108.6 million   $102.2 million           6.3%
    Adjusted net earnings
     (excludes non-operating
     gains and losses)(3)     $115.5 million   $102.5 million          12.7%
    Basic earnings per share           $1.33            $1.25           6.3%
    Adjusted basic earnings
     per share (excludes
     non-operating gains and
     losses)(3)                        $1.42            $1.26          12.7%

    (1) All dollar figures in this table are rounded.
    (2) The 2007 earnings figures have been restated for implementation, on a
        retrospective basis, of the CICA HB 3031-Inventories. Please refer to
        Note 2 in the Consolidated Financial Statements.
    (3) Non-GAAP measure. Please refer to section 14.0 of Management's
        Discussion and Analysis.TORONTO, Nov. 6 /CNW/ - Canadian Tire Corporation, Limited (CTC, CTC.a)
released its third quarter results today. In a simultaneous news release, the
Company announced the appointment of Stephen Wetmore as its next president and
CEO effective the beginning of 2009. Tom Gauld will retire from the role at
the end of this year and will continue as a member of the Board of Directors.
    Despite challenging economic conditions, the company reported a 7.3%
increase in retail sales and a 6.3% increase in net earnings compared to the
same period in 2007. Adjusted net earnings were $115.5 million, a 12.7%
increase over the previous year. The growth in adjusted earnings during the
quarter reflects strong quarterly performance in Canadian Tire Retail and
Financial Services, as well as benefits from lower effective tax rates.
    "Given the challenging market conditions, we are pleased with third
quarter sales and the continuing strong sales momentum during the month of
October," said Tom Gauld, president and CEO, Canadian Tire Corporation. "The
positive sales trends in Canadian Tire Retail stores reflect improvements in
our pricing and promotional strategies which will continue through the fourth
quarter. Financial Services' earnings growth is also expected to remain strong
throughout the remainder of 2008 reflecting the impact of our recent card
relaunch and stable aging trends in past due accounts."Business Overview

    CANADIAN TIRE RETAIL (CTR)

                        Q3        Q3                 YTD       YTD
    ($ in millions)   2008    2007(1)   Change      2008    2007(1)   Change
    -------------------------------------------------------------------------
    Retail
     sales(2)     $1,860.3  $1,787.4       4.1% $5,253.6  $5,171.9       1.6%
    Same store
     sales(3)
     (year-over-
     year % change)    2.0%    (2.7)%              (0.5)%      0.0%
    Gross
     operating
     revenue      $1,399.3  $1,304.0       7.3% $4,032.7  $3,889.8       3.7%
    Net shipments
     (year-over-
     year % change)    7.6%      1.4%                3.8%      3.1%
    Earnings
     before income
     taxes and
     minority
     interest        $94.0     $94.9     (1.0)%   $222.6    $221.4       0.6%
    -------------------------------------------------------------------------
    Less adjustment
     for:
      Gain/loss on
       disposals of
       property and
       equipment(4)   (0.3)      6.6                 3.7      10.3
      Former CEO
       retirement
       obligations     0.2       0.2                 1.1      (6.5)
    -------------------------------------------------------------------------
    Adjusted
     earnings
     before income
     taxes and
     minority
     interest(5)     $94.1     $88.1       6.9%   $217.8    $217.6       0.1%
    -------------------------------------------------------------------------
    (1) 2007 figures have been restated for implementation, on a
        retrospective basis, of the CICA HB 3031-Inventories. Please refer to
        Note 2 in the Consolidated Financial Statements.
    (2) Includes sales from Canadian Tire stores, PartSource stores, sales
        from CTR's online web store and the labour portion of CTR's auto
        service sales.
    (3) Same store sales include sales from all stores that have been open
        for more than 53 weeks.
    (4) Includes fair market value adjustments and impairments on property
        and equipment.
    (5) Non-GAAP measure. Please refer to section 14.0 in Management's
        Discussion and Analysis.CTR's retail sales increased 4.1% over the same quarter in 2007
reflecting an increase in sales across all three lines of business. CTR
experienced a 20% increase in fall/winter seasonal categories driven by strong
early sales in winter tires and snow throwers and an increase across kitchen
and storage and organization. Overall same store sales were up 2.0% compared
to the third quarter in 2007.
    CTR's third quarter adjusted earnings before taxes were $94.1 million, up
6.9% compared to a year ago due to strong shipment growth.
    CTR opened three new stores in the quarter, all of which were replacement
stores. Two of the stores were CTR's new small store format with a fully
integrated Mark's Work Wearhouse.
    During the fourth quarter, CTR will open the first two Smart stores in
Welland and Orleans, Ontario, which are expected to significantly enhance the
customer shopping experience and showcase core CTR growth categories in a new
and exciting way.
    PartSource experienced another quarter of sales growth driven primarily
by strong commercial sales. PartSource acquired six new corporate stores, two
of which were converted to the PartSource brand at the end of the quarter.
PartSource also converted one franchise store to a corporate store and opened
one new hub store during the quarter, bringing the network total to 82
locations.CANADIAN TIRE PETROLEUM (Petroleum)

                        Q3        Q3                 YTD       YTD
    ($ in millions)   2008      2007   Change       2008      2007   Change
    -------------------------------------------------------------------------
    Sales volume
     (millions of
     litres)         414.5     434.3     (4.6)%  1,257.9   1,287.0     (2.3)%
    Retail sales    $550.2    $451.3      21.9% $1,541.1  $1,308.6      17.8%
    Gross operating
     revenue        $519.3    $424.0      22.5% $1,456.9  $1,232.4      18.2%
    Earnings before
     income taxes     $7.5      $7.9     (5.5)%    $20.5     $16.8      22.3%
    -------------------------------------------------------------------------
    Less adjustment
     for:
      Loss on
       disposals of
       property and
       equipment(1)   (0.1)     (0.7)               (0.3)     (2.0)
    -------------------------------------------------------------------------
    Adjusted earnings
     before income
     taxes(2)         $7.6      $8.6    (12.2)%    $20.8     $18.8      11.0%
    -------------------------------------------------------------------------
    (1) Includes asset impairment losses.
    (2) Non-GAAP measure. Please refer to section 14.0 in Management's
        Discussion and Analysis.Higher fuel prices drove a 4.6% decrease in gasoline sales volumes.

    Petroleum's gross operating revenue totaled $519.3 million during the
quarter, a 22.5% increase over the $424.0 million in the comparable 2007
period, reflecting a significant increase in pump prices during the quarter
and a 10.7% increase in convenience store sales.
    Petroleum recorded pre-tax earnings of $7.5 million compared to $7.9
million a year ago, based on continued stable margins and good expense
management. While adjusted earnings were down 12.2% from $8.6 million this
time last year, compared to historical norms, this represents a strong
quarterly performance.
    Petroleum opened two new gas stations and rebranded two gas stations
during the quarter. The business also refurbished seven gas stations and
rebuilt one existing location during the period.MARK'S WORK WEARHOUSE (Mark's)

                        Q3        Q3                 YTD       YTD
    ($ in millions)   2008    2007(1)   Change      2008    2007(1)   Change
    -------------------------------------------------------------------------
    Total retail
     sales          $194.5    $189.5       2.6%   $600.1    $589.1       1.9%
    Same store
     sales(2)
     (year-over-
     year % change)  (1.0)%      0.6%              (2.0)%      7.2%
    Gross operating
     revenue(3)     $168.7    $159.8       5.5%   $516.8    $499.1       3.5%
    -------------------------------------------------------------------------
    Earnings (loss)
     before income
     taxes           $(0.3)     $6.2   (104.1)%     $4.2     $31.0    (86.3)%
    -------------------------------------------------------------------------
    Less adjustment
     for:
      Loss on
       disposal of
       property and
       equipment      (0.3)     (0.2)               (0.4)     (0.8)
    -------------------------------------------------------------------------
    Adjusted earnings
     before income
     taxes(4)         $0.0      $6.4    (99.2)%     $4.6     $31.8    (85.4)%
    -------------------------------------------------------------------------
    (1) 2007 figures have been restated for implementation, on a
        retrospective basis, of the CICA HB 3031-Inventories. Please refer to
        Note 2 in the Consolidated Financial Statements.
    (2) Mark's same store sales exclude new stores, stores not open for the
        full period in each year and store closures.
    (3) Gross operating revenue includes retail sales at corporate stores
        only.
    (4) Non-GAAP measure. Please refer to section 14.0 in Management's
        Discussion and Analysis.Mark's third quarter total retail sales grew to $194.5 million, a modest
increase of 2.6% from the $189.5 million recorded a year ago. While sales
overall were challenging during the quarter, Mark's mature industrial wear
business led corporate store sales growth, with a 10.1% increase over last
year driven principally by men's industrial footwear and accessories.
    Adjusted pre-tax earnings were $6.4 million lower than the same 2007
period due to lower margins related to promotional activity to clear seasonal
merchandise and continued investments in network expansion and longer term
growth and productivity initiatives.
    During the quarter, Mark's opened three new stores, bought back four
franchise stores, expanded one store and relocated seven stores.CANADIAN TIRE FINANCIAL SERVICES (Financial Services)

                        Q3        Q3                 YTD       YTD
    ($ in millions)   2008      2007    Change      2008      2007    Change
    -------------------------------------------------------------------------
    Total managed
     portfolio
     end of
     period                                     $4,002.3  $3,717.4       7.7%
    Gross
     operating
     revenue        $197.8    $187.2       5.6%   $608.0    $555.6       9.4%
    Earnings
     before
     income taxes    $47.0     $43.7       7.4%   $144.4    $157.7     (8.5)%
    -------------------------------------------------------------------------
    Less adjustment
     for:
      Gain on
       disposal/
       redemption
       of shares         -         -                   -      18.4
      Net effect
       of
       securitization
       activities(1)  (9.1)     (6.3)                7.7      (3.8)
      Loss on
       disposals of
       property and
       equipment      (0.6)     (0.1)               (0.6)     (0.3)
    -------------------------------------------------------------------------
    Adjusted
     earnings
     before income
     taxes(2)        $56.7     $50.1      13.0%   $137.3    $143.4     (4.3)%
    -------------------------------------------------------------------------
    (1) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability, change in securitization reserve
        and gain/loss on reinvestment.
    (2) Non-GAAP measure. Please refer to section 14.0 in Management's
        Discussion and Analysis in our 2007 Financial Report.Financial Services' total managed portfolio of loans receivable was $4.0
billion at the end of the third quarter, a 7.7% increase over the $3.7 billion
portfolio at the end of the comparable 2007 period.
    Financial Services' gross operating revenue was $197.8 million in the
quarter, a 5.6% increase over the $187.2 recorded in the prior year.
    Adjusted pre-tax earnings for the quarter were $56.7 million or 13.0%
higher than the third quarter of 2007. The increase in earnings in the third
quarter was due to higher receivable balances in the quarter and tight
controls on operating expenses.
    The net write-off rate for the total managed portfolio on a rolling
12-month basis was 6.04%, compared to 5.87% in the comparable 2007 period.
Overall aging of past due accounts is comparable to the same period in 2007
and 2006.
    For Financial Services, a number of new actions have been taken to
mitigate future credit risk exposure which may arise due to current economic
conditions including: reducing credit limits for cardholders; enhancing
predictive scorecards to identify high risk customer behaviour; and further
enhancing collection strategies.
    Financial Services continued its investment in the retail banking pilot
and at quarter-end had more than $128 million in high rate savings,
approximately $90 million in broker deposits, (net of liquidity reserves)
which on average, have a maturity of three years and $102 million in
mortgages.

    2008 EARNINGS AND CAPITAL FORECAST

    The Company confirms its expectation that earnings per share for 2008
will be in the range of $4.75 to $5.05, excluding non-operating items.
    The fourth quarter of the year is the most significant for CTR and Mark's
due to the concentration of sales and shipment activity for the Christmas
season. While it is reasonable to expect that the current economic environment
could affect consumer behaviour, the quarter has started strongly for CTR,
with strong sales and same store sales performance in October resulting from
continued improvements in pricing and promotional activity.
    As a result of the Corporation's long-standing currency hedging programs,
CTR's product purchasing in US funds will be largely sheltered from the recent
significant weakening of the Canadian dollar for the balance of 2008 and well
into 2009.
    Ongoing effective management of credit risk points to strong fourth
quarter earnings for Financial Services based on the anticipated level of
provisions necessary for doubtful accounts. Expected growth from the card
relaunch earlier this year and very effective expense management will also
contribute to earnings growth.
    Should economic conditions continue to deteriorate, rolling write off
rates may be outside the normal range of 5.0% to 6.0%. However, because of
ongoing productivity initiatives it is anticipated that returns on receivables
will remain at the upper end of the targeted range of 4.5% to 5.0% for 2008.
    Total capital commitments for 2008 have been reduced to approximately
$543 million on a gross basis. As previously announced, two sale/leaseback
transactions, including a total of 13 CTR properties in locations across the
country, were completed for proceeds of $214 million in the third quarter.

    FUNDING UPDATE

    While overall credit market conditions in Canada remain challenging, the
Corporation has substantial sources of liquidity to support its retail and
financial services growth plans, including committed bank lines totaling
approximately $1.22 billion from major Canadian and other banks. These credit
facilities are committed until close to the end of fiscal 2009 and are
currently renewed on a quarterly basis.
    In addition to the above bank lines, the following additional sources of
funding contribute to a strong liquidity position:-   Continued growth in high rate savings and broker deposits as part of
        Financial Services banking activities;
    -   An authorized medium term note program of up to $750 million of which
        $300 million has been utilized; and
    -   An authorized commercial paper program of $800 million, which is
        backed dollar for dollar by the above noted bank lines, in support of
        both Glacier Credit Card Trust ("Glacier") and the Corporation of
        which $367 million was outstanding at the end of the quarterThe broker deposit channel makes Canadian Tire Bank non-cashable GIC's,
with 1 to 5 year terms, available to customers of established deposit brokers.
    Broker deposits, which have grown, as of November 4th to $382 million
(net of liquidity reserves), have reduced the Corporation's dependency on the
securitization market for longer term funding.
    In addition to all of these sources of funding the Corporation continues
to look at creating additional financial flexibility through:-   The addition of further committed bank lines for which it is in
        active discussion with its current bankers and other lenders.
    -   Select real estate transactions at cost effective rates.For Glacier, the 2003 five year term notes totaling $570 million mature
in November 2008 and will be repaid in late November from funds already on
deposit. In terms of refinancing, the asset-backed term securitization market
in Canada is currently inactive due to market conditions, Glacier does,
however anticipate being able to access this market when conditions improve,
based on the quality of the assets held by the Trust and the past performance
of the program.
    As a result of current market conditions, the cost of funding for all
Canadian corporations has increased. However, as at the end of the quarter,
approximately 93% of the Corporation's and Glacier's funding rates were fixed,
thus sheltering it to a substantial degree from the impact of this cost
increase. Because of this significant fixed component of funding needs,
management estimates that the total impact on an annualized basis of expected
current or future funding cost increases, due to higher rates and fees, is not
material to the Corporation's consolidated earnings.

    FORWARD-LOOKING STATEMENTS

    This disclosure contains statements that are forward-looking. Actual
results or events may differ materially from those forecasted in this
disclosure because of the risks and uncertainties associated with Canadian
Tire's business and the general economic environment. Risks and uncertainties
are disclosed in other public filings by the Company, such as Management's
Discussion and Analysis ("the MD&A") and the 2007 Financial Report and
include, but are not limited to: changes in interest, currency exchange and
tax rates; the ability of Canadian Tire to attract and retain quality
employees, Associate Dealers, Petroleum agents and PartSource and Mark's Work
Wearhouse store operators and franchisees; and the willingness of customers to
purchase the Company's merchandise, financial products and services.
    Risk factors associated with the assumptions that underlie Canadian
Tire's forecasted performance in 2008 that have the potential to affect the
operating performance and results of the Company's divisions are outlined in
Section 11.2 of the MD&A.
    The Company has developed its 2008 forecast on the assumption that there
will not be a material deviation in the risks described in the MD&A compared
to the current operating environment. The Company cannot provide any assurance
that forecasted financial or operational performance will actually be
achieved, or if it is, that it will result in an increase in the price of
Canadian Tire shares.

    REVIEW BY BOARD OF DIRECTORS

    The Canadian Tire Board of Directors, on the recommendation of its Audit
Committee, has approved the contents of this disclosure.

    CONFERENCE CALL

    Canadian Tire will conduct a conference call to discuss information
included in this news release and related matters at 4:30 p.m. EDT on
Thursday, November 6th, 2008. The conference call will be available
simultaneously and in its entirety to all interested investors and the news
media through a webcast at http://investor.relations.canadiantire.ca, and will
be available through replay at this website for 12 months.

    Canadian Tire Corporation, Limited (TSX: CTC.a, CTC), operates more than
1,180 general merchandise and apparel retail stores and gas stations in an
inter-related network of businesses engaged in retail, financial services and
petroleum. Canadian Tire Retail, Canada's most shopped general merchandise
retailer, with 473 stores operated by dealers across Canada offers a unique
mix of products and services through three specialty categories in which the
organization is the market leader - Automotive, Sports and Leisure, and Home
Products. www.canadiantire.ca offers Canadians the opportunity to shop online.
PartSource is an automotive parts specialty chain with 82 stores designed to
meet the needs of purchasers of automotive parts - professional automotive
installers and serious do-it-yourselfers. Canadian Tire Petroleum is one of
the country's largest and most productive independent retailers of gasoline,
operating 269 gas bars, 262 convenience stores and kiosks, and 74 car washes.
Mark's Work Wearhouse is one of the country's leading apparel retailers
operating 364 stores in Canada. Under the Clothes that Work™ marketing
strategy, Mark's sells apparel and footwear in work, work-related, casual and
active-wear categories, as well as health-care and business-to-business
apparel. www.marks.com offers Canadians the opportunity to shop for Mark's
products online. Canadian Tire Financial Services has issued over five million
Canadian Tire MasterCard credit cards and also markets related financial
products and services for retail and petroleum customers. Canadians can also
access Financial Services online at www.ctfs.com. More than 57,000 Canadians
work across Canadian Tire's organization from coast-to-coast in the
enterprise's retail, financial services, and petroleum businesses.


    Management's discussion and analysis (MD&A)
    -------------------------------------------------------------------------

    Introduction

    This Management's Discussion and Analysis (MD&A) provides management's
perspective on our Company, our performance and our strategy for the future.

    We, us, our, Company and Canadian Tire

    In this document, the terms "we", "us", "our", "Company" and "Canadian
Tire" refer to Canadian Tire Corporation, Limited and its business units and
subsidiaries.

    Review and approval by the Board of Directors

    The Board of Directors, on the recommendation of its Audit Committee,
approved the contents of this MD&A on November 6, 2008.

    Quarterly and annual comparisons in this MD&A

    Unless otherwise indicated, all comparisons of results for the third
quarter (13 weeks ended September 27, 2008) are against results for the third
quarter of 2007 (13 weeks ended September 29, 2007).

    Restated figures

    Certain of the prior period's figures have been reclassified or restated
to conform to the current year's presentation or to be in accordance with the
adoption of the Canadian Institute of Chartered Accountants (CICA) new
accounting standards. Please refer to notes 2 and 16 in the Notes to the
Consolidated Financial Statements for further information.

    Accounting estimates and assumptions

    The preparation of consolidated financial statements that conform with
Canadian generally accepted accounting principles (GAAP) requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of the
Consolidated Financial Statements and the reported amounts of revenue and
expenses during the reporting period. We calculate our estimates using
detailed financial models that are based on historical experience, current
trends and other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from those estimates. In our
judgment, none of the estimates highlighted in note 1 in the Notes to the
Consolidated Financial Statements for the quarter ended September 27, 2008
requires us to make assumptions about matters that are highly uncertain. For
these reasons, none of the estimates is considered a "critical accounting
estimate" as defined in Form 51-102F1 published by the Ontario Securities
Commission.

    Forward-looking statements

    This MD&A contains statements that are forward-looking. Actual results or
events may differ materially from those forecasted in this disclosure because
of the risks and uncertainties associated with Canadian Tire's business and
the general economic environment. In addition to the principal risks
identified and discussed in detail in MD&A sections 9.0 to 9.3 of the 2007
Financial Report, there are other external factors that could affect our
results. These include, but are not limited to: changes in interest rates,
currency exchange rates and tax rates; the ability of Canadian Tire to attract
and retain quality employees, Dealers, Canadian Tire Petroleum™ (Petroleum)
agents and PartSource® and Mark's Work Wearhouse® (Mark's) store operators
and franchisees; and the willingness of customers to shop at our stores or
acquire our financial products and services. Please also refer to section 11.2
of this MD&A which identifies some of the operational risks that can affect
our businesses.
    We cannot provide any assurance that forecasted financial or operational
performance will actually be achieved, or if it is, that it will result in an
increase in the price of Canadian Tire shares.

    1.0 Our Company

    1.1 Overview of the business

    Canadian Tire has been in business for over 85 years, offering everyday
products and services to Canadians through its growing network of interrelated
businesses. Canadian Tire, our Dealers, store operators, franchisees and
Petroleum agents operate more than 1,180 general merchandise and apparel
retail stores and gas bars. The Canadian Tire Financial Services® (Financial
Services) division of the Company also markets a variety of financial services
to Canadians, primarily its proprietary Options® MasterCard®, personal
loans, lines of credit, insurance and warranty products, and a retail banking
pilot offering products to customers in certain test markets.
    Canadian Tire's model of interrelated businesses provides market
differentiation and competitive advantage. Canadian Tire's businesses benefit
from the Company's key capabilities in merchandising, marketing and
advertising, supply chain and real estate, which enable us to achieve a
greater level of efficiency.  Canadian Tire's primary loyalty program,
Canadian Tire 'Money'® - shared by Canadian Tire Retail (CTR), Financial
Services and Petroleum - is an example of how interrelationships between the
businesses create a strong competitive advantage for the Company.
    The success of the loyalty program has proven - through high customer
acceptance and redemption - to be a key element of Canadian Tire's total
customer value proposition and is designed to drive higher total sales across
CTR, Financial Services and Petroleum. For example, a customer who fills up
with gas at Petroleum's gas bars and uses Canadian Tire credit cards spends
considerably more at Canadian Tire stores, on average, than a customer who
only shops at Canadian Tire stores.
    Mark's has derived meaningful cost and operating synergies from Canadian
Tire's strengths in real estate and supply chain since its acquisition by the
Company in 2002. The Company co-locates Mark's and Canadian Tire stores in
certain locations and, where appropriate, has been extending its national
marketing and advertising channels to boost customer traffic and loyalty to
Mark's and increase its brand penetration.

    1.2 Operational synergies

    All of our businesses benefit from strategic and operational synergies
including real estate management, supply chain, merchandising, marketing and
advertising. Meaningful cost savings are also derived through Canadian Tire's
collective buying power and economies of scale, and we are continually
enhancing our customer value proposition by creating promotions and reward
programs to increase customer loyalty.
    Canadian Tire's four main businesses are described below.

    CTR is Canada's most shopped general merchandise retailer with a network
of 473 Canadian Tire stores that are operated by Dealers, who are independent
business owners. Dealers buy merchandise from the Company and sell it to
consumers in Canadian Tire stores. CTR also includes our online shopping
channel and PartSource. PartSource is a chain of 82 specialty automotive hard
parts stores that cater to serious "do-it-yourselfers" and professional
installers of automotive parts. The PartSource network consists of 34
franchise stores and 48 corporate stores.

    Mark's is one of Canada's leading clothing and footwear retailers,
operating 364 stores nationwide, including 321 corporate and 43 franchise
stores that offer men's wear, women's wear and industrial wear. Mark's
operates under the banner "Mark's", and in Quebec, "L'Equipeur®". Mark's
also conducts a business-to-business operation under the "Imagewear by Mark's
Work Wearhouse®" brand.

    Petroleum is Canada's largest independent retailer of gasoline with a
network of 269 gas bars, 262 convenience stores and kiosks, 74 car washes, 13
Pit Stops and 85 propane stations. The majority of Petroleum's sites are
co-located with Canadian Tire stores as a strategy to attract customers to
Canadian Tire stores. Substantially all of Petroleum's sites are operated by
agents.

    Financial Services markets a range of Canadian Tire branded credit cards,
including the Canadian Tire Options MasterCard, Commercial Link®
MasterCard® and Gas Advantage® MasterCard®. Financial Services also
markets personal loans, lines of credit, insurance and warranty products as
well as guaranteed investment certificates (GICs) offered through third-party
brokers and an emergency roadside assistance service called Canadian Tire
Roadside Assistance®. Canadian Tire Bank® (CTB), a wholly-owned
subsidiary, is a federally regulated bank that manages and finances Canadian
Tire's consumer MasterCard and retail credit card portfolios, as well as the
personal loan and line of credit portfolios. CTB also offers high interest
savings accounts, GICs and residential mortgages in three pilot markets as
well as the Canadian Tire One-and-Only™ account which offers customers the
opportunity to pay down their loan balances faster by consolidating their
chequing, savings, loans and mortgage loan balances into one account.1.3 Store network at a glance

                                                  September 27, September 29,
    Number of stores and retail square footage            2008          2007
    -------------------------------------------------------------------------
    Consolidated store count
      CTR retail stores(1)                                 473           468
      PartSource stores                                     82            68
      Mark's retail stores(1)                              364           348
      Petroleum gas bar locations                          269           265
    -------------------------------------------------------------------------
    Total stores                                         1,188         1,149
    Consolidated retail square footage (in millions)
      CTR retail square footage                           18.4          17.1
      PartSource retail square footage                     0.3           0.2
      Mark's retail square footage                         3.1           2.9
    -------------------------------------------------------------------------
    Total retail square footage(2)                        21.8          20.2
    -------------------------------------------------------------------------
    (1) Store count numbers reflect individual selling locations; therefore,
        CTR and Mark's store count numbers each include stores that are co-
        located on the same property.
    (2) The average retail square footage for Petroleum's convenience stores
        was 400 square feet per store in 2007 and has not been included in
        the total above.2.0 Our Strategic Plan

    2.1 Rolling Five-Year Strategic Plan to 2012 (2012 Plan)

    The 2012 Plan outlines our strategy to build a Bigger and Better Canadian
Tire through a continued focus on growth and productivity from a consolidated
perspective. The key initiatives of the 2012 Plan include network expansion
across all of our retail businesses (CTR, PartSource and Mark's), store
concept renewals and the continued testing of our retail banking products.
Other initiatives to improve productivity include upgrading our automotive
supply chain, renewing our technology infrastructure and streamlining our
organizational design.
    Specific objectives related to these programs are included in section 3.3
of this MD&A and section 3.0 of the MD&A contained in the 2007 Financial
Report.

    2.2 Financial aspirations

    The 2012 Plan includes financial aspirations for the Company for the
five-year period ending in 2012. These aspirations are not to be construed as
guidance or forecasts for any individual year within the 2012 Plan, but rather
as long-term, rolling targets that we aspire to achieve over the life of the
2012 Plan, based on the successful execution of our various initiatives.Financial aspirations                                          2012 Plan
    -------------------------------------------------------------------------
    Same store sales
     (simple average of annual percentage growth,
     CTR stores only)                                               3% to 4%
    Gross operating revenue
     (compound annual growth rate)                                  6% to 8%
    Retail sales
     (compound annual growth rate)                                       6%+
    Adjusted earnings per share(1)
     (compound annual growth rate)                                      10%+
    After-tax return on invested capital
     (annual simple average)                                            10%+
    -------------------------------------------------------------------------
    (1) Excludes gains and losses on real estate and the net effect of
        securitization activities, gain on disposal/ redemption of investment
        and former CEO retirement obligation.

    3.0 Our performance in 2008

    3.1 Consolidated financial results


    ($ in
     millions
     except
     per share           Q3       Q3                 YTD       YTD
     amounts)          2008   2007(1)   Change      2008    2007(1)   Change
    -------------------------------------------------------------------------
    Retail
     sales(2)     $2,605.0  $2,428.2       7.3% $7,394.8  $7,069.6       4.6%
    Gross
     operating
     revenue       2,257.5   2,049.2      10.2%  6,533.5   6,101.0       7.1%
    EBITDA(3)        223.9     218.0       2.7%    615.4     614.9       0.1%
    Earnings
     before
     income taxes    148.2     152.7     (2.9)%    391.7     426.9     (8.2)%
    Effective
     tax rate         26.7%     33.1%               30.3%     34.3%
    Net earnings  $  108.6  $  102.2       6.3% $  273.0  $  280.4     (2.6)%
    Basic
     earnings
     per share    $   1.33  $   1.25       6.3% $   3.35  $   3.44     (2.7)%
    Adjusted
     basic
     earnings per
     share(3)     $   1.42  $   1.26      12.7% $   3.26  $   3.32     (1.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) 2007 figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. See section 13.1
        for additional information.
    (2) Represents retail sales at CTR (which includes PartSource), Mark's
        corporate and franchise stores and Petroleum's sites.
    (3) See section 14.0 for non-GAAP measures.



    Highlights of top-line performance by business

    (year-over-year percentage change)                     Q3 2008   Q3 2007
    -------------------------------------------------------------------------
    CTR retail sales(1)                                        4.1%    (0.7)%
    CTR gross operating revenue                                7.3%      1.3%
    CTR net shipments                                          7.6%      1.4%
    Mark's retail sales                                        2.6%      3.9%
    Petroleum retail sales                                    21.9%      0.0%
    Petroleum gasoline volume (litres)                       (4.6)%    (1.5)%
    Financial Services' credit card sales                     14.0%     10.9%
    Financial Services' gross average receivables              6.5%      7.2%
    -------------------------------------------------------------------------
    (1) Includes sales from Canadian Tire stores, PartSource stores and CTR's
        online web store and the labour portion of CTR's auto service sales.Gross operating revenue

    During the third quarter of 2008, all of our businesses contributed to
the 10.2 percent increase in consolidated gross operating revenue, including
higher CTR shipment volume to Dealers, increased sales at Petroleum and Mark's
and receivables growth at Financial Services. Financial Services growth was
driven by both increased transaction volume and higher loan account balances.
Increased Petroleum revenues were a function of sustained higher retail
gasoline prices as well as strong convenience store sales. Revenue growth at
Mark's was attributable to the ongoing expansion of the store network.

    Net earnings

    Third quarter consolidated net earnings increased by 6.3 percent, despite
challenging economic conditions, reflecting strong adjusted earnings
performance at both CTR and Financial Services, as well as benefits
attributable to a lower effective tax rate. These were partially offset by
decreased earnings at Mark's which experienced a lower gross margin rate and
higher costs associated with the ongoing network expansion and increased
infrastructure.
    Earnings before income taxes were negatively impacted by non-operating
items, as noted below.

    Impact of non-operating items

    The following tables show our adjusted consolidated earnings on a pre-tax
and after-tax basis.Adjusted consolidated earnings before income taxes(1)

                        Q3        Q3                 YTD       YTD
    ($ in millions)   2008    2007(2)   Change      2008    2007(2)   Change
    -------------------------------------------------------------------------
    Earnings
     before
     income taxes $  148.2  $  152.7     (2.9)% $  391.7  $  426.9     (8.2)%
    Less pre-tax
     adjustment
     for:
      Gain on
       disposal of
       shares            -         -                   -      18.4
      Former CEO
       retirement
       obligation(3)   0.2       0.2                 1.1      (6.5)
      Net effect of
       securitization
       activities(4)  (9.1)     (6.3)                7.7      (3.8)
      Gain (loss) on
       disposals of
       property and
       equipment      (1.3)      5.6                 2.4       7.2
    -------------------------------------------------------------------------
    Adjusted
     earnings
     before
     income
     taxes(1)     $  158.4  $  153.2       3.4% $  380.5  $  411.6     (7.5)%
    -------------------------------------------------------------------------

    (1) See section 14.0 on non-GAAP measures.
    (2) 2007 figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. See section 13.1
        for additional information.
    (3) See section 3.3.1 on CTR's performance.
    (4) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability, change in securitization reserve
        and gain/loss on reinvestment.



    Adjusted consolidated net earnings after tax(1)

    ($ in
     millions
     except
     per share           Q3       Q3                 YTD      2007
     amounts)          2008   2007(2)   Change      2008     YTD(2)   Change
    -------------------------------------------------------------------------
    Net earnings  $  108.6  $  102.2       6.3% $  273.0  $  280.4     (2.6)%
    Less after-tax
     adjustment
     for:
      Gain on
       disposal of
       shares            -         -                   -      12.0
      Former CEO
       retirement
       obligation      0.2       0.2                 0.8      (4.2)
      Net effect
       of
       securitization
       activities(3)  (6.2)     (4.1)                5.2      (2.5)
      Gain (loss)
       on disposals
       of property
       and equipment  (0.9)      3.6                 1.6       4.7
    -------------------------------------------------------------------------
    Adjusted net
     earnings
     after
     tax(1)       $  115.5  $  102.5      12.7% $  265.4  $  270.4     (1.8)%
    -------------------------------------------------------------------------
    Basic earnings
     per share    $   1.33  $   1.25       6.3% $   3.35  $   3.44     (2.7)%
    Adjusted
     basic
     earnings per
     share(1)     $   1.42  $   1.26      12.7% $   3.26  $   3.32     (1.9)%
    -------------------------------------------------------------------------

    (1) See section 14.0 on non-GAAP measures.
    (2) 2007 figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. See section 13.1
        for additional information.
    (3) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability, change in securitization reserve
        and gain/loss on reinvestment.Included in the adjusted earnings table above, the tax provision was
impacted favourably by the net effect of adjustments to taxes on the sale and
leaseback of various properties and revisions to the estimate of tax
provisions. See section 9.0 for further details.

    Seasonal impact

    The second quarter and fourth quarters of each year are typically when we
experience stronger revenues and earnings in our retail businesses because of
the seasonal nature of some merchandise at CTR and Mark's and the timing of
marketing programs. The following table shows our financial performance by
quarter for the last two years.Consolidated quarterly results(1)

    ($ in millions except per
     share amounts)                    Q3 2008   Q2 2008   Q1 2008   Q4 2007
    -------------------------------------------------------------------------
    Gross operating revenue           $2,257.5  $2,450.7  $1,825.3  $2,503.1
    Net earnings                         108.6      97.7      66.7     131.3
    Basic earnings per share              1.33      1.20      0.82      1.61
    Diluted earnings per share            1.33      1.20      0.82      1.61
    -------------------------------------------------------------------------


    ($ in millions except per
     share amounts)                    Q3 2007   Q2 2007   Q1 2007   Q4 2006
    -------------------------------------------------------------------------
    Gross operating revenue           $2,049.2  $2,314.1  $1,737.7  $2,426.1
    Net earnings                         102.2     122.5      55.7     108.3
    Basic earnings per share              1.25      1.50      0.68      1.33
    Diluted earnings per share            1.25      1.50      0.68      1.32
    -------------------------------------------------------------------------
    (1) 2007 quarterly results have been restated for the implementation, on
        a retrospective basis, of CICA HB 3031 - Inventories. See section
        13.1 for additional information. 2006 results have not been restated
        as the information required to calculate the restatement on a
        quarterly basis is not readily available.


    3.2 Business unit Q3 2008 performance overview

    -------------------------------------------------------------------------
    Canadian Tire Retail                Mark's Work Wearhouse
    -------------------------------------------------------------------------

    Q3 2008 Performance highlights      Q3 2008 Performance highlights

    -   continued development of        -   opened three new corporate stores
        store network, now with a           (two of which are co-located with
        total of 473 stores including       a CTR store), relocated seven
        223 20/20 stores and two            stores, bought back four
        small market stores that            franchise stores which were
        opened in the pilot phase;          converted to corporate stores,
    -   continued development of new        and closed three stores;
        store formats; and              -   increased total retail space
    -   replaced two traditional            by approximately eight percent
        stores with two new small           year-over-year; store network
        market stores and replaced          totals 364 locations; and
        one new-format store with a     -   continued focus on Clothes That
        CTR-Mark's 20/20 store, the         Work campaign, with the
        Mark's component of which           introduction of three new Clothes
        will open in October 2008.          That Work items during the
                                            quarter.

    PartSource Q3 2008 performance
    highlights

    -   acquired six corporate stores
        (two of which were converted
        to the PartSource banner);
    -   opened one new hub store, and
        converted one franchise store
        to a corporate store; and
    -   approximately 12 percent
        year-over-year increase in
        retail square footage.

    -------------------------------------------------------------------------
    Canadian Tire Financial Services    Petroleum
    -------------------------------------------------------------------------

    Q3 2008 Performance highlights      Q3 2008 Performance highlights

    -   continued testing of the        -   growth of network to 269 gas bars
        retail banking initiative;          and 262 convenience stores;
    -   completion of the Options       -   refurbished seven gas bars and
        MasterCard relaunch; and            replaced one gas bar as part of
    -   continued increases in gross        the initiative to improve the
        average receivables for the         overall customer experience at
        total managed portfolio.            Petroleum's sites; and
                                        -   grew convenience store business
                                            by 10.7 percent over the prior
                                            year, despite record high
                                            gasoline prices.
    -------------------------------------------------------------------------The following sections outlining the Company's business segment
performance highlight the respective segments' achievements to date against
key initiatives identified in the 2012 Strategic Plan. The initiatives have
been divided into those contributing to building a "Bigger" Canadian Tire and
those designed to create a "Better" Canadian Tire.
    In this context, "Bigger" is intended to convey the objective of
achieving increased sales and market share primarily through network growth,
new stores and new products. "Better" is intended to convey the objective of
improved productivity, service levels and rates of return.

    3.3 Business segment performance

    3.3.1 Canadian Tire Retail

    3.3.1.1 Q3 2008 Strategic Plan performance

    The following outlines CTR's performance for the third quarter of 2008 in
the context of our 2012 Strategic Plan.-------------------------------------------------------------------------
    Initiatives to build a "BIGGER" Canadian Tire
    -------------------------------------------------------------------------

    New store program

    20/20 has been the cornerstone of CTR's growth agenda since 2003. This
    program is now largely complete and CTR is developing new store concepts
    which are designed to build on the successes of the 20/20 store with a
    greater focus on improving sales and productivity. Plans for 2008 include
    opening two of the new "smart" stores that will have the same focus of
    improving sales and productivity, as well as providing a more exciting
    customer experience, and four small market stores with the further goal
    of expanding our presence in smaller markets.

    -------------------------------------------------------------------------
    2008 Key initiatives                2008 Performance
    -------------------------------------------------------------------------

                                        Third quarter
    With the substantial completion
    of the 20/20 program in 2008,       During the third quarter CTR replaced
    CTR's strategy is to test the       two existing traditional stores with
    next versions of the CTR store.     two new small market stores and
    This includes completion of the     replaced one existing new-format
    new small market stores and new     store with a CTR-Mark's 20/20
    "smart" stores which will be an     combination store, the Mark's
    important aspect of the 2012 Plan.  component of which will open in
                                        October 2008. All of the stores
                                        opened in the quarter incorporate a
                                        full-size Mark's store inside.

                                        The store network now totals 473
                                        stores, 39 of which include a Mark's
                                        component, with a 40th scheduled to
                                        open in October 2008.

    -------------------------------------------------------------------------

    Customers for Life

    Canadian Tire is committed to building customer loyalty through fostering
    a positive, consistent and memorable customer experience. During 2007,
    Canadian Tire began working on a new strategic model for the organization
    that will lead to a stronger focus on customer service and improvements
    in generating Customers for Life.

    -------------------------------------------------------------------------
    2008 Key initiatives                2008 Performance
    -------------------------------------------------------------------------

    CTR is committed to generating      Third quarter
    consistent and coherent customer
    service measures, tracking and      The Customer Satisfaction Index (CSI)
    performance.                        was successfully developed, piloted
                                        and rolled out in 2007. The
                                        collecting of data for 2008
                                        continued, as planned, completing
                                        approximately two-thirds of the data
                                        gathering for the year. The Dealer
                                        relations team has also continued
                                        working with the Canadian Tire
                                        Dealers Association to address issues
                                        that will improve the overall process
                                        and survey results.
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    PartSource network expansion

    PartSource will continue its expansion into new markets through a
    combination of new stores and small-scale acquisitions. PartSource's
    strategy to buy small local businesses and convert them to the PartSource
    banner has proven successful, with high rates of customer retention after
    conversion.

    -------------------------------------------------------------------------
    2008 Key initiatives                2008 Performance
    -------------------------------------------------------------------------

    Key initiatives for PartSource      Third quarter
    include building CTR as a new
    commercial account for emergency    During the quarter, PartSource
    shipments, updating the             continued making significant progress
    organizational structure, testing   on building the CTR commercial
    new operating systems and           account and is now used by 170
    launching a new auto parts          Canadian Tire stores for emergency
    catalogue.                          auto parts. Progress on this
                                        initiative will continue building
                                        throughout the year.

                                        PartSource acquired six new corporate
                                        stores (of which two had been
                                        rebranded to the PartSource banner by
                                        the end of the quarter), opened one
                                        new hub store, relocated and/or
                                        retrofitted two existing stores into
                                        hub stores and converted one
                                        franchise store to a corporate store
                                        during the quarter. This brings the
                                        network total to 82 stores, including
                                        seven hub stores.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Initiatives to build a "BETTER" Canadian Tire
    -------------------------------------------------------------------------

    Automotive Infrastructure initiative

    CTR has made revitalizing its cornerstone automotive business a key
    priority over the 2012 Plan period and began to roll out Phase One of
    this project in 2007 through opening two PartSource hub stores. Regional
    hub stores are larger than traditional PartSource stores and are designed
    to provide a broader assortment of automotive parts to service both
    Canadian Tire and PartSource customers on an as needed basis. In
    addition, the Company is investing in physical distribution
    infrastructure and re-engineering customer facing processes and enabling
    technologies.

    -------------------------------------------------------------------------
    2008 Key initiatives               2008 Performance
    -------------------------------------------------------------------------

    The Automotive Infrastructure       Third quarter
    initiative is an important factor
    in CTR's future growth and          Progress on the Automotive
    involves a significant investment   Infrastructure initiative included:
    in fixed assets, working capital
    and the redesign of core processes  Emergency supply implementation:
    and enabling technologies.          -   opened PartSource hub stores in
                                            Pickering, Ontario; Sudbury,
                                            Ontario and Edmonton, Alberta,
                                            bringing the total number of hub
                                            stores to seven.

                                        Corporate assortment expansion:
                                        -   proceeded with the physical
                                            retrofit of the Vaughan auto
                                            parts distribution centre to
                                            accommodate a significantly
                                            larger auto parts assortment;
                                        -   increased auto parts SKU count by
                                            10 percent;
                                        -   completed testing of a new, state
                                            of the art warehouse management
                                            system in the Vaughan auto parts
                                            distribution centre.

                                        Enabling technologies:
                                        -   signed agreement with core
                                            software provider to secure
                                            licenses and professional
                                            services;
                                        -   completed level two process
                                            designs and constructed a
                                            software test environment for
                                            in-depth training.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    CTR Change program

    During 2007, CTR began to implement its multi-year productivity effort
    with projects designed to overhaul and upgrade internal processes and IT
    systems. As the benefits of these projects begin to unfold, we will be
    able to make faster and better decisions and improve our agility and
    speed to market.

    -------------------------------------------------------------------------
    2008 Key initiatives                2008 Performance
    -------------------------------------------------------------------------
    CTR will implement                  Third quarter
    productivity/control initiatives
    in the areas of pricing and         Progress made on the CTR change
    product hierarchy to streamline     program in the third quarter
    and strengthen operations and       included:
    improve organizational structures   -   continued implementation of new
    and efficiencies.                       pricing system across the
                                            merchandising division;
                                        -   continued implementation of
                                            Master Data Management
                                            infrastructure for CTR's core
                                            data;
                                        -   began design of new promotional
                                            planning system;
                                        -   continued work on vendor
                                            management capability; and
                                        -   began initiative to review
                                            organizational design in
                                            merchandising and marketing
                                            areas.
    -------------------------------------------------------------------------

    3.3.1.2 Key performance indicators

    The following are key measures of CTR's sales productivity:
    -   total same store sales growth;
    -   average retail sales per store; and
    -   average sales per square foot of retail space

    CTR total retail and same store sales

    (year-over-year percentage change) Q3 2008   Q3 2007  2008 YTD  2007 YTD
    -------------------------------------------------------------------------
    Total retail sales(1)                 4.1%    (0.7)%      1.6%      2.0%

    Same store sales(2)                   2.0%    (2.7)%    (0.5)%      0.0%
    -------------------------------------------------------------------------
    (1) Includes sales from Canadian Tire and PartSource stores, sales from
        CTR's online web store and the labour portion of CTR's auto service
        sales.
    (2) Includes sales from Canadian Tire and PartSource stores, but excludes
        sales from CTR's online web store and the labour portion of CTR's
        auto service sales.

    CTR's retail sales

    Retail sales represent total merchandise sold at retail prices and the
labour portion of automotive sales to consumers across CTR's network of
stores, including CTR's online web store and PartSource.

    CTR same store sales by store format

    (year-over-year percentage change) Q3 2008   Q3 2007  2008 YTD  2007 YTD
    -------------------------------------------------------------------------
    Same store sales(1)
      20/20 stores                        2.9%      0.0%      0.4%      3.1%
      New-format stores                   0.6%    (4.8)%    (1.7)%    (2.1)%
      Traditional stores                  2.4%    (5.0)%    (0.9)%    (2.3)%
    -------------------------------------------------------------------------
    (1) Excludes sales from PartSource stores, CTR's online web store and the
        labour portion of CTR's auto service sales.


    -------------------------------------------------------------------------
    CTR's same store sales

    Same store sales include sales from all stores that have been open for
    more than 53 weeks.
    -------------------------------------------------------------------------

    As our store network continues to evolve, we will be introducing new store
formats into our store class categories. In this 2008 third quarter MD&A, we
continue to report three separate classes of stores, defined as follows:

    -------------------------------------------------------------------------
          20/20 stores          New-format stores        Traditional stores
       (mid 2003 to 2008)      (1994 to mid 2003)         (1994 and prior)
     Average retail square    Average retail square    Average retail square
        footage: 53,000          footage: 31,000          footage: 16,000
    -------------------------------------------------------------------------
    Larger format launched   Large format, including  Smaller than either the
    in September 2003,       "Class Of" and "Next     new-format or 20/20
    ranging in size from     Generation" stores,      stores on average.
    approximately 18,000 to  ranging in size from     Traditional stores are
    89,000 square feet       16,000 to 66,000 square  characterized by varied
    (excluding the Mark's    feet, most of which were sizes and layouts.
    component of Mark's-     opened between 1994 and  Traditional stores make
    inside-a-CTR store).     mid 2003. New-format     up approximately seven
    20/20 stores make up     stores make up           percent of the retail
    approximately 65 percent approximately 28 percent square footage in the
    of the retail square     of the retail square     network.
    footage of the network.  footage in the network.
    See section 3.3.1.1,     This format immediately
    Q3 2008 Strategic Plan   preceded the 20/20 format.
    performance for more
    information on the
    20/20 rollout.
    -------------------------------------------------------------------------

    20/20 stores represented approximately 65 percent of CTR's retail square
footage and 58 percent of total retail sales in the third quarter of 2008.

    CTR store count

                             Q3 2008      2007      2006      2005      2004
    -------------------------------------------------------------------------
    20/20 stores(1)              225       192       126        53        25
    New-format stores(2)         167       189       237       292       302
    Traditional stores            81        92       105       117       130
    -------------------------------------------------------------------------
    Total new-format,
     traditional and 20/20
     stores                      473       473       468       462       457
    PartSource stores             82        71        63        57        47
    -------------------------------------------------------------------------
    (1) The 20/20 store total in 2008 includes seven 20/20 Mark's-inside-a-
        CTR stores (the Mark's component of one will open in October 2008),
        two small market stores which have been opened in pilot phase and 28
        CTR-Mark's combination 20/20 stores.
    (2) New-format store total in 2008 includes three CTR-Mark's combination
        stores.

    CTR continues to expand and retrofit its store network with a focus on
converting older format stores to the new formats. The 20/20 store format will
be completed by the end of 2008 and new formats consistent with the goals of
the 2012 Plan will be piloted in 2008 and rolled out in subsequent years.


    Average retail sales per Canadian Tire store(1),(2)
                                                         For the     For the
                                                       12 months   12 months
                                                           ended       ended
                                                       September   September
    ($ in millions)                                     27, 2008    29, 2007
    -------------------------------------------------------------------------
    20/20 stores                                          $ 19.2      $ 19.6
    New-format stores                                       13.5        13.7
    Traditional stores                                       7.9         8.1
    -------------------------------------------------------------------------
    (1) Retail sales are shown on a 52-week basis in each year and exclude
        sales from PartSource stores, CTR's online web store and the labour
        portion of CTR's auto service sales.
    (2) Only includes stores that have been open for a minimum of two years
        as at the end of the quarter.

    The 20/20 stores experience higher customer traffic and increases in
average transaction value compared to previous store formats as customers
spend more time browsing in these stores.

    Average sales per square foot of Canadian Tire retail space(1),(2),(3)

                                                         For the     For the
                                                       12 months   12 months
                                                           ended,      ended,
                                                       September   September
                                                        27, 2008    29, 2007
    -------------------------------------------------------------------------
    Retail square footage(1),(3) (millions of
     square feet)                                           18.4        17.1
    20/20 stores(2),(3)                                   $  365      $  374
    New-format stores(2),(3)                                 437         444
    Traditional stores(2),(3)                                492         503
    -------------------------------------------------------------------------
    (1) Retail square footage is based on the total retail square footage
        including stores that have not been open for a minimum of two years
        as at the end of the quarter.
    (2) Retail sales are shown on a 52-week basis in each year for those
        stores that have been open for a minimum of two years as at the end
        of the current quarter. Sales from PartSource stores, CTR's online
        web store and the labour portion of CTR's auto service sales are
        excluded.
    (3) Retail space does not include warehouse, garden centre and auto
        service areas.The two tables above show a year-over-year decrease in retail sales per
store and retail sales per square foot. The decrease is partially due to the
significant number of new-format and 20/20 stores that are excluded from the
calculation as they have not been open, in that format, for a period of two
years. Once the stores have been open for two years, they are included once
again in the average sales metrics.
    Average sales per square foot of retail space in the larger store formats
are lower than in traditional stores because additional space is designed to
display more merchandise, accommodate wider aisles, include more appealing
product displays and provide a more compelling shopping experience overall.
The larger 20/20 stores and new-format stores do however, on average, generate
more total sales and have a lower operating cost for Dealers per retail square
foot.

    CTR retail sales

    Third quarter

    CTR's third quarter same store sales increased by 2.0 percent and retail
sales increased 4.1 percent over the same quarter of 2007. The positive sales
performance reflected increases in our home, leisure and automotive businesses
and increases in both our regular and promotional sales when compared to the
third quarter of 2007. Retail sales were also positively affected by
improvements in non-seasonal categories and by strong early season results in
fall/winter categories, driven by winter tires and snowthrowers and an
increase across kitchen, storage and organization.
    While our retail stores continue to be influenced by the challenging
economic conditions that are currently affecting Canada, CTR experienced
increased retail sales in all provincial markets during the third quarter with
stronger sales experienced in Quebec and Eastern Canada and weaker sales
results in Alberta and in BC than in past quarters. In particular, retail
sales were up 8.2 percent for the quarter in Quebec and are up 2.8 percent on
a year-to-date basis.
    PartSource experienced another quarter of year-over-year sales increases
driven by both the continued expansion of the network and growth in the
commercial customer segment. In addition, PartSource shipments to Dealers
continue to increase as components of the Automotive Infrastructure initiative
project are rolled out.3.3.1.3 CTR's financial results

    ($ in millions)    Q3 2008 Q3 2007(1) Change  2008 YTD 2007 YTD(1) Change
    -------------------------------------------------------------------------
    Retail sales      $1,860.3  $1,787.4    4.1%  $5,253.6  $5,171.9    1.6%
    Net shipments
     (year-over-year
     % change)            7.6%      1.4%              3.8%      3.1%
    Gross operating
     revenue          $1,399.3  $1,304.0    7.3%  $4,032.7  $3,889.8    3.7%
    EBITDA(2)            152.8     148.5    2.8%     398.0     376.7    5.6%
    -------------------------------------------------------------------------
    Earnings before
     income taxes         94.0      94.9  (1.0)%     222.6     221.4    0.6%
    Less adjustment
     for:
      Gain (loss) on
       disposals of
       property and
       equipment          (0.3)      6.6               3.7      10.3
      Former CEO
       retirement
       obligation          0.2       0.2               1.1      (6.5)
    -------------------------------------------------------------------------
    Adjusted earnings
     before income
     taxes(2)         $   94.1  $   88.1    6.9%  $  217.8  $  217.6    0.1%
    -------------------------------------------------------------------------
    (1) 2007 earnings figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. Please refer to
        section 13.1 for additional information.
    (2) See section 14.0 on non-GAAP measures.


    CTR's net shipments
    -------------------------------------------------------------------------
    CTR's net shipments are the total value of merchandise shipped to
    Canadian Tire and PartSource stores, and through our online web store,
    less discounts and net of returns. Shipments to stores are recorded at
    the wholesale price that we charge to our Dealers and PartSource
    franchisees.
    -------------------------------------------------------------------------Explanation of CTR's financial results

    Third quarter

    Third quarter gross operating revenue increased 7.3 percent compared to
the third quarter of 2007, primarily as a result of higher net shipments to
Dealers, particularly in the automotive and home categories.
    Adjusted pre-tax earnings in CTR increased 6.9 percent in the third
quarter principally due to an increase in product shipments. This was
partially offset by a slight decline in the margin rate primarily due to
aggressive promotional activity and product mix. Third quarter earnings also
included $2.7 million of incremental expenses to support long-term
productivity and growth initiatives, including the Automotive Infrastructure
initiative and Information Technology Renewal, which will provide long-term
benefits.

    3.3.1.4 Business risks

    CTR is exposed to a number of risks in the normal course of its business
that have the potential to affect its operating performance. The following are
some of the business risks specific to CTR's retail and other operations.
Please also refer to section 9.0 of our 2007 Financial Report for a discussion
of some other industry-wide and Company-wide risks affecting the business.

    Supply chain disruption risk

    An increasing portion of CTR's product assortment is being sourced from
foreign suppliers, lengthening the supply chain and extending the time between
order and delivery to CTR's warehouses. Accordingly, CTR is exposed to
potential supply chain disruptions due to foreign supplier failures,
geopolitical risk, labour disruption or insufficient capacity at ports, and
risks of delays or loss of inventory in transit. The Company mitigates this
risk through effective supplier selection and procurement practices, strong
relationships with transportation companies, port and other shipping
authorities, supplemented by marine insurance coverage.

    Seasonality risk

    CTR derives a significant amount of its revenues from the sale of
seasonal merchandise and, accordingly, bears a degree of risk from
unseasonable weather patterns. CTR mitigates this risk, to the extent
possible, through the breadth of our product mix as well as effective
procurement and inventory management practices.

    Environmental risk

    Environmental risk within CTR is primarily associated with the handling
and recycling of certain materials, such as tires, paint, oil and lawn
chemicals, sold in Canadian Tire and PartSource stores. The Company has
established and follows comprehensive environmental policies and practices to
avoid a negative impact on the environment, protect CTR's reputation and
comply with environmental laws.

    3.3.2 Mark's Work Wearhouse

    3.3.2.1 Q3 2008 Strategic Plan performance

    The following outlines Mark's performance for the third quarter of 2008
in the context of our 2012 Strategic Plan.-------------------------------------------------------------------------
    Initiatives to build a "BIGGER" Canadian Tire
    -------------------------------------------------------------------------
    Network expansion

    A critical aspect of Mark's growth plan revolves around its objective of
    capturing an increasingly significant share of overall apparel sales in
    each geographic market in which Mark's competes. To increase Mark's
    market presence, the Company plans to continue with its aggressive goal
    of expanding the network of Mark's stores.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    Mark's will continue network        Third quarter
    development through opening new
    stores, relocating or expanding     -   opened three new corporate
    existing stores and renovating          stores, two of which are
    older stores to the newest Mark's       co-located inside a CTR
    format.                                 store;
                                        -   expanded one corporate store;
                                        -   relocated six corporate
                                            stores and one franchise
                                            store;
                                        -   bought back and converted
                                            four franchise stores to
                                            corporate stores; and
                                        -   closed three corporate stores.

                                        Mark's total retail square
                                        footage at the end of the
                                        quarter was 3.1 million square
                                        feet.
    -------------------------------------------------------------------------
    New store concepts
    In addition to adding incremental stores to the total network, Mark's is
    in the process of developing new store concepts that will be rolled out
    over the Plan period.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    Mark's will continue to expand the  Third quarter
    store network by developing new
    and innovative ways to bring        Mark's opened two new
    Clothes That Work to consumers      Mark's-inside-a-CTR stores as
    across the country, resulting in    part of CTR's small market store
    an increased physical presence      network expansion (included in
    across the geographic regions of    total above).
    Canada.
    -------------------------------------------------------------------------
    Initiatives to build a "BETTER" Canadian Tire
    -------------------------------------------------------------------------
    Category expansion

    Mark's has set aggressive growth goals for the 2012 Plan period which
    will be supported by its plans for category expansion in its three major
    product lines. Although growth was modest in 2007 and the first three
    quarters of 2008, women's wear is still expected to be the fastest
    growing segment of the business over the plan period as it is the least
    developed of the Mark's main category lines. Improvements in the product
    assortment in the women's wear category are expected to bring continued
    growth during the Plan period.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    In 2008, Mark's will continue to    Third quarter - corporate sales
    expand its product assortment in    -   sales of industrial wear
    the three main categories of            increased by 10.1 percent;
    apparel and footwear with a focus   -   sales of women's wear
    on the Clothes That Work campaign.      increased by 5.2 percent; and
                                        -   sales of men's wear decreased
                                            by 0.2 percent.

                                        Mark's continued to focus on the
                                        Clothes That Work campaign with
                                        the introduction of three new
                                        Clothes That Work items during the
                                        quarter.
    -------------------------------------------------------------------------

    3.3.2.2 Key performance indicators

    The following are key performance indicators for Mark's:

    -   retail and same store sales growth;
    -   average sales per corporate store; and
    -   average sales per square foot of retail space

    Mark's retail and same store sales growth

    (year-over-year
    percentage change)              Q3 2008    Q3 2007   2008 YTD   2007 YTD
    -------------------------------------------------------------------------
    Total retail sales                 2.6%       3.9%       1.9%       9.9%

    Same store sales(1)              (1.0)%       0.6%     (2.0)%       7.2%
    -------------------------------------------------------------------------

    (1) Mark's same store sales excludes new stores, stores not open for the
        full period in each year and store closures.

    -------------------------------------------------------------------------
    Mark's retail sales

    Mark's retail sales represent total merchandise sales to consumers and
    business-to-business customers, net of returns, across Mark's entire
    network of stores, fulfillment centres and Mark's online web store,
    recorded at retail prices.
    -------------------------------------------------------------------------Third quarter

    Mark's retail sales during the third quarter of 2008 continued to be
impacted by further softening of retail and economic conditions across many
parts of Canada. Despite these factors, retail sales increased 2.6 percent due
to expansion in the store network. Same store sales growth decreased slightly
compared to the third quarter of 2007. Men's industrial footwear demonstrated
the largest dollar sales increase in corporate store sales in the third
quarter, along with positive sales performance in men's accessories, women's
sweaters, men's workwear and men's casual footwear categories.Average corporate store sales(1)

                                           For the      For the      For the
                                         12 months    12 months    12 months
                                             ended,       ended,       ended,
                                         September    September    September
                                          27, 2008     29, 2007     30, 2006
    -------------------------------------------------------------------------
    Average retail sales per store
     ($ thousands)(2)                    $   2,712    $   2,862    $   2,623
    Average sales per square foot ($)(3)       318          341          331
    -------------------------------------------------------------------------
    (1) Calculated on a rolling 12-month basis.
    (2) Average retail sales per corporate store include corporate stores
        that have been open for 12 months or more.
    (3) Average sales per square foot is based on sales from corporate
        stores. We have prorated square footage for corporate stores that
        have been open for less than 12 months.Mark's continues to focus on productivity at its stores. Due to the
softening retail environment in Canada during 2008, there was a decrease in
the current rolling 12 months average sales per store and average sales per
square foot. This followed strong nine percent and three percent year-over-
year increases in those respective measures for the two previous periods due
to the factors noted above in the retail sales discussion.3.3.2.3 Mark's financial results

    ($ in millions)    Q3 2008  Q3 2007(1) Change 2008 YTD 2007 YTD(1) Change
    -------------------------------------------------------------------------
    Retail sales(2)   $  194.5  $  189.5     2.6% $  600.1  $  589.1    1.9%
    Gross operating
     revenue(3)          168.7     159.8     5.5%    516.8     499.1    3.5%
    EBITDA(4)              6.7      11.7  (41.6)%     24.4      46.4 (47.4)%
    -------------------------------------------------------------------------
    Earnings (loss)
     before income
     taxes                (0.3)      6.2 (104.1)%      4.2      31.0 (86.3)%
    Less adjustment for:
      Loss on
       disposals of
       property and
       equipment          (0.3)     (0.2)             (0.4)     (0.8)
    -------------------------------------------------------------------------
    Adjusted earnings
     before income
     taxes(4)         $    0.0  $    6.4  (99.2)% $    4.6  $   31.8 (85.4)%
    -------------------------------------------------------------------------
    (1) Mark's 2007 results have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - inventories. Please refer to
        section 13.1 for additional information.
    (2) Includes retail sales from corporate and franchise stores.
    (3) Gross operating revenue includes retail sales at corporate stores
        only.
    (4) See section 14.0 on non-GAAP measures.Explanation of Mark's financial results

    Third quarter

    Mark's pre-tax earnings decreased in the third quarter of 2008 primarily
as a result of the decrease in gross margin rate attributable to higher
markdowns, mainly related to inventory clearance, and a higher inventory
shrinkage accrual provision made in the third quarter of 2008 compared to the
same period of the previous year. Operating expenses, including depreciation
but excluding interest, increased by 9.6 percent over the third quarter of
2007, largely attributable to higher personnel, occupancy and depreciation
expenses to support the growth in the store network and backline
infrastructure, that has occurred over the last several years.

    3.3.2.4 Business risks

    Mark's is exposed to a number of risks in the normal course of its
business that have the potential to affect its operating performance. The
following are some of the business risks specific to Mark's. Please also refer
to section 9.0 of our 2007 Financial Report for a discussion of some other
industry and Company-wide risks affecting the business.

    Seasonality risk

    Mark's business remains very seasonal, with the fourth quarter typically
producing the largest share of annual sales and earnings due to the general
increase in consumer spending for winter clothing and Christmas related
purchases. In 2007, for example, the fourth quarter produced about 40 percent
of total annual retail sales and prior to the adoption of CICA HB 3031 -
Inventories, approximately 54 percent of annual pre-tax earnings. With the
adoption of CICA HB 3031 - Inventories, an even higher percentage of Mark's
annual pre-tax earnings are expected to occur in the fourth quarter. Detailed
sales reporting and merchandise planning modules assist Mark's in mitigating
the risks and uncertainties associated with unseasonable weather and consumer
behaviour during the important Christmas selling season, but cannot remove
risks completely because inventory orders, especially for a significant
portion of merchandise purchased off-shore, must be placed well ahead of the
season.

    Market obsolescence risk

    All clothing retailers are exposed, to varying degrees, to the vagaries
of consumers' fashion preferences. Mark's mitigates this risk through its
brand positioning, consumer preference monitoring, demand forecasting and
merchandise selection efforts. Mark's specifically targets consumers of
durable everyday wear and is less exposed to changing fashions than apparel
retailers offering high-fashion apparel and accessories.

    3.3.3 Canadian Tire Petroleum

    3.3.3.1 Q3 2008 Strategic Plan performance

    Petroleum plays a strategic role in increasing customer loyalty and
driving traffic and transactions for CTR and Financial Services. Petroleum
increases Canadian Tire's total value proposition by offering Canadian Tire
'Money' loyalty rewards on gas purchases paid for in cash or by Canadian
Tire's Options MasterCard. Petroleum also supports other cross-marketing
promotions and joint product launches, such as Canadian Tire's Gas Advantage
MasterCard, which has gained wide popularity since its introduction in Ontario
in mid-2006. Customers who have a Canadian Tire MasterCard and purchase gas at
Petroleum are Canadian Tire's most loyal and profitable customers.
    The following outlines Petroleum's performance for the third quarter of
2008 in the context of our 2012 Strategic Plan.-------------------------------------------------------------------------
    Initiatives to build a "BIGGER" Canadian Tire
    -------------------------------------------------------------------------
    Network renewal and new store concept

    Petroleum's business is an integral part of the Canadian Tire
    organization as customers that use Petroleum's gas bars drive sales and
    traffic to our other business units. Over the 2012 Plan period, Petroleum
    will continue to develop its real estate plan, focusing on introducing
    new store concepts into its existing network of locations, while
    continuing to focus on renewing its current sites.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    In 2008, Petroleum will continue    Third quarter
    to strengthen the existing network
    by opening new sites and            -   opened two new gas bars;
    refurbishing or rebuilding existing -   rebranded two gas bars;
    sites.                              -   refurbished seven gas bars
                                            and replaced one gas bar; and
                                        -   closed two existing locations.

                                        At the end of the quarter, Petroleum
                                        had 269 gas bars, including 44
                                        re-branded sites.
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Initiatives to build a "BETTER" Canadian Tire
    -------------------------------------------------------------------------
    Enhancing interrelatedness

    Petroleum's business is integrated with CTR and Financial Services
    through Canadian Tire 'Money' and various cross-marketing programs
    designed to build customer loyalty. Petroleum is in the process of
    enhancing its interrelatedness strategy to further extend its marketing
    leverage across the Company.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    In 2008, Petroleum will             Third quarter
    aggressively seek out additional
    cross-marketing opportunities to    -   issued multiplier coupons
    further leverage its                    that increase the Canadian
    interrelatedness strategy to drive      Tire 'Money' offered on gas
    customer traffic, transactions,         purchases paid for in cash
    customer loyalty and earnings           or by Canadian Tire Options
    across the enterprise.                  MasterCard;
                                        -   offered discount coupons on
                                            Canadian Tire merchandise
                                            with the purchase of gas;
                                            and
                                        -   launched Gas Advantage
                                            MasterCard in Quebec and
                                            Atlantic Canada.
    -------------------------------------------------------------------------3.3.3.2 Key performance indicators

    Gasoline sales volume is a top-line performance indicator for Petroleum,
as measured by the number of gasoline litres sold. Fluctuations in the
wholesale and retail price of gasoline may result in fluctuations in
Petroleum's margin and profitability.Gasoline sales volume

                       Q3 2008   Q3 2007  Change  2008 YTD  2007 YTD  Change
    -------------------------------------------------------------------------
    Sales volume
     (millions of
     litres)             414.5     434.3  (4.6)%   1,257.9   1,287.0  (2.3)%
    -------------------------------------------------------------------------

    Gasoline sales volumes during the quarter were down slightly due to lower
same site sales, partially offset by increases in new site openings. On a same
site basis, our gasoline volumes decreased by 5.7 percent in the quarter,
which was principally due to a year-over-year increase in average retail gas
prices of approximately 29 percent and a softening economic environment.

    Petroleum's convenience and car wash sales

    (year-over-year
    percentage change)              Q3 2008    Q3 2007   2008 YTD   2007 YTD
    -------------------------------------------------------------------------
    Total retail sales
      Convenience store sales         10.7%      12.2%       9.0%      15.5%
      Car wash sales                (14.3)%      29.2%    (16.5)%      22.9%
    -------------------------------------------------------------------------
    Same store sales
      Convenience                      9.1%       7.9%       7.3%      11.1%
      Car wash                      (14.1)%      26.9%    (16.5)%      19.8%Convenience store sales in the third quarter of 2008 increased as a
result of new site openings and increases in confectionary, lottery and
tobacco sales. The decline in car wash sales is largely attributable to
decreased consumer disposable income which was impacted by higher gasoline
prices and softening economic conditions experienced in the third quarter of
2008 compared to the previous year.3.3.3.3 Petroleum's financial results

    ($ in millions)    Q3 2008   Q3 2007  Change  2008 YTD  2007 YTD  Change
    -------------------------------------------------------------------------
    Retail sales      $  550.2  $  451.3   21.9%  $1,541.1  $1,308.6   17.8%
    Gross operating
     revenue             519.3     424.0   22.5%   1,456.9   1,232.4   18.2%
    EBITDA(1)             11.7      12.1   (3.4)%     32.8      29.1   13.0%
    -------------------------------------------------------------------------
    Earnings before
     income taxes          7.5       7.9   (5.5)%     20.5      16.8   22.3%
    Less adjustment
     for:
      Loss on
       disposals of
       property
       and equipment      (0.1)     (0.7)             (0.3)     (2.0)
    -------------------------------------------------------------------------
    Adjusted earnings
     before income
     taxes(1)         $    7.6  $    8.6  (12.2)% $   20.8  $   18.8   11.0%
    -------------------------------------------------------------------------
    (1) See section 14.0 on non-GAAP measures.

    -------------------------------------------------------------------------

    Petroleum's retail sales

    Retail sales include the sales of gasoline at Petroleum's entire network
    of petroleum sites recorded at retail pump prices, including re-branded
    sites, and excluding goods and services taxes and provincial sales taxes,
    where applicable. Retail sales also include sales of products sold at our
    convenience stores, car wash sites, propane and Pit Stop sites, all of
    which we record at retail selling prices.
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Gasoline pricing

    Petroleum maintains long-term wholesale agreements with major refiners to
    source competitively priced gasoline across Canada. This fuel is then
    sold through Petroleum retail locations at market prices.
    -------------------------------------------------------------------------Explanation of Petroleum's financial results

    Third quarter

    Record high gasoline prices and an increase in convenience store sales,
partially offset by lower gasoline volumes, contributed to Petroleum's revenue
growth in the third quarter. Average retail gasoline prices during the third
quarter of 2008 increased by approximately 29 percent over the third quarter
of 2007, driving the increased revenue.
    Lower gasoline sales volume and higher credit card fees, partially offset
by increased gasoline margins, were the major factors that contributed to
Petroleum's reduced earnings during the quarter. While adjusted earnings were
down 12.2 percent from $8.6 million this time last year, compared to
historical norms, this represents a strong quarterly performance. Petroleum
incurred $1.0 million in environmental expenses in the third quarter related
to clean-up costs associated with certain site closures compared to
$0.8 million incurred in the third quarter of 2007.

    3.3.3.4 Business risks

    Petroleum is exposed to a number of risks in the normal course of its
business that have the potential to affect its operating performance. The
following are some of the business risks specific to Petroleum's operations.
Please also refer to section 9.0 of our 2007 Financial Report for a discussion
of some other industry-wide and Company-wide risks.

    Commodity price and disruption risk

    The operating performance of petroleum retailers can be affected by
fluctuations in the commodity cost of oil. The wholesale price of gasoline is
subject to global oil price supply and demand conditions, which are
increasingly a function of rising demand from fast-developing countries such
as India and China, political instability in the Middle East, potential supply
chain disruptions from natural and human-caused disasters, as well as
commodity speculation. To mitigate this risk to profitability, Petroleum
tightly controls its operating costs and enters into long-term gasoline
purchase arrangements with integrated gasoline wholesalers.

    Environmental risk

    Environmental risk within Petroleum is primarily associated with the
handling of gasoline, oil and propane. Environmental contamination, if not
prevented or remediated, could result in fines and sanctions and damage our
reputation. Petroleum mitigates its environmental risks through a
comprehensive regulatory compliance program, which involves environmental
investigations, as required, and the remediation of any contaminated sites in
a timely manner. Petroleum also carries environmental insurance coverage.

    3.3.4 Canadian Tire Financial Services

    3.3.4.1 Q3 2008 Strategic Plan performance

    The following outlines Financial Services' performance for the third
quarter of 2008 in the context of our 2012 Strategic Plan.-------------------------------------------------------------------------
    Initiatives to build a "BIGGER" Canadian Tire
    -------------------------------------------------------------------------
    Total managed portfolio of loans receivable (credit card, personal and
    line of credit loans)

    Financial Services plans to grow its portfolio through increases in
    average balances, new account acquisition, the introduction of new credit
    cards and continued testing of the personal loan portfolio.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    For 2008, Financial Services has    Third quarter
    targeted increasing gross average
    credit card receivables and the     Gross average loans receivable
    number of accounts carrying a       were $4.0 billion in the third
    balance and growing its total       quarter. The growth reflects a
    managed portfolio as key            6.1 percent increase in the
    initiatives.                        average account balance and a
                                        0.4 percent increase in the
    In addition, Financial Services     number of accounts carrying a
    is planning a major relaunch of     balance.
    the Canadian Tire Options
    MasterCard in 2008.                 During the quarter Financial
                                        Services completed the relaunch
                                        of the Canadian Tire Options
                                        MasterCard.
    -------------------------------------------------------------------------
    Retail banking

    Financial Services began offering retail banking products in two pilot
    markets in October 2006, including high interest savings accounts, GICs
    and residential mortgages. In 2007, the pilot was expanded to include a
    third market in Ontario along with the launch of the Canadian Tire
    One-and-Only account. The retail banking business leverages the trust and
    credibility Canadian Tire has earned over the last 40 years providing
    financial services to millions of customers.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    Financial Services' retail          Third quarter
    banking plans include increasing    Financial Services had accumulated
    the ending mortgage portfolio       over $300 million in deposits and
    balance and deposit balances.       approximately $100 million in
                                        mortgages as at the end of the third
                                        quarter of 2008.

    Financial Services will incur
    approximately $28 million in net    Financial Services incurred
    expenses associated with the        $6.0 million in net expenses
    marketing and operations of the     associated with the marketing and
    retail banking initiative in 2008.  operation of the retail banking
                                        initiative during the third
                                        quarter of 2008.
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Initiatives to build a "BETTER" Canadian Tire
    -------------------------------------------------------------------------
    Insurance and other ancillary products

    Financial Services plans to enhance its insurance and warranty product
    offering to credit card customers. Revenues from insurance and warranty
    products have increased significantly in the last five years through
    direct marketing to Canadian Tire's growing base of customers.
    -------------------------------------------------------------------------
    2008 Key initiatives                Q3 2008 Performance
    -------------------------------------------------------------------------
    Financial Services plans to         Revenues from insurance and
    increase revenues from insurance    warranty products increased 7.2
    and warranty products during 2008.  percent in the third quarter on a
                                        comparable basis year-over-year.
    -------------------------------------------------------------------------

    3.3.4.2 Key performance indicators

    The following are key indicators of Financial Services' performance:

    -   size of the total managed portfolio
    -   profitability of the portfolio
    -   quality of the portfolio

    Financial Services' total managed portfolio of loans receivable

    ($ in millions,
    except where
    noted)             Q3 2008   Q3 2007  Change  2008 YTD  2007 YTD  Change
    -------------------------------------------------------------------------
    Average number of
     accounts with a
     balance
     (thousands)         1,862     1,854    0.4%     1,857     1,851    0.3%
    Average account
     balance ($)      $  2,123  $  2,001    6.1%  $  2,087  $  1,950    7.0%
    Gross average
     receivables (GAR) 3,951.8   3,709.8    6.5%   3,876.1   3,609.1    7.4%
    Total managed
     portfolio (end of
     period)                                       4,002.3   3,717.4    7.7%
    Net managed
     portfolio (end of
     period)                                       3,903.2   3,626.9    7.6%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total and net managed portfolio

    Financial Services' total managed portfolio is the total value of loans
    receivable including credit card, personal, line of credit and mortgage
    loans. The total managed portfolio includes both loans that have been
    securitized and those that remain a receivable of the Company, as
    reflected in the Consolidated Balance Sheet. Financial Services' net
    managed portfolio represents the total managed portfolio, less
    allowances.
    -------------------------------------------------------------------------Financial Services' gross average receivables were up in the third
quarter, due primarily to an increase in credit sales and increased mortgage
volumes. The continued success of the Gas Advantage MasterCard and an increase
in balance transfers contributed to the total portfolio growth, offset by a
decline in personal loan accounts and personal loan account balances. During
the quarter, Financial Services ramped up the offering of GICs through third-
party brokers. Please refer to section 5.0 for additional information
regarding the broker GICs.
    Financial Services' future growth will be driven by increases in average
account balances, modest increases in new accounts and the introduction of new
credit card and insurance products. Management regards new retail banking
products as another high-potential channel for growth in the longer term.
    Approximately 2.6 million cards were issued as part of the Options
MasterCard relaunch which is now complete. By the end of the third quarter,
over 13 percent of the accounts with a PayPass™ card had been used for
PayPass transactions, which is higher than anticipated.Gross average receivables
    -------------------------------------------------------------------------

    GAR is the monthly average of Financial Services' loans receivable
    averaged over a specified period of time.
    -------------------------------------------------------------------------

    Securitization of loans receivable

    -------------------------------------------------------------------------
    Securitization is the process by which interests in financial assets are
    sold to a third party. Financial Services routinely securitizes credit
    card loans receivable by selling an interest in those assets to trusts
    involved in the business of handling receivables portfolios. In the case
    of credit card loans, co-ownership interests are sold to Glacier Credit
    Card Trust® (GCCT). Financial Services records these securitization
    transactions as a sale, and as a result, these assets are not included on
    the Company's Consolidated Balance Sheet, but are included in our total
    managed portfolio of loans receivable. Financial Services has
    traditionally securitized between 70 percent and 80 percent of loans
    receivable on an ongoing basis.
    -------------------------------------------------------------------------

    Financial Services' portfolio of credit card loans receivable

    ($ in millions,
    except where
    noted)             Q3 2008   Q3 2007  Change  2008 YTD  2007 YTD  Change
    -------------------------------------------------------------------------
    Average number of
     accounts with a
     balance
     (thousands)         1,826     1,817    0.5%     1,820     1,812    0.4%
    Average account
     balance ($)      $  2,041  $  1,934    5.5%  $  2,013  $  1,878    7.2%
    Gross average
     receivables         3,728     3,513    6.1%     3,663     3,404    7.6%
    Total managed
     portfolio (end
     of period)                                      3,773     3,525    7.0%
    -------------------------------------------------------------------------Gross average credit card loans receivable grew 6.1 percent to
$3.7 billion at the end of the quarter primarily due to a 5.5 percent increase
in the average account balance during the quarter compared to the previous
year. The increase in average account balances is largely a result of
marketing programs designed to increase average balances.

    Financial Services' profitability

    Financial Services' profitability measures are tracked as a percentage of
GAR, shown in the table below.Profitability of total managed portfolio(1)

                                               Q3 2008    Q3 2007    Q3 2006
    -------------------------------------------------------------------------
    Total revenue as a % of GAR(2)              24.28%     24.88%     25.01%
    Gross margin as a % of GAR(2)               12.40%     13.19%     13.06%
    Operating expenses as a % of GAR(3)          7.73%      7.77%      7.98%
    Return on average total managed
     portfolio(2),(3),(4)                        4.69%      5.43%      5.08%
    -------------------------------------------------------------------------
    (1) Figures are calculated on a rolling 12-month basis and comprise the
        total managed portfolio of loans receivable.
    (2) Excludes the net effect of securitization activities and gain on
        disposal/redemption of investment.
    (3) Excludes the impact of the modification to the stock option
        agreements in the fourth quarter of 2006. 4 Return is calculated as
        adjusted earnings before taxes as a percentage of GAR.

    The decline in the return on the total managed portfolio is principally
due to an increase in the provision for credit losses and is also due to
expenses incurred for the Options MasterCard relaunch.

    -------------------------------------------------------------------------
    Gross margin

    Gross margin is Financial Services' total revenue less direct expenses
    associated with credit card, personal, line of credit and mortgage loans
    and insurance and warranty products. The most significant direct expenses
    are the provision for credit losses associated with the credit card,
    personal loan and line of credit portfolios, loyalty program costs and
    interest expense.
    -------------------------------------------------------------------------Financial Services' MasterCard accounts provide increased earnings
potential through cross-selling of balance-based insurance products and other
financial services being offered by Financial Services. As Financial Services
introduces lower rate credit cards and other loans receivable, the reduction
in revenue and gross margin as a percentage of gross average receivables will
be offset by continued growth in loans receivable, higher sales of insurance
and warranty products and ongoing improvements in the operating expense ratio.
    As part of the strategic planning process, management set a long-term
goal of managing Financial Services' pre-tax return on the average total
managed portfolio in the target range of 4.5 to 5.0 percent. As shown in the
table above, Financial Services has met or exceeded this target in the third
quarters of 2006, 2007 and 2008.Portfolio quality

                                               Q3 2008    Q3 2007    Q3 2006
    -------------------------------------------------------------------------
    Net write-off rate (rolling 12-month basis)  6.04%      5.87%      5.94%
    Account balances less than 30 days overdue
     at end of period                           96.32%     96.26%     96.14%
    Allowance rate                               2.48%      2.44%      2.60%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net write-offs

    Net write-offs represent account balances that have been written off, net
    of recoveries. Net write-off rate is the net write-offs expressed as a
    percentage of gross average receivables in a given period. Financial
    Services calculates the write-off rate for the loans portfolio on a
    rolling 12-month basis to mitigate unusual quarterly fluctuations.
    -------------------------------------------------------------------------Financial Services' rolling 12-month net write-off rate on the total
loans portfolio was 6.04 percent in the third quarter of 2008, an increase of
17 basis points over the same period of the previous year. As a result of more
challenging economic conditions, Financial Services expects that the write-off
rate may increase above the target range of 5.0 percent and 6.0 percent,
however a number of actions have already been taken to manage the quality of
the portfolio and expected write-off rates to acceptable levels.-------------------------------------------------------------------------
    Allowance

    The allowance is determined using a roll rate model that incorporates
    historical loss experience of account balances based on the aging and
    arrears status, with certain adjustments for other relevant circumstances
    influencing the recoverability of the loans. The allowance rate is a
    point-in-time calculation and represents the allowance as a percentage of
    ending receivables.
    -------------------------------------------------------------------------Periodic fluctuations in write-offs, aging and allowances occur as a
result of a variety of economic influences such as job growth or losses,
personal debt levels and personal bankruptcy rates, as well as changes caused
by adjustments to collection strategies. The increase in the allowance rate
compared to the third quarter of 2007 is due to a modest increase in the
credit card portfolio aging due to challenging economic conditions and the
impact of changes in collection practices in 2007. Aging of the credit card
portfolio is comparable to the same period in 2007 and 2006.3.3.4.3 Financial Services' financial results

    ($ in millions)    Q3 2008   Q3 2007  Change  2008 YTD  2007 YTD  Change
    -------------------------------------------------------------------------
    Gross operating
     revenue          $  197.8  $  187.2    5.6%  $  608.0  $  555.6    9.4%
    EBITDA(1)             52.7      45.7   15.3%     160.2     162.7  (1.5)%
    Earnings before
     income taxes         47.0      43.7    7.4%     144.4     157.7  (8.5)%
    Less adjustment for:
      Gain on sale
       of investment         -         -                 -      18.4
      Loss on disposals
       of property and
       equipment          (0.6)     (0.1)             (0.6)     (0.3)
      Net effect of
       securitization
       activities(1)      (9.1)     (6.3)              7.7      (3.8)
    Adjusted earnings
     before income
     taxes(2)         $   56.7  $   50.1   13.0%  $  137.3  $  143.4  (4.3)%
    -------------------------------------------------------------------------
    (1) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability, change in securitization reserve
        and gain/loss on re-investment.
    (2) See section 14.0 on non-GAAP measures.Explanation of Financial Services' financial results

    Third quarter

    Financial Services' gross operating revenue increased over the third
quarter of 2007 largely as a result of higher credit sales and an increase in
interest bearing balances which resulted in an increase in credit interest
earned. In addition, ongoing expenses were well controlled as the third-
quarter operating ratio on a rolling 12-month basis, excluding the Options
MasterCard relaunch costs and costs of the retail banking initiative was 6.71
percent in 2008 compared to 7.07 percent in 2007 and 7.82 percent in 2006.

    3.3.4.4 Business risks

    Financial Services is exposed to a number of risks in the normal course
of its business that have the potential to affect its operating performance.
The following are some of the business risks specific to Financial Services'
operations. Please also refer to section 9.0 of our 2007 Financial Report for
a discussion of some other industry-wide and Company-wide risks affecting the
business.

    Consumer credit risk

    Financial Services grants credit to its customers through Canadian Tire
MasterCards, retail credit cards, personal loans, line of credit loans and
residential mortgages. With the granting of credit, Financial Services assumes
certain risks such as the failure to accurately predict the creditworthiness
of its customers or their ability to repay debt. Financial Services minimizes
credit risks to maintain and improve the quality of its consumer lending
portfolio by:-   employing sophisticated credit-scoring models to constantly monitor
        the creditworthiness of customers;
    -   using the latest technology to make informed credit decisions for
        each customer account;
    -   adopting technology to improve the effectiveness of the collection
        process; and
    -   monitoring the macro-economic environment, especially with respect to
        consumer debt levels, interest rates, employment levels and income
        levels.Securitization funding risk

    Securitization is an important source of funding for Canadian Tire,
involving the sale of credit card loans to GCCT. Securitization enables
Financial Services to diversify funding sources, and manage risks and capital
requirements. Financial Services' securitization program relies on the
marketability of the asset-backed commercial paper (ABCP) and longer term
notes issued by GCCT as described in section 5.1.4. A decline in the
marketability of the commercial paper and notes would require the Company to
find new sources of funding. Developments since the last half of 2007 to date
in the international credit markets had an impact on some companies'
securitization programs. See sections 5.1.4 and 5.1.5 below.

    Interest rate risk

    The Company's sensitivity to movements in interest rates is substantially
limited to its cash and short-term investments. A one percent change in
interest rates would not materially affect its earnings, cash flow or
financial position.
    Most of Financial Services' revenue is not interest rate sensitive as it
is generated primarily from Canadian Tire MasterCards, which carry a fixed
interest rate appropriate to customer segments with common credit ratings. The
securitization program as described in section 5.1.5 of this MD&A reduces
Financial Services' funding requirements. Canadian Tire constantly monitors
the potential impact of interest rate fluctuations on its fixed versus
floating rate exposure and manages its overall balance to reduce the magnitude
of this exposure.
    As the success of Financial Services is dependent upon its ability to
access capital markets at favourable rates, and given the rapid growth of the
total managed portfolio, maintaining the quality of the total managed
portfolio and securitized loans receivable is a key priority of Financial
Services. For additional information on Canadian Tire's liquidity and capital
market activity, please refer to section 5.1 below.

    Regulatory risk

    Regulatory risk is the risk of negative impact to business activities,
earnings or capital, regulatory relationships or reputation as a result of
failure to comply with or a failure to adapt to current and changing
regulations or regulatory expectations.
    Financial Services' regulatory compliance strategy is to manage
regulatory risk through the promotion of a strong compliance culture and the
integration of solid controls within the Company. Primary responsibility for
compliance with all applicable regulatory requirements rests with senior
management of the Company and extends to all employees.
    Financial Services' Compliance Department is responsible for the
development and maintenance of a legislative compliance management system and
reports on a quarterly basis to CTB's Governance and Conduct Review Committee.
    Specific activities that assist the Company in adhering to regulatory
standards include communication of regulatory requirements, advice, training,
testing, monitoring, reporting and escalation of control deficiencies and
regulatory risks.

    4.0 Capital management

    In order to support our growth agenda and meet the objectives enumerated
in our 2012 Strategic Plan, the Company actively manages its capital in the
manner indicated below.

    4.1 Capital management objectivesThe Company's objectives when managing capital are:

    -   minimizing the after-tax cost of capital; and
    -   maintaining flexibility in capital structure to ensure the ongoing
        ability to execute the Strategic Plan.

    4.2 Definition and management of capital

    In the process of managing the Company's capital, management includes the
following items in its definition of capital:


    ($ in        September      % of September      % of  December      % of
    millions)     27, 2008     total  29, 2007     total  29, 2007     total
    -------------------------------------------------------------------------
    Capital
     components
    Current portion
     of long-term
     debt         $   10.5      0.2%  $  153.1      3.6%  $  156.3      3.4%
    Long-term debt 1,370.3     28.1%   1,013.8     24.0%   1,341.8     28.8%
    Long-term
     deposits        114.5      2.4%       1.1      0.0%       3.8      0.1%
    Other long-term
     liabilities(1)    0.3      0.0%      12.4      0.3%      10.6      0.2%
    Share capital    706.5     14.5%     707.1     16.7%     700.7     15.0%
    Contributed
     surplus             -       - %       1.9      0.0%       2.3      0.0%
    Components of
     accumulated
     other
     comprehensive
     loss(2)         (12.1)   (0.2)%      (6.0)   (0.1)%      (8.5)   (0.2)%
    Retained
     earnings      2,674.3     55.0%   2,339.0     55.5%   2,455.1     52.7%
    -------------------------------------------------------------------------
    Net capital
     under
     management   $4,864.3    100.0%  $4,222.4    100.0%  $4,662.1    100.0%
    -------------------------------------------------------------------------
    (1) Long-term liabilities that are derivative or hedge instruments
        related to capital items only.
    (2) Components of other comprehensive loss relating to capital items
        only.The Company has in place various policies which it uses to manage
capital, including a leverage and liquidity policy and a securities and
derivatives policy. As part of the overall management of capital, Management's
Financial Risk Management Committee and the Audit Committee of the Board of
Directors review the Company's compliance with, and performance against, these
policies.
    In addition, Management's Financial Risk Management Committee and the
Audit Committee of the Board of Directors perform periodic reviews of the
policies to ensure they remain consistent with the risk tolerance acceptable
to the Company and the current market trends and conditions.

    4.3 Constraints on managing capital

    The Company manages its capital structure and makes modifications in
response to changes in economic conditions and the risks associated with the
underlying strategic initiatives. In addition, we are required to comply with
regulatory requirements associated with the operations of CTB, our federally
chartered bank, and other regulatory requirements that impact our business
operations. As part of existing debt agreements, two key financial covenants
are monitored on an on-going basis by Management to ensure compliance with the
agreements. The key covenants are as follows:-   net tangible assets coverage - calculated as:
        -  total assets less intangible assets, current liabilities
           (excluding current portion of long-term debt), and liability for
           employee future benefits
        -  divided by long-term debt (including current portion of long-term
           debt)
    -   limitations on surplus available for distribution to shareholders -
        the Company is restricted from distributions (including dividends and
        redemptions or purchases of shares) exceeding its accumulated net
        income over a defined period.The Company was in compliance with these covenants during the third
quarter of 2008. Under these covenants, the Company currently has significant
flexibility to fund business growth and increase dividend rates within our
existing dividend policy.
    In order to maintain or adjust the capital structure, the Company may
adjust the amount of dividends paid to shareholders, purchase shares for
cancellation pursuant to normal course issuer bids (NCIB), issue new shares,
issue new debt, issue new debt to replace existing debt with different
characteristics, engage in additional sale and leaseback transactions of real
estate properties and/or increase or decrease the amount of sales of loan
receivable to Glacier Credit Card Trust.

    4.3.1 CTB's regulatory environment

    The Company's wholly-owned subsidiary, CTB, manages its capital under
guidelines established by the Office of the Superintendent of Financial
Institutions Canada (OSFI). The regulatory capital guidelines measure capital
in relation to credit, market and operational risks. CTB has a capital
management policy, capital plan, and procedures and controls which it utilizes
to achieve its goals and objectives. CTB's objectives include:-   providing sufficient capital to maintain the confidence of
        depositors;
    -   being an appropriately capitalized institution, as measured
        internally, defined by regulatory authorities and compared with CTB's
        peers; and
    -   achieving the lowest overall cost of capital consistent with
        preserving the appropriate mix of capital elements to meet target
        capitalization levels.OSFI's current regulatory capital guidelines classify capital into two
tiers. At the end of the third quarter of 2008, Tier 1 capital included common
shares and retained earnings reduced by net securitization exposures. CTB
currently does not hold any instruments in Tier 2 capital. Risk-weighted
assets, referenced in the regulatory guidelines, include all on-balance sheet
assets weighted for the risk inherent in each type of asset as well as an
operational risk component based on a percentage of average risk-weighted
revenues.
    CTB's ratios are above internal minimum targets of 12.0 percent for Tier
1 and total capital ratios and within internal maximum targets of 11.0 times
for the assets-to-capital multiple. OSFI's minimum Tier 1 and total capital
ratios for Canadian banks are 7 percent and 10 percent, respectively. OSFI
will consider applications for authorized assets-to-capital multiples in
excess of 20 times for institutions that meet certain requirements. OSFI has
currently authorized CTB to maintain a maximum assets-to-capital multiple of
12.5.
    During the third quarter of 2008, CTB complied with the capital
guidelines issued by OSFI under the "International Convergence of Capital
Measurement and Capital Standards - A Revised Framework" (Basel II). For the
comparative period, CTB complied with the capital guidelines issued by OSFI
under the then current Basel I Capital Accord (Basel I).

    4.4 Key performance measures

    Management also monitors capital and measures our capital position
according to certain key performance measures identified in the table below.September    September     December
                                          27, 2008   29, 2007(1)  29, 2007(1)
    -------------------------------------------------------------------------
    Debt ratio
      Long-term debt to total
       capitalization(2)                     25.2%        26.0%        31.2%
    Coverage ratio
      Interest coverage(3)               8.1 times   11.5 times   10.7 times
    -------------------------------------------------------------------------
    (1) 2007 results have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. Please refer to
        section 13.1 for additional information.
    (2) Long-term debt includes the current portion of long-term debt.
        Capitalization is based on current and long-term debt, commercial
        paper, long-term deposits, future income taxes, other long-term
        liabilities and shareholders' equity.
    (3) Interest coverage is calculated on a rolling 12-month basis after
        annualizing short -term and long-term interest on long-term debt
        issued and retired during the period. See section 14.0 for additional
        information on non-GAAP measures.The interest coverage ratio has declined from the previous two years due
to the significant increase in interest expense which can be explained as
follows:-   higher interest rate on Q4 2007 MTN issuance;
    -   additional utilization of commercial paper due to a delay in the GCCT
        refinancing;
    -   an increase in retail banking interest of approximately $3.8 million;
        and
    -   mark-to-market adjustments

    As noted above in section 4.3, we are in compliance with our debt
covenants.

    5.0 Financing

    Canadian Tire has a number of alternative financing sources in order to
ensure that the appropriate level of liquidity is available to meet our
strategic objectives. These sources may be summarized as follows:


    Summary of Canadian Tire's financing sources
    -------------------------------------------------------------------------
    Financing Source           Amount Available         Description

    Committed bank lines of      $1.22 billion  Provided by 11 domestic and
     credit                                     international banks and
                                                includes support for the
                                                $800 million commercial
                                                paper program noted below
                                                which is covered by the bank
                                                lines on a dollar for dollar
                                                basis. There was
                                                approximately $50 million
                                                drawn on the bank lines as
                                                at September 27, 2008.

    Commercial paper program      $800 million  $367 million was outstanding
                                                as at September 27, 2008.

    Medium Term Notes (MTN)       $750 million  $300 million has been issued
    program                                     to date under the current
                                                Base Shelf Prospectus.

    Securitization of receivables  Transaction  Securitization transactions
                                      specific  handled through Glacier
                                                Credit Card Trust have
                                                historically proved to be a
                                                relatively cost-effective
                                                form of financing. As of
                                                September 27, 2008, Financial
                                                Services has securitized
                                                $635 million of credit card
                                                receivables in 2008.

    Broker deposits                  Unlimited  This avenue of fund-raising
                                                ramped up in the third
                                                quarter and funds are readily
                                                available through broker
                                                networks. As at the end of
                                                the third quarter, Financial
                                                Services held $89.7 million
                                                in broker deposits.

    Sale/leaseback transactions    Transaction  Additional sources of funding
                                      specific  available on strategic
                                                transactions involving
                                                Company owned properties as
                                                appropriate. Completed two
                                                sale and leaseback
                                                transactions which raised
                                                $214 million in the quarter.As of September 27, 2008, the GCCT commercial paper program has access of
up to $1.0 billion of the total Canadian Tire committed lines and GCCT had
achieved compliance with DBRS® Global Liquidity Standards.
    During the current quarter, the market conditions surrounding the
liquidity of ABCP continued to experience some volatility; however, GCCT has
generally been able to roll over its commercial paper, albeit at varying
spreads and terms. There continues to be constraints on the amount of ABCP
that GCCT is able to issue, as investors are cautious and demand remains
limited. As of September 27, 2008, $135 million of GCCT's commercial paper was
outstanding, fully backed by the bank credit lines.

    Debt market conditions

    In August 2007, global debt markets began to experience a credit crisis
linked to problems in the U.S. sub-prime mortgage market. This caused a
worldwide reassessment of the financial risks involved with asset-backed
securities and led to market disruptions, constrictions and increased interest
rates for borrowers looking to refinance their short-term debt.
    Canadian Tire participates in the asset-backed security markets through
the use of commercial paper and issuance of MTN. GCCT issued five-year MTN in
the first quarter of 2008 and continues to refinance certain of its maturing
commercial paper, demonstrating that access to the capital markets exists but
is challenging.
    In November 2008, a five-year $570 million GCCT-issued MTN will be
maturing. As per the Series Purchase Agreement, GCCT is required to accumulate
the principal liquidation amounts for these notes from credit card collections
over the three months preceding maturity into the Liquidation Principal
Funding account. The total required funding for the repayment of the notes has
been accumulated and will be repaid to the noteholders on November 20, 2008.
    Should the Company be unable to complete a credit card securitization
transaction in the near term due to the unstable financial market conditions,
the Company believes it has access to other sufficient sources of financing.
    In November 2007, Canadian Tire received confirmation from its rating
agencies on its various funding programs, all of which had a stable outlook.
As at September 27, 2008 there has been no change in the ratings.Credit rating summary                     DBRS            S&P
    -------------------------------------------------------------------------
    Canadian Tire
      Commercial paper                      R-1 (low)   A-1 (low) (Cdn)
      Debentures                             A (low)         BBB+
      Medium-term notes                      A (low)         BBB+

    Glacier Credit Card Trust(1)
      Asset-backed commercial paper         R-1 (high)        -
      Asset-backed senior notes                AAA           AAA
      Asset-backed subordinated notes           A             A

    Trend or outlook                         Stable         Stable
    -------------------------------------------------------------------------
    (1) Asset-backed Series 2002 Senior and Subordinated Notes were
        discontinued on January 2, 2008.Broker deposits

    During the fourth quarter of 2007, CTB began piloting the use of broker
GIC deposits. CTB broker deposits raise cash through sales of GICs through
brokers rather than directly to the retail customer and are typically offered
at a higher interest rate compared to retail GICs. Individual balances up to
$100,000 are Canadian Deposit Insurance Corporation (CDIC) insured and CTB
broker GICs are offered in one year to five year terms and all issued GICs are
non-redeemable prior to maturity. Given that the overall size of the broker
GIC market is estimated to be $57 billion, CTB believes that there is ample
room in the market to take advantage of CTB broker GIC deposits as an
alternative funding source to the securitization of credit card receivables at
reasonable and cost-effective interest rates to fund operations.
    As at the end of the third quarter, CTB had approximately $90 million in
short-term and long-term CTB broker deposits outstanding on its balance sheet.
CTB believes that there is potential to generate further increases in this
funding source in the future, depending on the time of year and on market
conditions.

    Foreign exchange hedging program

    The Company has significant demand for United States dollars, due to
global sourcing. To mitigate the impact of fluctuating foreign exchange rates
on the cost of our globally sourced merchandise and consequently earnings, the
Company had, and continues to have, a comprehensive foreign currency hedging
program. The Company's Foreign Exchange Risk Management Policy has specific
guidelines for determining the minimum hedge percentage required for purchases
of foreign-denominated goods and services that are expected to be completed in
the period from one month to 18 months forward. Consequently, when dramatic
swings in foreign currency rates arise, as experienced since the end of the
third quarter of 2008, the Company has fixed the foreign currency impact for
US denominated purchases for the balance of 2008 and more than half of 2009,
as a majority of the US dollars required are available at hedge rates well
below the current spot reference rate. The current foreign currency hedge
portfolio allows the Company to have a significant amount of margin stability
for 2008 and 2009 and the Company may be able to pass on changes in foreign
currency exchange rates through pricing, subject to competitive conditions.

    5.1 Funding program

    5.1.1 Funding requirements

    We fund our capital expenditures, working capital needs, dividend
payments and other financing needs, such as debt repayments and Class A Non-
Voting Share purchases under the NCIB, from a combination of sources. In the
third quarter of 2008, the primary sources of funding were:-   $ 367 million of cash generated from the issuance of commercial
        paper;
    -   $ 214 million of cash generated from the sale and leaseback of
        property;
    -   $140 million of cash generated from operating activities before other
        changes in working capital; and
    -   $ 121 million of cash arising from an increase in net deposits.5.1.2 Cash and cash equivalents

    At September 27, 2008, the Company's cash and cash equivalents totaled
$2.1 million compared to a negative cash and cash equivalents position of
$84.2 million at September 29, 2007. There was $367.2 million of commercial
paper outstanding at the end of the third quarter of 2008 compared to
$135.4 million of commercial paper outstanding at the end of the third quarter
of 2007. During the third quarter of 2008, we used cash primarily for the
following:-   $382 million for the net growth in new loans receivable;
    -   $380 million for the accumulation of the maturing $570 million GCCT
        MTN to be repaid in November 2008; and
    -   $122 million for additions to property and equipment.5.1.3 Working capital

    Minimizing our working capital requirements continues to be a long-term
priority in order to maximize cash flow for use in the operations of the
Company. The table below shows the change in the value of our working capital
components at the end of the third quarter of 2008 from the third quarter of
2007.Comparable working capital components(1)

                                                                   Increase/
                                                                   (decrease)
                                         September    September   in working
    ($ in millions)                       27, 2008     29, 2007      capital
    -------------------------------------------------------------------------
    Accounts receivable                  $   584.1    $   519.4    $    64.7
    Loans receivable                       1,314.6        847.2        467.4
    Merchandise inventories                1,301.2      1,083.7        217.5
    Prepaid expenses and deposits             56.3         54.3          2.0
    Income taxes recoverable                  83.7        117.4        (33.7)
    Accounts payable and other            (1,417.5)    (1,525.9)       108.4
    -------------------------------------------------------------------------
                                                                   $   826.3
    -------------------------------------------------------------------------
    (1) 2007 figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. See section 13.1
        for additional information.The increase in loans receivable is due to increases in the mortgage
portfolio, credit card loans portfolio, line of credit account balances and
the repurchase of the securitized personal loan portfolio in May 2008. The
balance is also higher compared to the third quarter of 2007 due to the timing
of securitization transactions. Since a transaction was not completed during
the third quarter of 2008, a greater amount of receivables is being reflected
on the Consolidated Balance Sheet than would otherwise have been if the
receivables been securitized.

    The increase in merchandise inventories is due to:-   an increase in the amount of globally sourced product, which has
        longer lead times due to increases required by certain business
        partners which comprise the global supply chain; and
    -   Management's decision to keep seasonal inventory from the spring and
        summer seasons in storage to sell next year versus heavily
        discounting or otherwise disposing of the goods.Plans are in place to manage inventories back to planned levels over the
next several quarters.
    The decrease in accounts payable and other is largely due to a decrease,
and consequent reclassification to accounts receivable, of foreign exchange
derivatives resulting in their increase in value due to movement in the
Canadian dollar exchange rate. Payables also decreased due to the timing of a
financing arrangement for Petroleum (which will commence in the fourth quarter
of 2008 compared to beginning in September 2007), partially offset by an
increase in merchandise payables due to higher inventory levels.

    5.1.4 Asset-backed commercial paper

    Background

    The market for Canadian third-party asset-backed commercial paper, which
was greatly impacted by the global disruption in the market experienced in
August 2007, has been addressed in a formal restructuring proposal. On
September 19, 2008, the Supreme Court of Canada denied a challenge to the
restructuring plan clearing the way for the committee of investors to proceed
with the implementation. Under the plan investors will receive the
restructured notes with maturities up to nine years. The new notes were
expected in October 2008 however the restructuring plan has been delayed due
to the recent market upheavals and it is expected that the restructuring will
close by the end of November 2008. The restructuring provides investors with
new long-term notes to replace the short-term ABCP that is currently illiquid.
More than 90 percent of the Company's $8.9 million of affected ABCP will be
converted into notes that will pay interest at the rate paid on banker's
acceptance notes less 50 basis points until maturity, which is currently
expected to be between 2016 and 2017. The committee responsible for the
restructuring proposal is working to ensure that a secondary market in the new
notes develops so that investors will have an opportunity to sell their new
notes, should they so choose.

    Valuation and classification

    During 2007, the Company recorded a $1.3 million before-tax provision for
impairment of the ABCP in the Consolidated Statement of Earnings based on
management's best estimate of impairment at the time. Due to additional
information provided to investors who hold ABCP through the formal
restructuring proposal, the Company recorded an additional $1.0 million
before-tax provision for impairment of the ABCP in the first quarter of 2008,
bringing the total charge for impairment to $2.3 million or 25 percent. The
Company's valuation is representative of the expected outcome of the plan, and
as such no further write-down was recorded in the second and third quarters of
2008.
    The valuation model used by the Company to estimate the fair value of the
ABCP incorporates discounted cash flows considering the best available
information regarding market conditions and other factors that a market
participant would consider for such investments.
    Consistent with the terms of the restructuring proposal, the Company has
classified the remaining balance of this investment in ABCP of $6.6 million as
long-term investments on the Consolidated Balance Sheet.

    Assumptions underlying valuation

    The valuation assumes a redemption term of approximately nine years
corresponding to the expected maturities of the ABCP held by the Company. As
indicated above, the Company's valuation assumes that the replacement notes
will bear interest rates similar to short-term instruments and that such rates
would be commensurate with the nature of the underlying assets and their
associated cash flows. Assumptions have been made as to the amount of
restructuring and other costs that the Company will bear.
    There still remains some uncertainty regarding the value of the
underlying assets, the amount and timing of cash flows and whether a secondary
market can be established for the new notes and this could give rise to a
further change in the value of the Company's investment in ABCP which would
impact the Company's future earnings. While these changes could positively or
negatively affect the Company's future earnings, it would not be considered
material to the Company's overall financial position, given the relatively
small amount of ABCP held at September 27, 2008.

    Impact on debt covenants and ratings

    The write-down and reclassification of the Company's investment in ABCP
has had no effect to date on the Company's debt covenants, debt ratings or
compliance with banking regulations governing the Financial Services segment
or CTB.
    As referenced in section 5.0, due to the amount of funds we have
available through committed lines of credit and various other forms of
funding, the Company has sufficient credit facilities to satisfy its financial
obligations as they come due and does not expect any impact on its business as
a result of the current third-party ABCP liquidity issue.

    5.1.5 Loans receivable

    Our loans receivable securitization program is designed to provide a
cost-effective source of funding for Financial Services. Loans receivable were
as follows at the indicated dates:September    September
    ($ in millions)                                    27, 2008     29, 2007
    -------------------------------------------------------------------------
    Securitized                                       $ 2,471.3    $ 2,694.5
    Unsecuritized                                       1,431.9        932.4
    -------------------------------------------------------------------------
    Net managed loans receivable                      $ 3,903.2    $ 3,626.9
    -------------------------------------------------------------------------Net managed loans receivable continued to increase over the last 12
months as customers' use of the Canadian Tire Options MasterCard and Canadian
Tire Gas Advantage MasterCard grew and mortgage volumes increased. At the end
of the third quarter of 2008, net managed loans receivable were 7.6 percent
higher than at the end of the third quarter of 2007.
    CTB sells co-ownership interests in credit card loans to GCCT. The
Company does not have a controlling interest in GCCT, so we do not include
financial results of GCCT in our Consolidated Financial Statements.
    We record the sale of loans receivable in accordance with CICA's
Accounting Guideline 12, "Transfers of Receivables". Please see note 1 in the
Notes to the 2007 Consolidated Financial Statements.
    We expect the continued growth in the number and average balances of
Canadian Tire MasterCard credit card accounts to lead to an increase in total
loans receivable in 2008. Financial Services expects to continue to fund this
increase from the sale of co-ownership interests in credit card loans to GCCT,
deposit raising by CTB and bank borrowing. GCCT is a third party trust that
was formed to buy our credit card loans and also issues debt to third party
investors to fund its credit card loans purchases. The success of the
securitization program is dependent on GCCT's ability to obtain funds from
third parties by issuing debt instruments with high credit ratings. Please
refer to section 5.0 above for a listing of GCCT's credit ratings and
prevailing market conditions.
    The trustee and custodian for GCCT, Computershare Trust Company of
Canada, manages the co-ownership interest and acts as agent for, and on behalf
of, CTB and GCCT, as the owners of the co-ownership interests. Pursuant to an
asset purchase agreement dated February 26, 2007, all rights and obligations
of The Canada Trust Company as custodian have been assigned to Computershare
Trust Company of Canada effective September 5, 2008. BNY Trust Company of
Canada acts as indenture trustee with respect to GCCT and manages the security
interests of the holders of the senior and subordinated notes issued by GCCT.
We are currently not aware of any events, commitments, trends or uncertainties
that may have a negative impact on our arrangement with GCCT.

    6.0 Equity

    The book value of Common and Class A Non-Voting Shares at the end of the
third quarter of 2008 was $41.45 per share compared to $36.61 at the end of
the third quarter of 2007.
    We have a policy of repurchasing Class A Non-Voting Shares to offset the
dilutive effect of shares issued to fulfill the Company's obligations under
various employee profit sharing, stock option and share purchase plans and the
dividend reinvestment plan. In the long term, these repurchases are expected
to offset the issuance of new Class A Non-Voting Shares. In addition, the
Company may purchase additional Class A Non-Voting Shares if the Board
determines, after consideration of market conditions and the Company's
financial flexibility and investment opportunities, that a purchase of
additional Class A Non-Voting Shares is an appropriate means of enhancing the
value of the remaining Class A Non-Voting Shares.
    On February 7, 2008, we announced our intention to initiate a NCIB to
purchase up to 3.6 million of the issued and outstanding Class A Non-Voting
Shares over the 12-month period ending February 18, 2009.
    A NCIB is a bid by a listed company to buy back its shares, up to a
prescribed number, on a stock exchange, subject to certain rules that protect
investors. A total of approximately 0.5 million Class A Non-Voting Shares were
purchased in 2007 under the previous NCIB.Shares outstanding

                                                      September    September
                                                       27, 2008     29, 2007
    -------------------------------------------------------------------------
    Class A Non-Voting Shares (CTC.A)
      Shares outstanding at beginning of year        78,048,062   78,047,456
      Shares issued under plans(1)                      495,043      372,463
      Shares purchased under NCIB                      (494,800)    (287,000)
    -------------------------------------------------------------------------
      Shares outstanding at end of quarter           78,048,305   78,132,919
    Common Shares (CTC)
      Shares outstanding at beginning and end of
       the quarter                                    3,423,366    3,423,366
    -------------------------------------------------------------------------
    (1) We issue shares under various employee profit sharing and share
        purchase plans, and the dividend reinvestment plan.Dividends

    Dividends of approximately $17.0 million were declared on Common and
Class A Non-Voting Shares in the third quarter of 2008 compared to dividends
of $15.1 million in the third quarter of 2007. The increase in dividends
declared reflected the Board of Directors' decision in February 2008 to
increase the annual dividend rate by 13.5 percent from $0.74 per share to
$0.84 per share. The third quarterly dividend at the 2008 rate was declared on
August 7, 2008 in the amount of $0.21 per share payable on December 1, 2008 to
shareholders of record as of October 31, 2008.Dividend policy
    -------------------------------------------------------------------------
    Canadian Tire's policy is to maintain dividend payments equal to
    approximately 15 to 20 percent of the prior year's normalized basic net
    earnings per share, after giving consideration to the period-end cash
    position, future cash requirements, capital market conditions and
    investment opportunities. Normalized earnings per share for this purpose
    include gains and losses on the ordinary course disposition of property
    and equipment.
    -------------------------------------------------------------------------7.0 Investing activities

    7.1 Q3 2008 Capital expenditures program

    Canadian Tire's capital expenditures totaled $131 million in the third
quarter of 2008 (as disclosed in the Consolidated Financial Statements of Cash
Flows, see note 12 in the Notes to the Consolidated Financial Statements),
approximately 21 percent lower than the $165 million spent in the third
quarter of 2007. These capital expenditures were comprised of:-   $85 million for real estate projects, including projects associated
        with the rollout of CTR's new store projects;
    -   $12 million for the Eastern Canada distribution centre;
    -   $14 million for information technology; and
    -   $20 million for other purposesOverall, capital investments for real estate projects has slowed as the
20/20 store rollout nears completion and a large majority of the investment in
the construction of the Eastern Canada distribution centre will be
substantially completed this year. We have also begun to focus on the next
store concept renewals, including our small market stores, which are less
capital-intensive.

    7.2 2008 Capital expenditures plan

    The 2008 capital plan was originally to incur gross capital expenditures
of $588 million and has now been revised to be in the range of $520 million to
$550 million. 2008 gross capital expenditures are now forecasted as follows,
which total $543 million:-   $385 million for real estate projects, including $244 million
        associated with the rollout of CTR's store network;
    -   $ 77 million for the Eastern Canada distribution centre;
    -   $ 61 million for information technology; and
    -   $ 20 million for other purposesThese expenditures have been partially funded by various sale and
leaseback transactions originally expected to be $145 million but which are
now estimated to net $214 million.

    8.0 Foreign operations

    Since the late 1970s, the Company has established operations outside
Canada for a variety of business purposes. This has resulted in a portion of
the Company's capital and accumulated earnings being in wholly-owned foreign
subsidiaries. As there are currently no plans to repatriate the capital and
earnings, Canadian and foreign taxes that might arise upon such repatriation
have not been provided for. These funds have been accumulated in the following
international operations:-   U.S.-based subsidiaries hold highly rated short-term securities and
        loans to the Company and its wholly-owned Canadian subsidiaries. The
        capital and earnings of these U.S.-based subsidiaries arose from
        investments made to offset net operating losses incurred by U.S.
        retail operations closed in the 1980s and 1990s and from the
        reinsurance of risks relating to certain insurance products marketed
        to customers of Financial Services and other reinsurance activities;
    -   subsidiaries operating in the Pacific Rim have provided the Company
        with a variety of important services related to product sourcing,
        logistics and vendor management. During 2007, several representative
        offices of the Company were created to perform the activities
        formerly provided by the subsidiaries due to changes in local
        regulations and the need to enhance operational efficiencies; and
    -   a Bermuda-based reinsurance company was established in 2004 to
        reinsure the risk of certain insurance products marketed to customers
        of Financial Services. In addition to its reinsurance activities,
        this company invests in highly rated short-term securities and makes
        loans to the Company and its wholly-owned Canadian subsidiaries.9.0 Tax matters

    In the ordinary course of business, the Company is subject to ongoing
audits by tax authorities. While the Company believes that its tax filing
positions are appropriate and supportable, from time to time certain matters
are reviewed and challenged by the tax authorities.
    The main issues challenged by the Canada Revenue Agency (CRA) relate to
the tax treatments of commissions paid to foreign subsidiaries of the Company
(covering periods from 1995 to 2007), and dividends received on an investment
made by a wholly-owned subsidiary of the Company related to reinsurance
(covering periods from 1999 to 2003). The applicable provincial tax
authorities have reassessed and are also expected to issue further
reassessments on these matters for the corresponding periods.
    The Company has agreed with the CRA to settle the commissions issue for
the period 1995-2003, although the determination of the final tax liability
pursuant to the settlement is subject to the verification by the CRA of
certain information provided by the Company. The Company believes the
provincial tax authorities will also reassess on the same basis. The Company
does not have a significant exposure on this issue subsequent to the 2003
taxation year.
    The reassessments with respect to the dividends received issue are based
on multiple grounds, some of which are highly unusual. The Company has
appealed the reassessments and the matter is currently pending before the Tax
Court of Canada. If the CRA (and applicable provincial tax authorities) were
entirely successful in their reassessments - an outcome that the Company and
its tax advisors believe to be unlikely - it is estimated that the total
liability of the Company for additional taxes, interest and penalties could be
approximately $188.3 million. Although the Company has appealed these
reassessments, current tax legislation requires the Company to remit to the
CRA and its provincial counterparts approximately $116.8 million related to
this matter, of which $112.6 million had been remitted by the end of the
quarter.
    The Company regularly reviews the potential for adverse outcomes in
respect of tax matters. The Company believes that the ultimate disposition of
the settlements, finalization on the commissions issue, resolution of the
dividends received issue and other tax matters, will not have a material
adverse effect on its liquidity, consolidated financial position or results of
operations because the Company believes that it has adequate provision for
these tax matters. Should the ultimate tax liability materially differ from
the provisions, the Company's effective tax rate and its earnings could be
affected, positively or negatively, in the period in which the matters are
resolved.
    Income tax expense for the third quarter of 2008 has been favourably
impacted by the net tax effect of adjustments to taxes on the sale and
leaseback of various properties ($6.6 million) and revisions to the estimate
of tax provisions.

    10.0 Off-balance sheet arrangements

    10.1 Glacier Credit Card Trust

    As noted earlier, GCCT was formed to buy our credit card loans and it
issues debt to third-party investors to fund its credit card loans purchases.
Refer to section 5.1.5 of this MD&A for additional information on GCCT.

    10.2 Trust financing for Dealers

    A financing program has been established to provide an efficient and
cost- effective way for Dealers to access the majority of the financing they
require for their store operations. Refer to MD&A section 8.2 of our 2007
Financial Report for additional information on this program.

    10.3 Bank financing for Dealers and PartSource franchisees

    We have guaranteed the bank debt of some Dealers and some PartSource
franchisees. Refer to MD&A section 8.3 of our 2007 Financial Report for
additional information on this program.

    10.4 Derivative financial instruments

    We use derivative financial instruments to manage our exposure to changes
in interest rates and foreign currency exchange rates. We also use equity
derivative contracts to hedge certain future stock-based compensation
expenses. We do not use hedging to speculate, but rather as a risk management
tool. Refer to MD&A section 8.4 of our 2007 Financial Report for additional
information on derivative financial instruments.

    11.0 Enterprise risk management

    To preserve and enhance shareholder value, the Company approaches the
management of risk strategically through its Enterprise Risk Management (ERM)
framework. Introduced in 2003, the ERM framework sets out principles and tools
for identifying, evaluating, prioritizing and managing risk effectively and
consistently across the Company.
    The ERM framework and the identification of principle risks that the
Company manages on an ongoing basis is described in detail in section 9.0 of
the MD&A in our 2007 Financial Report.
    Management reviews risks on an ongoing basis and did not identify any new
principal risks during the third quarter of 2008.

    11.1 Financial instruments

    The following discussion on risks and risk management includes some of
the required disclosures under the CICA Handbook Section 3862 - Financial
Instruments - Disclosures related to the nature and extent of risks arising
from financial instruments, as required by the standard. Further information
is also available in note 10 of the Notes to the Consolidated Financial
Statements.
    The Company is exposed to a number of risks associated with financial
instruments that have the potential to affect its operating and financial
performance. The Company's primary financial instrument risk exposures are
allowances for credit losses and liquidity risk. The Company also has
financial risk exposures to foreign currency risk and interest rate risk which
may be managed through the use of derivative financial instruments to manage
these risks. The Company does not use derivative financial instruments for
trading or speculative purposes.

    Allowance for credit losses

    The Company's allowances for receivables are maintained at levels which
are considered adequate to absorb future credit losses. A continuity of the
Company's allowances for credit losses is as follows:Credit card loans     Other loans(1)
                                     ----------------------------------------
                                     September September September September
    (Dollars in millions)             27, 2008   29 2007  27, 2008   29 2007
                                     ----------------------------------------
    Balance, beginning of year        $   51.5  $   30.4  $    2.7  $    2.9
    Provision for credit losses           47.1      42.6       8.2       4.5
    Recoveries                            10.7       7.4       0.4       0.1
    Write-offs                           (59.3)    (41.8)     (7.5)     (4.5)
                                     ----------------------------------------
    Balance, end of period            $   50.0  $   38.6  $    3.8  $    3.0
                                     ----------------------------------------

                                      Accounts receivable      Total(2)
                                     ----------------------------------------
                                     September September September September
    (Dollars in millions)             27, 2008   29 2007  27, 2008   29 2007
                                     ----------------------------------------
    Balance, beginning of year        $    5.0  $    4.6  $   59.2  $   37.9
    Provision for credit losses            0.8       0.2      56.1      47 3
    Recoveries                             0.3      (0.2)     11.4       7.3
    Write-offs                            (2.5)     (0.1)    (69.3)    (46.4)
                                     ----------------------------------------
    Balance, end of period            $    3.6  $    4.5  $   57.4  $   46.1
                                     ----------------------------------------

    (1) Other loans include personal loans, mortgages loans and lines of
        credit loans.
    (2) Relates to Company owned receivables.

    Foreign currency risk

    The Company has significant demand for foreign currencies, primarily
United States dollars, due to global sourcing. However, it mitigates its
exposure to foreign exchange rate risk through active hedging programs and
through its ability, subject to competitive conditions, to pass on changes in
foreign currency exchange rates through pricing. Refer to section 5.0 above
for additional information on our foreign currency hedging program.

    Liquidity risk

    The following table summarizes the Company's contractual maturity for its
financial liabilities. The table includes both interest and principal cash
flows.

    (Dollars in millions)               1 year   2 years   3 years   4 years
    -------------------------------------------------------------------------
    Deposits                          $  186.5  $   11.4  $   13.1  $    3.8
    Accounts payable and other(1)      1,808.5         -         -         -
    Long-term debt                         7.1     465.0       9.0      20.9
    Interest payment                      92.8      84.6      50.4      49.2
    Other                                    -       5.5         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total                             $2,094.9  $  566.5  $   72.5  $   73.9
    -------------------------------------------------------------------------

    (Dollars in millions)              5 years Thereafter    Total
    ---------------------------------------------------------------
    Deposits                          $   86.2  $      -  $  301.0
    Accounts payable and other(1)            -         -   1,808.5
    Long-term debt                         7.8     863.6   1,373.4
    Interest payment                      48.8     677.4   1,003.2
    Other                                  0.1       7.2      12.8
    ---------------------------------------------------------------
    ---------------------------------------------------------------
    Total                             $  142.9  $1,548.2  $4,498.9
    ---------------------------------------------------------------

    (1) Includes bank indebtedness and commercial paper.Interest rate risk

    The Company is exposed to interest rate risk, which it manages through
the use of interest rate swaps. The Company has a policy in place whereby a
minimum of 75 percent of its long-term debt (term greater than one year) must
be at fixed versus floating interest rates. The Company is in compliance with
the policy.

    11.2 Other risks

    In addition to the Principal Risks identified in our 2007 Financial
Report other business risks that may cause actual results or events to differ
materially from those forecasted in this MD&A include:-   expansion activity planned for Mark's, PartSource, Petroleum and CTR,
        (the retail businesses), as well as the associated supply chain
        infrastructure, could be affected by weather conditions that could
        impact the timing of construction;
    -   the Company's ability to acquire and develop real estate properties,
        obtain municipal and other required government approvals, access
        construction labour and materials at reasonable prices, lease
        suitable properties and access sufficient funds from capital markets
        to finance the development of properties could also impact the timing
        of construction;
    -   expansion activity planned for the retail businesses, the associated
        supply chain infrastructure and Financial Services could be
        negatively affected by the Company's ability to access sufficient
        funds, in a cost- effective manner, to finance the building projects
        due to difficulties experienced in the capital markets;
    -   expansion activity for CTR could also be affected by the ability of
        our Dealers to secure financing through the Trusts referenced in
        section 10.0 or through other means;
    -   unseasonable weather patterns could affect the sales of seasonal
        merchandise at CTR and Mark's throughout the year, particularly in
        the second and fourth quarters, which historically are these
        divisions' largest selling periods;
    -   adverse environmental occurrences could damage the Company's
        reputation or threaten its licences to operate, particularly in the
        Petroleum division;
    -   changes in commodity prices could affect the profitability of
        Petroleum, CTR and Mark's;
    -   fluctuating foreign currency exchange rates could impact cross-border
        shopping patterns and employment levels in the manufacturing and
        export sectors and, consequently, negatively impact consumer spending
        practices;
    -   disruptions in the supply of gasoline could affect Petroleum's
        revenue and earnings;
    -   the earnings of Financial Services could be affected by customers'
        inability to repay their Canadian Tire credit card or loan balances
        or by an unsatisfactory response to the retail banking initiative;
        and
    -   failure to comply with applicable laws and regulations could result
        in sanctions and financial penalties by regulatory bodies that could
        impact our earnings and reputation. Areas of compliance include
        environmental, health and safety, competition law, transportation of
        dangerous goods, customs and excise tax and laws and regulations
        governing financial institutions.

    We cannot provide any assurance that forecasted financial or operational
performance will actually be achieved, or if it is, that it will result in an
increase in the price of Canadian Tire shares.

    12.0 Contractual obligations

    Contractual obligations due by period

                                        In the
                                     remaining
                                         three  In years  In years
                                        months    2009 -    2011 -     After
    ($ in millions)            Total   of 2008      2010      2012      2012
    -------------------------------------------------------------------------
    Long-term debt          $1,325.9  $    0.5  $  460.3  $   15.0  $  850.1
    Capital lease
     obligations                47.5       1.8      13.2      14.2      18.3
    Operating leases         2,144.5      57.4     439.7     368.7   1,278.7
    Purchase obligations       811.4     552.2     188.3      45.3      25.6
    Other obligations           27.3       2.0      11.8       7.8       5.7
    -------------------------------------------------------------------------
    Total contractual
     obligations            $4,356.6  $  613.9  $1,113.3  $  451.0  $2,178.4
    -------------------------------------------------------------------------

    (1) The long-term debt number in the Consolidated Balance Sheet has been
        adjusted by $7.4 million due to the implementation of the new
        Financial Instrument standard.13.0 Changes in accounting policies

    The numbers indicated in this MD&A follow the same accounting policies
and methods of their application as the most recently issued annual financial
statements for the 52 weeks ended December 29, 2007 (contained in our 2007
Annual Report), except as noted below.

    13.1 Merchandise inventories

    Effective, December 30, 2007 (the first day of the Company's 2008 fiscal
year), the Company implemented, on a retrospective basis with restatement, the
new CICA Handbook Section 3031 - Inventories, which is effective for interim
and annual financial statements for fiscal years beginning on or after January
1, 2008.
    This new standard provides guidance on the determination of cost and
requires inventories to be measured at the lower of cost and net realizable
value. The cost of inventories includes the cost of purchase and other costs
incurred in bringing the inventories to their present location and condition.
Costs such as storage costs, administrative overheads that do not contribute
to bringing the inventories to their present location and condition, and
selling costs are specifically excluded from the cost of inventories and are
expensed in the period incurred. Reversals of previous write-downs to net
realizable value are now required when there is a subsequent increase in the
value of inventories. The cost of inventories should be determined using
either a first-in, first-out or weighted average cost formula. Techniques for
the measurement of cost of inventories, such as the retail method or standard
cost method, may be used for convenience if the results approximate actual
cost. The new standard also requires additional disclosures including the
accounting policies adopted in measuring inventories, the carrying amount of
inventories, amount of inventories recognized as an expense during the period,
the amount of write-downs during the period and the amount of any reversal of
write-downs that is recognized as a reduction of expenses.
    In order to correspond with the new standard, the Company's new policy
states that merchandise inventories are carried at the lower of cost and net
realizable value, with cost being determined as weighted average cost.
    As a result of the retrospective implementation of this new standard, the
cumulative impact on previously reported balances on the following dates is as
follows:Increase/(Decrease)
    -------------------------------------------------------------------------
                                                December September  December
    ($ in millions)                             29, 2007  29, 2007  30, 2006
    -------------------------------------------------------------------------
    Retained earnings                           $   14.2  $    8.0  $   20.1
    Inventories                                     22.0      11.6      31.5
    Income taxes recoverable                        (5.8)      1.0         -
    Future income tax assets                        (2.0)     (5.3)     (5.3)
    Accounts payable and other                         -      (0.7)      0.6
    Income taxes payable                               -         -       5.5
    -------------------------------------------------------------------------In addition, the impact of the retrospective impact on net earnings for
the 13 weeks ended September 29, 2007 was a reduction of $3.7 million, or
$0.04 per share and for the 26 weeks ended September 29, 2007 was a reduction
of $12.2 million, or $0.15 per share. See note 2 in the Notes to the
Consolidated Financial Statements for additional information.

    13.2 Capital management disclosures

    Effective December 30, 2007, the Company implemented the new CICA
Handbook Section 1535 - Capital Disclosures which is effective for fiscal
years beginning on or after October 1, 2007. The new standard requires
entities to disclose information about their objectives, policies and
processes for managing capital, as well as their compliance with any
externally imposed capital requirements. See section 4.0 for additional
information. The adoption of this new standard does not require any changes to
the Company's accounting, but does require additional note disclosure.

    13.3 Financial instruments

    Effective, December 30, 2007, the Company implemented the new CICA
Handbook Section 3862 -Financial Instruments - Disclosures and CICA Handbook
Section 3863 - Financial Instruments - Presentation. These standards replace
the existing CICA Handbook Section 3861 - Financial Instruments - Disclosure
and Presentation. They also require increased disclosures regarding the risks
associated with financial instruments and how these risks are managed. These
new standards carry forward the presentation standards for financial
instruments and non-financial derivatives but provide additional guidance for
the classification of financial instruments, from the perspective of the
issuer, between liabilities and equity. The adoption of these new standards
does not require any changes to the Company's accounting, but does require
additional note disclosure (see note 11.1 in this MD&A and note 10 in the
Notes to the Consolidated Financial Statements for additional information).

    13.4 International Financial Reporting Standards

    In February 2008, the CICA announced that Canadian generally accepted
accounting principles (GAAP) for publicly accountable enterprises will be
replaced by International Financial Reporting Standards (IFRS) for fiscal
years beginning on or after January 1, 2011. Companies will be required to
provide IFRS comparative information for the previous fiscal year.
Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to
the Company's reporting for the first quarter of 2011 for which the current
and comparative information will be prepared under IFRS. The Company expects
the transition to IFRS to impact accounting, financial reporting, internal
control over financial reporting, taxes, IT systems and processes as well as
certain contractual arrangements. The Company is currently assessing the
impact of the transition to IFRS. Training and hiring additional resources is
underway to ensure the timely conversion to IFRS.

    13.5 Goodwill and intangible assets

    In February 2008, the CICA issued CICA Handbook Section 3064 - Goodwill
and Intangible Assets, which replaces CICA Handbook Section 3062 - Goodwill
and Other Intangible Assets and CICA Handbook Section 3450 - Research and
Development.
    This new standard provides guidance on the recognition, measurement,
presentation and disclosure of goodwill and intangible assets.
    As this standard applies to interim and annual financial statements for
fiscal years beginning on or after October 1, 2008, the Company will adopt
this new standard effective January 4, 2009 (the first day of the Company's
2009 fiscal year) retrospectively with a restatement of prior periods, with
the exception of intangible items initially recognized as an expense.
    The Company is currently evaluating the potential impact of this new
standard on the financial statements for 2009 and will adjust its systems and
processes as necessary to comply with this new standard.

    14.0 Non-GAAP measures

    The following measures included in this MD&A do not have a standardized
meaning under Canadian generally accepted accounting principles (GAAP) and may
not be comparable to similar measures presented by other companies:-   EBITDA (earnings before interest, income taxes, depreciation and
        amortization);
    -   adjusted earnings; and
    -   same store salesEBITDA

    With the exception of Financial Services, we consider EBITDA to be an
effective measure of the contribution of each of our businesses to our
profitability on an operational basis, before allocating the cost of income
taxes and capital investments. EBITDA is also commonly regarded as an indirect
measure of operating cash flow, a significant indicator of success for many
businesses.
    A reconciliation of EBITDA to the most comparable GAAP measure (earnings
before income taxes) is provided as follows:Reconciliation of EBITDA to GAAP measures(1)

    ($ in millions)                 Q3 2008  Q3 2007(2)  YTD 2008 YTD 2007(2)
    -------------------------------------------------------------------------
    EBITDA(3)
      CTR                          $  152.8   $  148.5   $  398.0   $  376.7
      Financial Services               52.7       45.7      160.2      162.7
      Petroleum                        11.7       12.1       32.8       29.1
      Mark's                            6.7       11.7       24.4       46.4
    -------------------------------------------------------------------------
      Total EBITDA                 $  223.9   $  218.0   $  615.4   $  614.9
    -------------------------------------------------------------------------
    Less: Depreciation and
     amortization expense
        CTR                        $   43.2   $   39.5   $  127.7   $  114.9
        Financial Services              3.4        3.1       10.0        9.4
        Petroleum                       4.2        4.2       12.3       12.3
        Mark's                          5.9        4.4       17.0       13.2
    -------------------------------------------------------------------------
        Total depreciation and
         amortization expense      $   56.7   $   51.2   $  167.0   $  149.8
    -------------------------------------------------------------------------
      Interest expense(3)
        CTR                        $   15.6   $   14.1   $   47.7   $   40.4
        Financial Services              2.3       (1.1)       5.8       (4.4)
        Mark's                          1.1        1.1        3.2        2.2
    -------------------------------------------------------------------------
        Total interest expense     $   19.0   $   14.1   $   56.7   $   38.2
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes
      CTR                          $   94.0   $   94.9   $  222.6   $  221.4
      Financial Services               47.0       43.7      144.4      157.7
      Petroleum                         7.5        7.9       20.5       16.8
      Mark's                           (0.3)       6.2        4.2       31.0
    -------------------------------------------------------------------------
    Total earnings before income
     taxes                         $  148.2   $  152.7   $  391.7   $  426.9
    -------------------------------------------------------------------------
    (1) Differences may occur due to rounding.
    (2) 2007 figures have been restated for the implementation, on a
        retrospective basis, of CICA HB 3031 - Inventories. See section 13.1
        for additional information.
    (3) Eliminations of inter-company transactions (eg. a loan of funds from
        one business unit to another), previously disclosed as a separate
        line item, are now presented net of these transactions.References to adjusted earnings

    In several places in this MD&A, we refer to adjusted pre-tax and after-
tax earnings before the impact of non-operating items. Historically, non-
operating items have included the net effect of securitization activities and
dispositions of surplus property and equipment. The timing and amount of gains
and losses from these items are not consistent from quarter to quarter. We
believe the adjusted figures allow for a clearer assessment of earnings for
each of our businesses and provide a more meaningful measure of our
consolidated and segmented operating results.
    From time to time adjusted earnings may also contain additional unusual
and/or non-recurring items which are explained in detail at that time.

    Same store sales

    Same store sales is the metric used by management, and most commonly used
in the retail industry, to compare retail sales growth in a more consistent
manner across the industry. CTR's same store sales includes sales from all
stores that have been open for more than 53 weeks and therefore allows for a
more consistent comparison to other stores open during the period and to
results in the prior year.

    15.0 Controls and procedures

    Disclosure controls and procedures

    Management is responsible for establishing and maintaining a system of
controls and procedures over the public disclosure of financial and non-
financial information regarding the Company. Such controls and procedures are
designed to provide reasonable assurance that all relevant information is
gathered and reported, on a timely basis, to senior management, including the
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), so that
appropriate decisions can be made by them regarding public disclosure.
    Our system of disclosure controls and procedures includes, but is not
limited to, our Disclosure Policy, our Code of Business Conduct, the effective
functioning of our Disclosure Committee, procedures in place to systematically
identify matters warranting consideration of disclosure by the Disclosure
Committee, verification processes for individual financial and non-financial
metrics and information contained in annual and interim filings, including the
financial statements, MD&As, Annual Information Forms and other documents and
external communications.

    Internal control over financial reporting

    Management is also responsible for establishing and maintaining
appropriate internal controls over financial reporting. Our internal controls
over financial reporting include, but are not limited to, detailed policies
and procedures related to financial accounting and reporting, and controls
over systems that process and summarize transactions. Our procedures for
financial reporting also include the active involvement of qualified financial
professionals, senior management and our Audit Committee.
    All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
    Management has evaluated whether there were changes in our internal
controls over financial reporting during the interim period ended September
27, 2008 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting. Management has
determined that no material changes occurred in the third quarter.

    Commitment to disclosure and investor communication

    Canadian Tire strives to maintain a high standard of disclosure and
investor communication and has been recognized as a leader in financial
reporting practices. In many cases, the Company's disclosure practices exceed
the requirements of current legislation. Reflecting our commitment to full and
transparent disclosure, the Investor Relations section of the Company's web
site includes the following documents and information of interest to
investors:-   Annual Information Form;
    -   Management Information Circular;
    -   quarterly reports;
    -   quarterly fact sheets; and
    -   conference call webcasts (archived for one year)

    The Company's Annual Information Form, Management Information Circular and
quarterly reports are also available on the SEDAR (System for Electronic
Disclosure and Retrieval) web site at www.sedar.com.
    If you would like to contact the Investor Relations department directly,
call Karen Meagher (416) 480-8058 or email investor.relations@cantire.com.



                             2008 THIRD QUARTER

                          INTERIM REPORT FINANCIALS

    Consolidated Statements of Earnings (Unaudited)
    -------------------------------------------------------------------------

    (Dollars in millions       13 weeks ended,           39 weeks ended,
    except per share        September    September    September    September
    amounts)                 27, 2008     29, 2007     27, 2008     29, 2007
    -------------------------------------------------------------------------
                                       (Restated -               (Restated -
                                          Notes 2                   Notes 2
                                           and 16)                   and 16)

    Gross operating
     revenue              $   2,257.5  $   2,049.2  $   6,533.5  $   6,101.0
    -------------------------------------------------------------------------

    Operating expenses
      Cost of merchandise
       sold and all other
       operating expenses
       except for the
       undernoted items       2,024.3      1,822.0      5,895.0      5,461.9
      Net interest expense
       (Note 7)                  19.0         14.1         56.7         38.2
      Depreciation and
       amortization              56.7         51.2        167.0        149.8
      Employee Profit
       Sharing Plan               9.3          9.2         23.1         24.2
    -------------------------------------------------------------------------
    Total operating
     expenses                 2,109.3      1,896.5      6,141.8      5,674.1
    -------------------------------------------------------------------------

    Earnings before
     income taxes               148.2        152.7        391.7        426.9

    Income taxes
      Current                    61.6         42.3        140.7        138.3
      Future                    (22.0)         8.2        (22.0)         8.2
    -------------------------------------------------------------------------
    Income taxes                 39.6         50.5        118.7        146.5
    -------------------------------------------------------------------------

    Net earnings          $     108.6  $     102.2  $     273.0  $     280.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings per share   $      1.33  $      1.25  $      3.35  $      3.44
    -------------------------------------------------------------------------

    Weighted average
     number of Common and
     Class A Non-Voting
     Shares outstanding    81,512,981   81,519,870   81,510,371   81,498,943
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows (Unaudited)
    -------------------------------------------------------------------------
                                13 weeks ended,          39 weeks ended,
                            September    September    September    September
    (Dollars in millions)    27, 2008     29, 2007     27, 2008     29, 2007
    -------------------------------------------------------------------------
                                       (Restated -               (Restated -
                                           Notes 2                   Notes 2
                                            and 16)                   and 16)

    Cash generated from
     (used for):

    Operating activities
      Net earnings        $     108.6  $     102.2  $     273.0  $     280.4
      Items not affecting
       cash
        Depreciation and
         amortization            56.7         51.2        167.0        149.8
        Net provision for
         loans receivable
         (Note 3)                25.1         21.4         55.3         47.1
        Changes in fair
         value of
         derivative
         instruments              1.7          2.6         16.5          5.7
        Employee future
         benefits expense
         (Note 4)                 1.6          1.6          4.8          4.9
        Fair market value
         adjustment and
         impairments on
         property and
         equipment                1.4          0.4          1.7          2.8
        Impairment of
         other long-term
         investments
         (Note 11)                  -          1.3          1.0          1.3
        Other                    (1.8)         0.7         (1.5)         2.5
        Gain on disposals
         of property and
         equipment               (0.1)        (6.1)        (4.1)       (10.1)
        Future income
         taxes                  (22.0)         8.2        (22.0)         8.2
        Securitization
         loans receivable       (13.8)       (14.1)       (40.3)       (40.5)
        Gain on sales of
         loans receivable
         (Note 3)               (17.4)       (21.1)       (63.5)       (67.0)
        Gain on
         disposals/
         redemptions of
         shares                     -            -            -        (18.4)
    -------------------------------------------------------------------------
                                140.0        148.3        387.9        366.7
    -------------------------------------------------------------------------
    Changes in other
     working capital
     components                (287.5)       (41.4)      (660.1)      (855.0)
    -------------------------------------------------------------------------
    Cash generated from
     (used for) operating
     activities                (147.5)       106.9       (272.2)      (488.3)
    -------------------------------------------------------------------------

    Investing activities
      Additions to property
       and equipment           (121.5)      (155.9)      (375.7)      (420.0)
      Investment in loans
       receivable, net          (56.3)        (1.5)       (35.4)       (69.4)
      Purchases of stores       (10.4)        (2.6)       (28.5)        (6.8)
      Other                      (1.6)        (1.4)        (3.5)        (3.1)
      Long-term receivables
       and other assets           9.6          1.3          1.5         19.6
      Proceeds on
       disposition of
       property and
       equipment                214.5         10.6        230.6         19.1
      Net securitization
       of loans receivable     (382.1)      (152.9)       240.3        (16.9)
      Reclassification of
       other long-term
       investments
       (Note 11)                    -         (8.9)           -         (8.9)
      Proceeds on
       disposals/
       redemptions of
       shares                       -            -            -         18.4
    -------------------------------------------------------------------------
    Cash generated from
     (used for) investing
     activities                (347.8)      (311.3)        29.3       (468.0)
    -------------------------------------------------------------------------

    Financing activities
      Commercial paper          367.2        135.4        367.2        135.4
      Net change in
       deposits (Note 16)       120.9         11.6        185.7         36.8
      Other                      (0.5)         6.2          1.2          4.6
      Dividends                 (17.1)       (15.1)       (49.3)       (43.6)
      Repayment of
       long-term debt            (1.6)        (1.0)      (154.3)        (2.4)
    -------------------------------------------------------------------------
    Cash generated from
     financing activities       468.9        137.1        350.5        130.8
    -------------------------------------------------------------------------

    Cash generated (used)
     in the period              (26.4)       (67.3)       107.6       (825.5)
    Cash and cash
     equivalents, beginning
     of period                   28.5        (16.9)      (105.5)       741.3
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period (Note 8)      $       2.1  $     (84.2) $       2.1  $     (84.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Income (Unaudited)
    -------------------------------------------------------------------------

                                13 weeks ended,          39 weeks ended,
                            September    September    September    September
    (Dollars in millions)    27, 2008     29, 2007     27, 2008     29, 2007
    -------------------------------------------------------------------------
                                       (Restated -               (Restated -
                                           Note 2)                   Note 2)

    Net earnings          $     108.6  $     102.2  $     273.0  $     280.4
    Other comprehensive
     income (loss), net of
     taxes
      Gain (loss) on
       derivatives
       designated as cash
       flow hedges, net of
       tax of $8.1 and
       $12.2 (2007 - $22.0
       and $45.0),
       respectively              14.3        (41.2)        22.3        (83.5)
      Reclassification to
       non-financial asset
       of loss (gain) on
       derivatives
       designated as cash
       flow hedges, net of
       tax of $3.3 and
       $8.4 (2007 - $12.3
       and $8.2),
       respectively              (6.1)        22.8         17.9         15.3
      Reclassification to
       earnings of loss
       (gain) on
       derivatives
       designated as cash
       flow hedges, net of
       tax of $0.6 and
       $2.8 (2007 - $0.2
       and $1.4),
       respectively               1.3          0.4          6.0         (2.6)
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)                9.5        (18.0)        46.2        (70.8)
    -------------------------------------------------------------------------
    Comprehensive income  $     118.1  $      84.2  $     319.2  $     209.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
    -------------------------------------------------------------------------

                                                         39 weeks ended,
                                                      September    September
    (Dollars in millions)                              27, 2008     29, 2007
    -------------------------------------------------------------------------
                                                                 (Restated -
                                                                     Note 2)

    Share capital
    Balance, beginning of period                    $     700.7  $     702.7
    Transactions, net (Note 5)                              5.8          4.4
    -------------------------------------------------------------------------
    Balance, end of period                          $     706.5  $     707.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contributed surplus
    Balance, beginning of period                    $       2.3  $       0.1
    Transactions, net                                      (2.3)         1.8
    -------------------------------------------------------------------------
    Balance, end of period                          $         -  $       1.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
    Balance, beginning of period as previously
     reported                                       $   2,440.9  $   2,083.7
    Transitional adjustment on adoption of new
     accounting policies (Note 2)                          14.2         20.1
    -------------------------------------------------------------------------
    Balance, beginning of period as restated            2,455.1      2,103.8
    Net earnings for the period                           273.0        280.4
    Dividends                                             (51.3)       (45.2)
    Repurchase of Class A Non-Voting Shares                (2.5)           -
    -------------------------------------------------------------------------
    Balance, end of period                          $   2,674.3  $   2,339.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)
    Balance, beginning of period                    $     (50.0) $       8.6
    Other comprehensive income (loss) for the
     period                                                46.2        (70.8)
    -------------------------------------------------------------------------
    Balance, end of period                          $      (3.8) $     (62.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Retained earnings and accumulated other
     comprehensive income                           $   2,670.5  $   2,276.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Balance Sheets (Unaudited)
    -------------------------------------------------------------------------
    (Dollars in millions)                September    September     December
    As at                                 27, 2008     29, 2007     29, 2007
    -------------------------------------------------------------------------
                                                    (Restated -  (Restated -
                                                        Notes 2      Notes 2
                                                        and 16)      and 16)

    ASSETS
    Current assets
      Cash and cash equivalents
       (Note 8)                        $       2.1  $         -  $         -
      Accounts receivable                    584.1        519.4        715.0
      Loans receivable (Note 3)            1,314.6        847.2      1,486.1
      Merchandise inventories (Note 2)     1,301.2      1,083.7        778.7
      Income taxes recoverable                83.7        117.4         53.2
      Prepaid expenses and deposits           56.3         54.3         29.5
      Future income taxes                     53.6         36.5         75.7
    -------------------------------------------------------------------------
    Total current assets                   3,395.6      2,658.5      3,138.2
    -------------------------------------------------------------------------
    Long-term receivables and other
     assets (Note 3)                         235.5        254.8        231.2
    Other long-term investments, net
     (Note 11)                                 6.6          7.6          7.6
    Goodwill                                  72.2         50.0         51.8
    Intangible assets                         52.5         52.4         52.4
    Property and equipment, net            3,320.0      3,119.6      3,283.6
    -------------------------------------------------------------------------
    Total assets                       $   7,082.4  $   6,142.9  $   6,764.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Bank indebtedness (Note 8)       $         -  $      84.2  $     105.5
      Commercial paper                       367.2        135.4            -
      Deposits                               186.5         37.9        111.5
      Accounts payable and other           1,417.5      1,525.9      1,740.4
      Current portion of long-term debt       10.5        153.1        156.3
    -------------------------------------------------------------------------
    Total current liabilities              1,981.7      1,936.5      2,113.7
    -------------------------------------------------------------------------
    Long-term debt                         1,370.3      1,013.8      1,341.8
    Future income taxes                       51.3         78.8         71.8
    Long-term deposits                       114.5          1.1          3.8
    Other long-term liabilities              187.6        126.9        125.6
    -------------------------------------------------------------------------
    Total liabilities                      3,705.4      3,157.1      3,656.7
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Share capital (Note 5)                   706.5        707.1        700.7
    Contributed surplus                          -          1.9          2.3
    Accumulated other comprehensive
     loss                                     (3.8)       (62.2)       (50.0)
    Retained earnings                      2,674.3      2,339.0      2,455.1
    -------------------------------------------------------------------------
    Total shareholders' equity             3,377.0      2,985.8      3,108.1
    -------------------------------------------------------------------------
    Total liabilities and shareholders'
     equity                            $   7,082.4  $   6,142.9  $   6,764.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to the Consolidated Financial Statements (Unaudited)
    -------------------------------------------------------------------------

    1.  Basis of Presentation

        These unaudited interim consolidated financial statements (the
        "financial statements") have been prepared by management in
        accordance with Canadian generally accepted accounting principles
        ("GAAP") and include the accounts of Canadian Tire Corporation,
        Limited and its subsidiaries, collectively referred to as the
        "Company". These financial statements do not contain all disclosures
        required by Canadian GAAP for annual financial statements, and
        accordingly, these financial statements should be read in conjunction
        with the most recently issued annual financial statements for the
        52 weeks ended December 29, 2007 contained in our 2007 Annual Report.

        The preparation of the financial statements in conformity with GAAP
        requires management to make estimates and assumptions that affect the
        reported amounts of assets and liabilities and disclosures of
        contingent assets and liabilities at the date of the financial
        statements and the reported amounts of revenue and expenses during
        the reporting period. Actual results could differ from these
        estimates. Estimates are used when accounting for items such as
        income taxes, impairment of assets (including goodwill), employee
        benefits, product warranties, inventory provisions, amortization,
        uncollectible loans, environmental reserves, asset retirement
        obligations, financial instruments, and the liability for the
        Company's loyalty programs.

    2.  Change in Accounting Policies

        These financial statements follow the same accounting policies and
        methods of their application as the most recently issued annual
        financial statements for the 52 weeks ended December 29, 2007, except
        as noted below.

        Merchandise inventories

        Effective, December 30, 2007 (the first day of the Company's 2008
        fiscal year), the Company implemented, on a retrospective basis with
        restatement, the Canadian Institute of Chartered Accountants (CICA)
        Handbook Section 3031 - Inventories, which is effective for interim
        and annual financial statements for fiscal years beginning on or
        after January 1, 2008.

        This new standard provides guidance on the determination of cost and
        requires inventories to be measured at the lower of cost and net
        realizable value. The cost of inventories includes the cost of
        purchase and other costs incurred in bringing the inventories to
        their present location and condition. Costs such as storage costs,
        administrative overheads that do not contribute to bringing the
        inventories to their present location and condition, and selling
        costs are specifically excluded from the cost of inventories and are
        expensed in the period incurred. Reversals of previous write-downs to
        net realizable value are now required when there is a subsequent
        increase in the value of inventories. The cost of inventories should
        be determined using either a first-in, first-out or weighted average
        cost formula. Techniques for the measurement of cost of inventories,
        such as the retail method or standard cost method, may be used for
        convenience if the results approximate actual cost. The new standard
        also requires additional disclosures including the accounting
        policies adopted in measuring inventories, the carrying amount of
        inventories, amount of inventories recognized as an expense during
        the period, the amount of write-downs during the period and the
        amount of any reversal of write-downs that is recognized as a
        reduction of expenses.

        The Company's new policy to correspond with the new standard is as
        follows:

        Merchandise inventories are carried at the lower of cost and net
        realizable value, with cost being determined as weighted average
        cost.

        As a result of the retrospective implementation of this new standard,
        the cumulative impact on previously reported balances on the
        following dates is as follows:

        (Dollars in millions)                  Increase / (Decrease)
                                    -----------------------------------------
                                     December 29, September 29,  December 30,
                                            2007          2007          2006
                                    -----------------------------------------
        Retained earnings            $      14.2   $       8.0   $      20.1
        Inventories                         22.0          11.6          31.5
        Income taxes recoverable            (5.8)          1.0             -
        Future income tax assets            (2.0)         (5.3)         (5.3)
        Accounts payable and other             -          (0.7)          0.6
        Income taxes payable                   -             -           5.5

        In addition, the retrospective impact on net earnings for the
        13 weeks ended September 29, 2007 was a reduction of $3.7 million, or
        $0.04 per share, and for the 39 weeks ended September 29, 2007 a
        reduction of $12.2 million, or $0.15 per share.

        Included in "cost of merchandise sold and all other operating
        expenses except for the undernoted items" for the 13 weeks and
        39 weeks ended September 27, 2008 is $1,604.6 million (2007 -
        $1,410.8 million) and $4,610.1 million (2007 - $4,263.2 million),
        respectively, of inventory recognized as an expense, which included
        $16.0 million (2007 - $9.4 million) and $48.9 million
        (2007 - $31.6 million), respectively, of write-downs of inventory as
        a result of net realizable value being lower than cost. Inventory
        write-downs recognized in previous periods and reversed in the
        current quarter and year to date and the comparative quarter and year
        to date were insignificant.

        Financial instruments

        Effective, December 30, 2007, the Company implemented the new CICA
        Handbook Section 3862 "Financial Instruments - Disclosures" and CICA
        Handbook Section 3863 "Financial Instruments - Presentation". These
        standards replaced the existing CICA Handbook Section 3861 "Financial
        Instruments - Disclosure and Presentation". They require increased
        disclosures regarding the risks associated with financial instruments
        and how these risks are managed. These new standards carry forward
        the presentation standards for financial instruments and non-
        financial derivatives but provide additional guidance for the
        classification of financial instruments, from the perspective of the
        issuer, between liabilities and equity. The adoption of these new
        standards did not require any changes to the Company's accounting,
        but does require additional note disclosure, which is included in
        note 10.

        Capital management disclosures

        Effective, December 30, 2007, the Company implemented the new CICA
        Handbook Section 1535 "Capital Disclosures" which is effective for
        fiscal years beginning on or after October 1, 2007. The new standard
        requires entities to disclose information about their objectives,
        policies and processes for managing capital, as well as their
        compliance with any externally imposed capital requirements. The
        adoption of this new standard did not require any changes to the
        Company's accounting, but does require additional note disclosure,
        which is included in note 9.

        Future accounting changes

        Goodwill and intangible assets

        In February 2008, the CICA issued CICA HB 3064 - Goodwill and
        Intangible Assets, which replaces CICA HB 3062 - Goodwill and Other
        Intangible Assets as well as CICA HB 3450 - Research and Development.

        This new standard provides guidance on the recognition, measurement,
        presentation and disclosure of goodwill and intangible assets.

        As this standard applies to interim and annual financial statements
        for fiscal years beginning on or after October 1, 2008, the Company
        will adopt this new standard effective January 4, 2009 (the first day
        of the Company's 2009 fiscal year) retrospectively with a restatement
        of prior periods with the exception of intangible items initially
        recognized as an expense.

        The Company is evaluating the potential impact of this new standard
        on the financial statements for 2009 and will adjust its systems and
        processes as necessary to comply with this new standard.

        International Financial Reporting Standards (IFRS)

        In February 2008, the CICA announced that Canadian generally accepted
        accounting principles (GAAP) for publicly accountable enterprises
        will be replaced by International Financial Reporting Standards
        (IFRS) for fiscal years beginning on or after January 1, 2011.
        Companies will be required to provide IFRS comparative information
        for the previous fiscal year. Accordingly, the conversion from
        Canadian GAAP to IFRS will be applicable to the Company's reporting
        for the first quarter of 2011 for which the current and comparative
        information will be prepared under IFRS. The Company expects the
        transition to IFRS to impact accounting, financial reporting,
        internal control over financial reporting, taxes, IT systems and
        processes as well as certain contractual arrangements. The Company is
        currently assessing the impact of the transition to IFRS. Training
        and hiring additional resources is underway to ensure the timely
        conversion to IFRS.

    3.  Loans Receivable

        The Company sells pools of loans receivable (the Loans) to third
        party trusts (the Trusts) in transactions known as
        securitizations. The transactions are accounted for as sales in
        accordance with CICA Accounting Guideline 12 (AcG-12), Transfers of
        Receivables, and the Loans are removed from the Consolidated Balance
        Sheets.

        The Company retains the interest-only strip, and, for the personal
        loan securitization, a subordinated interest in the loans sold (the
        "seller's interest") and cash deposited with one of the Trusts (the
        "securitization reserve"), which are components of retained
        interests. The interest-only strip represents the present value of
        the expected spread to be earned over the collection period on the
        loans receivable sold. The expected spread is equal to the yield
        earned, less the net write-offs and interest expense on the loans
        receivable sold. The seller's interest and securitization reserve
        provide the Trust with a source of funds in the event that the
        interest and principal collected on the Loans is not sufficient to
        pay the Trust's creditors. The Trusts' recourse to the Company is
        limited to the interest-only strip, the seller's interest and the
        securitization reserve and for the credit card loan securitization,
        the additional enhancement required to be maintained.

        The proceeds of the sale are deemed to be the cash received,
        interest-only strip and securitization reserve, less any servicing
        obligation assumed. The servicing liability represents the Company's
        estimated cost of servicing the securitized loans and is amortized
        over the life of the securitized loans. The proceeds are allocated
        between the Loans, interest-only strip, seller's interest and
        securitization reserve based on their relative fair value at the date
        of sale, with any excess or deficiency recorded as a gain or loss on
        sale, respectively.

        The Trusts have not been consolidated in these financial statements
        because either they meet the criteria for a qualified special purpose
        entity (which are exempt from consolidation) or the Company is not
        the primary beneficiary.

        Quantitative information about loans managed and securitized by the
        Company is as follows:

                                              Total principal amount
        (Dollars in millions)                of receivables as at (1)
                                       --------------------------------------
                                         September    September     December
                                          27, 2008     29, 2007     29, 2007
                                       ------------ ------------ ------------
        Total net managed credit card
         loans                         $   3,677.6  $   3,441.7  $   3,681.3
        Credit card loans sold            (2,471.2)    (2,625.5)    (2,233.7)
                                       ------------ ------------ ------------
        Credit card loans held             1,206.4        816.2      1,447.6

        Total net managed personal
         loans (2)                           101.1        163.4        140.2
        Personal loans sold                      -        (69.1)       (56.0)
                                       ------------ ------------ ------------
        Personal loans held                  101.1         94.3         84.2

        Total net managed mortgage
         loans (3)                           102.3         21.9         35.4
                                       ------------ ------------ ------------

        Total net managed line of
         credit loans (4)                     22.1            -            -
                                       ------------ ------------ ------------

        Total loans receivable             1,431.9        932.4      1,567.2
        Less: long-term portion (5)         (117.3)       (85.2)       (81.1)
                                       ------------ ------------ ------------

        Current portion of loans
         receivable                    $   1,314.6  $     847.2  $   1,486.1
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------


                                            Average balances
        (Dollars in millions)           for the 39 weeks ended
                                       -------------------------
                                         September    September
                                          27, 2008     29, 2007
                                       ------------ ------------
        Total net managed credit card
         loans                         $   3,571.1  $   3,325.7
        Credit card loans sold            (2,704.6)    (2,685.1)
                                       ------------ ------------
        Credit card loans held               866.5        640.6

        Total net managed personal
         loans (2)                           121.5        189.2
        Personal loans sold                  (23.7)       (92.6)
                                       ------------ ------------
        Personal loans held                   97.8         96.6

        Total net managed mortgage
         loans (3)                            61.4          8.0
                                       ------------ ------------
        Total net managed line of
         credit loans (4)                     24.5            -
                                       ------------ ------------

        Total loans receivable         $   1,050.2  $     745.2
                                       ------------ ------------
                                       ------------ ------------
        Less: long-term portion (5)


        Current portion of loans
         receivable

        (1)   Amounts shown are net of allowance for credit losses.
        (2)   Personal loans are unsecured loans that are provided to
              qualified existing credit cardholders for terms of three to
              five years. Personal loans have fixed monthly payments of
              principal and interest; however, the personal loans can be
              repaid at any time without penalty. The original portfolio of
              personal loans of $43.7 million was repurchased in May 2008 for
              $26.7 million.
        (3)   Mortgage loans are issued for terms of up to ten years, have
              fixed or variable interest rates, are secured and include a mix
              of both high and low ratio loans. High ratio loans are fully
              insured and low ratio loans are partially insured.
        (4)   Line of credit portfolio was purchased in January 2008 for
              $29.6 million.
        (5)   The long-term portion of loans is included in "Long-term
              receivables and other assets".

        Net credit losses for the owned portfolio for the 13 weeks and 39
        weeks ended September 27, 2008 were $25.1 million (2007 -
        $21.4 million) and $55.3 million (2007 - $47.1 million),
        respectively. Net credit losses for the total managed portfolio for
        the 13 weeks and 39 weeks ended September 27, 2008 were $60.6 million
        (2007 - $56.9 million) and $181.6 million (2007 - $158.8 million),
        respectively.

    4.  Employee Future Benefits

        The net employee future benefit expense for the 13 weeks and 39 weeks
        ended September 27, 2008 was $1.6 million (2007 - $1.6 million) and
        $4.8 million (2007 - $4.9 million), respectively.

    5.  Share Capital

                                    September 27, September 29,  December 29,
        (Dollars in millions)               2008          2007          2007
                                    ------------- ------------- -------------
        Authorized
          3,423,366 Common Shares
          100,000,000 Class A
           Non-Voting Shares

        Issued
          3,423,366 Common Shares
           (September 29, 2007 -
           3,423,366)                $       0.2   $       0.2   $       0.2

          78,048,305 Class A
           Non-Voting Shares
           (September 29, 2007 -
           78,132,919)                     706.3         706.9         700.5
                                    ------------- ------------- -------------
                                     $     706.5   $     707.1   $     700.7
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------

        The Company issues and repurchases Class A Non-Voting Shares. The net
        excess of the issue price over the repurchase price results in
        contributed surplus. The net excess of the repurchase price over the
        issue price is allocated first to contributed surplus, to the extent
        of any previous net excess from the issue of shares, with any
        remainder allocated to retained earnings.

        The following transactions occurred with respect to Class A
        Non-Voting Shares:

        (Dollars in             39 weeks ended            39 weeks ended
         millions)            September 27, 2008        September 29, 2007
                          ------------------------- -------------------------
                               Number          $         Number          $
                          ----------------- ------- ----------------- -------
        Shares outstanding
         at the beginning
         of the period          78,048,062   700.5        78,047,456   702.5
        Issued                     495,043    29.8           372,463    28.5
        Repurchased               (494,800)  (28.8)         (287,000)  (22.3)
        Excess of
         repurchase price
         over issue price
          (issue price
           over
           repurchase
           price)                        -     4.8                 -    (1.8)
                          ----------------- ------- ----------------- -------
        Shares outstanding
         at the end of
         the period             78,048,305   706.3        78,132,919   706.9
                          ----------------- ------- ----------------- -------
                          ----------------- ------- ----------------- -------

    6.  Stock-based Compensation Plans

        All stock-based compensation plans are as disclosed in the most
        recently issued annual financial statements for the 52 weeks ended
        December 29, 2007 except as follows:

        2008 Performance Share Unit Plan

        The Company has granted 2008 performance share units (2008 PSUs) to
        certain employees. Each 2008 PSU entitles the participant to receive
        a cash payment in an amount equal to the weighted average closing
        price of Class A Non-Voting Shares traded on the Toronto Stock
        Exchange for the 20-day period prior to and including the last day of
        the performance period, multiplied by an applicable multiplier
        determined by specific performance-based criteria. Compensation
        expense related to 2008 PSUs is accrued over the performance period
        based on the expected total compensation to be paid out at the end of
        the performance period. For the 13 weeks and 39 weeks ended
        September 27, 2008, $0.6 million and $1.5 million of compensation
        expense was recorded for the 2008 PSUs, respectively.

    7.  Segmented Information - Statement of Earnings

        ---------------------------------------------------------------------
                                           13 weeks                39 weeks
                                              ended                   ended
                                          September               September
                               13 weeks    29, 2007    39 weeks    29, 2007
                                  ended (Restated -       ended (Restated -
                              September     Notes 2   September     Notes 2
       (Dollars in millions)   27, 2008      and 16)   27, 2008      and 16)
        ---------------------------------------------------------------------

        Gross operating revenue
          CTR                 $ 1,399.3   $ 1,304.0   $ 4,032.7   $ 3,889.8
          Financial Services      197.8       187.2       608.0       555.6
          Petroleum               519.3       424.0     1,456.9     1,232.4
          Mark's                  168.7       159.8       516.8       499.1
          Eliminations           (27.6)       (25.8)      (80.9)      (75.9)
                              -----------------------------------------------
          Total gross
           operating revenue  $ 2,257.5   $ 2,049.2   $ 6,533.5   $ 6,101.0
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings (loss)
         before income taxes
          CTR                 $    94.0   $    94.9   $   222.6   $   221.4
          Financial Services       47.0        43.7       144.4       157.7
          Petroleum                 7.5         7.9        20.5        16.8
          Mark's                   (0.3)        6.2         4.2        31.0
                              -----------------------------------------------
          Total earnings
           before income
           taxes                  148.2       152.7       391.7       426.9
        Income taxes               39.6        50.5       118.7       146.5
                              -----------------------------------------------
        Net earnings          $   108.6   $   102.2   $   273.0   $   280.4
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Net Interest
         expense(1)
          CTR                 $    15.6   $    14.1   $    47.7   $    40.4
          Financial Services        2.3        (1.1)        5.8        (4.4)
          Mark's                    1.1         1.1         3.2         2.2
                              -----------------------------------------------
          Total interest
           expense            $    19.0   $    14.1   $    56.7   $    38.2
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Depreciation and
        amortization expense
          CTR                 $    43.2   $    39.5   $   127.7   $   114.9
          Financial Services        3.4         3.1        10.0         9.4
          Petroleum                 4.2         4.2        12.3        12.3
          Mark's                    5.9         4.4        17.0        13.2
                              -----------------------------------------------
          Total depreciation
           and amortization
           expense            $    56.7   $    51.2   $   167.0   $   149.8
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Net interest expense includes interest on short-term and long-
            term debt, offset by passive interest income. Interest on long-
            term debt for the 13 weeks and 39 weeks ended September 27, 2008
            was $18.6 million (2007 - $16.6 million) and $57.6 million (2007
            - $46.6 million), respectively.

        Segmented Information - Total Assets

        ---------------------------------------------------------------------
                                                 September 29,  December 29,
                                                         2007          2007
                                     September    (Restated -   (Restated -
        (Dollars in millions)         27, 2008         Note 2)       Note 2)
        ---------------------------------------------------------------------
        CTR                          $ 6,208.9      $ 5,509.3      $ 5,732.4

        Financial Services             2,147.2        1,504.0        1,852.0

        Petroleum                        281.5          290.0          573.4

        Mark's                           568.6          519.8          464.1

        Eliminations                  (2,123.8)      (1,680.2)      (1,857.1)
                                     ----------------------------------------
        Total                        $ 7,082.4      $ 6,142.9      $ 6,764.8
        ---------------------------------------------------------------------

    8.  Cash and Cash Equivalents (Bank Indebtedness)

        The components of cash and cash equivalents (bank indebtedness) are:

                                         September    September     December
        (Dollars in millions)             27, 2008     29, 2007     29, 2007
                                        -----------  -----------  -----------

        Cash (bank overdraft)            $   (58.0)   $  (108.9)   $    71.8
        Line of credit borrowings            (49.8)       (49.8)      (316.8)
        Short-term investments               109.9         74.5        139.5
                                        -----------  -----------  -----------
        Cash and cash equivalents
         (bank indebtedness)             $     2.1    $   (84.2)   $  (105.5)
                                        -----------  -----------  -----------
                                        -----------  -----------  -----------

    9.  Capital Management Disclosures

        The Company's objectives when managing capital are:

        -  minimizing the after-tax cost of capital; and
        -  maintaining flexibility in capital structure to ensure the ongoing
           ability to execute the Strategic Plan;

        Management includes the following items in its definition of capital:

    (Dollars      September     % of  September     % of   December     % of
     in millions)  27, 2008    total   29, 2007    total   29, 2007    total
                  ---------- -------- ---------- -------- ---------- --------
    Current
     portion of
     long-term
     debt          $   10.5     0.2%   $  153.1     3.6%   $  156.3     3.4%
    Long-term
     debt           1,370.3    28.1%    1,013.8    24.0%    1,341.8    28.8%
    Long-term
     deposits         114.5     2.4%        1.1     0.0%        3.8     0.1%
    Other long-term
     liabilities(1)     0.3     0.0%       12.4     0.3%       10.6     0.2%
    Share capital     706.5    14.5%      707.1    16.7%      700.7    15.0%
    Contributed
     surplus              -       -%        1.9     0.0%        2.3     0.0%
    Components of
     accumulated
     other
     comprehensive
     loss(2)          (12.1)  (0.2)%       (6.0)  (0.1)%       (8.5)  (0.2)%
    Retained
     earnings       2,674.3    55.0%    2,339.0    55.5%    2,455.1    52.7%
                  ---------- -------- ---------- -------- ---------- --------

    Net capital
     under
     management    $4,864.3   100.0%   $4,222.4   100.0%   $4,662.1   100.0%
                  ---------- -------- ---------- -------- ---------- --------
                  ---------- -------- ---------- -------- ---------- --------
        (1)  Long-term liabilities that are derivative or hedge instruments
             related to capital items only.
        (2)  Components of other comprehensive loss relating to derivative or
             hedged items only.

        The Company has in place various policies which it uses to manage
        capital, including a leverage and liquidity policy and a securities
        and derivatives policy. As part of the overall management of capital,
        management's Financial Risk Management Committee and the Audit
        Committee of the Board review the Company's compliance with and
        performance against these policies.

        In addition, management's Financial Risk Management Committee and the
        Audit Committee of the Board perform periodic reviews of the policies
        to ensure they remain consistent with the risk tolerance acceptable
        to the Company and with current market trends and conditions.

        To assess its effectiveness in managing capital, management monitors
        certain key ratios to ensure they are within targeted ranges.

                                         September    September     December
        (Dollars in millions)             27, 2008   29, 2007(1)  29, 2007(1)
                                        -------------------------------------
        Debt ratio
          Long-term debt to total
           capitalization(2)                  25.2%        26.0%        31.2%
        Coverage ratio
          Interest coverage(3)            8.1 times   11.5 times   10.7 times
                                        -------------------------------------
                                        -------------------------------------
        (1)   2007 results have been restated for the implementation, on a
              retrospective basis, of CICA HB 3031 - Inventories.
        (2)   Long-term debt includes the current portion of long-term debt.
              Capitalization is based on current and long-term debt,
              commercial paper, long-term deposits, future income taxes,
              other long-term liabilities and shareholders' equity.
        (3)   Interest coverage is calculated on a rolling 12-month basis
              after annualizing short-term and long-term interest on debt
              issued and retired during the period.

        As part of existing debt agreements, two key financial covenants are
        monitored on an on-going basis by management to ensure compliance
        with the agreements. The key covenants are as follows:

        -  net tangible assets coverage - calculated as:
           -   total assets less intangible assets, current liabilities
               (excluding current portion of long-term debt), and liability
               for employee future benefits
           -   divided by long-term debt (including current portion of long-
               term debt)
        -  limitations on surplus available for distribution to shareholders
           - the Company is restricted from distributions (including
           dividends and redemptions or purchases of shares) exceeding its
           accumulated net income over a defined period.

        The Company was in compliance with these covenants during the period.

        The Company's wholly-owned subsidiary, Canadian Tire Bank (the
        "Bank") manages its capital under guidelines established by the
        Office of the Superintendent of Financial Institutions Canada
        ("OSFI"). The regulatory capital guidelines measure capital in
        relation to credit, market and operational risks. The Bank has
        various capital policies, procedures and controls which it utilizes
        to achieve its goals and objectives.

        The Bank's objectives include:

        -  Providing sufficient capital to maintain the confidence of
           depositors.
        -  Being an appropriately capitalized institution, as measured
           internally, defined by regulatory authorities and compared
           with the Bank's peers.
        -  Achieving the lowest overall cost of capital consistent with
           preserving the appropriate mix of capital elements to meet
           target capitalization levels.

        The Bank's total capital consists of two tiers of capital approved
        under OSFI's current regulatory capital guidelines. As at
        September 30, 2008 (the bank's fiscal third quarter), Tier 1 capital
        includes common shares and retained earnings reduced by net
        securitization exposures. The Bank currently does not hold any
        instruments in Tier 2 capital. Risk-weighted assets ("RWA"),
        referenced in the regulatory guidelines, include all on-balance sheet
        assets weighted for the risk inherent in each type of asset as well
        as an operational risk component based on a percentage of average
        risk-weighted revenues.

        The Bank's ratios are above internal minimum targets of 12% for
        Tier 1 and Total capital ratios and within internal maximum targets
        of 11.0 times for the assets to capital multiple. OSFI's minimum
        Tier 1 and Total capital ratios for Canadian banks are 7% and 10%,
        respectively. OSFI will consider applications for authorized
        assets-to-capital multiples in excess of 20 times for institutions
        that meet certain requirements. CTB is currently restricted to a
        maximum assets-to-capital multiple of 12.5.

        During the nine months ended September 27, 2008, the Bank complied
        with the capital guidelines issued by OSFI under the "International
        Convergence of Capital Measurement and Capital Standards - A Revised
        Framework" ("Basel II"). For the comparative period, the Bank
        complied with the capital guidelines issued by OSFI under the then
        current Basel I Capital Accord ("Basel I").

    10. Financial Instruments Disclosures

        Allowance for credit losses

        The Company's allowances for receivables are maintained at levels
        which are considered adequate to absorb future credit losses. A
        continuity of the Company's allowances for credit losses is as
        follows:

                           Credit card loans          Other loans(1)
                      -------------------------------------------------------
    (Dollars          September 27, September 29, September 27, September 29,
     in millions)             2008          2007          2008          2007
                      -------------------------------------------------------
    Balance,
     beginning of year  $     51.5    $     30.4    $      2.7    $      2.9
    Provision for
     credit losses            47.1          42.6           8.2           4.5
    Recoveries                10.7           7.4           0.4           0.1
    Write-offs               (59.3)        (41.8)         (7.5)         (4.5)
                      -------------------------------------------------------
    Balance,
     end of period      $     50.0    $     38.6    $      3.8    $      3.0
                      -------------------------------------------------------
                      -------------------------------------------------------


                          Accounts receivable               Total(2)
                      -------------------------------------------------------
    (Dollars          September 27, September 29, September 27, September 29,
     in millions)             2008          2007          2008          2007
                      -------------------------------------------------------
    Balance,
     beginning of year  $      5.0    $      4.6    $     59.2    $     37.9
    Provision for
     credit losses             0.8           0.2          56.1          47.3
    Recoveries                 0.3          (0.2)         11.4           7.3
    Write-offs                (2.5)         (0.1)        (69.3)        (46.4)
                      -------------------------------------------------------
    Balance,
     end of period      $      3.6    $      4.5    $     57.4    $     46.1
                      -------------------------------------------------------
                      -------------------------------------------------------
        (1)   Other Loans include personal loans, mortgages loans and lines
              of credit loans.
        (2)   Relates to Company owned receivables.

        Foreign currency risk

        The Company has significant demand for foreign currencies, primarily
        United States dollars, due to global sourcing. However, it mitigates
        its exposure to foreign exchange rate risk through active hedging
        programs and through its ability, subject to competitive conditions,
        to pass on changes in foreign currency exchange rates through
        pricing.

        Liquidity risk

        The following table summarizes the Company's contractual maturity for
        its financial liabilities. The table includes both interest and
        principal cash flows.

        (Dollars
         in millions)       1 year       2 years       3 years       4 years
                       ------------------------------------------------------
        Deposits        $    186.5    $     11.4    $     13.1    $      3.8
        Accounts
         payable and
         other(1)          1,808.5             -             -             -
        Long-term debt         7.1         465.0           9.0          20.9
        Interest
         payment              92.8          84.6          50.4          49.2
        Other                    -           5.5             -             -
                       ------------------------------------------------------
        Total           $  2,094.9    $    566.5    $     72.5    $     73.9
                       ------------------------------------------------------
                       ------------------------------------------------------


        (Dollars
         in millions)      5 years    Thereafter         Total
                       ----------------------------------------
        Deposits        $     86.2    $        -    $    301.0
        Accounts
         payable and
         other(1)                -             -       1,808.5
        Long-term debt         7.8         863.6       1,373.4
        Interest
         payment              48.8         677.4       1,003.2
        Other                  0.1           7.2          12.8
                       ----------------------------------------
        Total           $    142.9    $  1,548.2    $  4,498.9
                       ----------------------------------------
                       ----------------------------------------
        (1)   Includes commercial paper and bank indebtedness.

        Interest rate risk

        The Company is exposed to interest rate risk, which it manages
        through the use of interest rate swaps. The Company has a policy in
        place that requires a minimum of 75% of its long term debt (term
        greater than one year) to be at fixed versus floating interest rates.
        The Company is in compliance with the policy.

    11. Other Long-Term Investments

        The market for Canadian third-party asset-backed commercial paper
        (ABCP), which was greatly impacted by the global disruption in the
        market experienced in August 2007, has been addressed in a formal
        restructuring proposal. On April 25, 2008, the majority of the note
        holders with investments in the affected ABCP voted in favour of the
        restructuring proposal. The restructuring provides investors with new
        long-term notes to replace the short-term ABCP that is currently
        illiquid. The deal, however, included a controversial clause that
        would give all players in the market immunity from lawsuits.
        Subsequent court hearings were held regarding these clauses in the
        plan and after slight modifications were made to the plan, the court
        has permitted the plan to proceed. Several parties appealed the
        court's decision and on September 19, 2008, the Supreme Court of
        Canada denied a challenge to the restructuring plan approved on
        April 25, 2008. The restructuring plan has been delayed due to the
        recent market upheavals and it is expected that the restructuring
        will close by the end of November 2008. More than 90 percent of the
        Company's $8.9 million of affected ABCP will be converted into notes
        that will pay interest at the rate paid on banker's acceptance notes
        less 50 basis points until maturity, which is currently expected to
        be between 2016 and 2017. The committee responsible for the
        restructuring proposal is working to ensure that a secondary market
        in the new notes develops so that investors will have an opportunity
        to sell their new notes, should they so choose.

        During 2007, the Company recorded a $1.3 million before-tax provision
        for impairment of the ABCP in the Consolidated Statement of Earnings
        based on management's best estimate of impairment at the time. Due to
        additional information provided to investors who hold ABCP through
        the formal restructuring proposal, the Company recorded an additional
        $1.0 million before-tax provision for impairment of the ABCP during
        the first quarter of 2008. The Company's valuation is
        representative of the expected outcome of the plan, and as such no
        further write down was recorded in the third quarter of 2008. The
        total charge for impairment is $2.3 million or 25 percent of the
        original value of the ABCP.

        The valuation model used by the Company to estimate the fair value of
        the ABCP incorporates discounted cash flows considering the best
        available information regarding market conditions and other factors
        that a market participant would consider for such investments. The
        valuation assumes a redemption term of approximately nine years
        corresponding to the expected maturities of the ABCP held by the
        Company. As indicated above, the Company's valuation assumes that the
        replacement notes will bear interest rates similar to short-term
        instruments and that such rates would be commensurate with the nature
        of the underlying assets and their associated cash flows. Assumptions
        have been made as to the amount of restructuring and other costs that
        the Company will bear.

        Consistent with the terms of the restructuring proposal, the Company
        has classified the remaining balance of this investment in ABCP of
        $6.6 million as long-term investments on the Consolidated Balance
        Sheet.

        There still remains some uncertainty regarding the value of the
        underlying assets, the amount and timing of cash flows and whether a
        secondary market can be established for the new notes and this could
        give rise to a further change in the value of the Company's
        investment in ABCP. While these changes could positively or
        negatively affect the Company's future earnings, it would not be
        considered material to the Company's overall financial position,
        given the relatively small amount of ABCP held at September 27, 2008.

        The write-down and reclassification of the Company's investment in
        ABCP has had no effect to date on the Company's debt covenants, debt
        ratings or compliance with banking regulations governing the
        Financial Services segment or Canadian Tire Bank.

        The Company does not expect a material adverse impact on its business
        as a result of the current third-party ABCP liquidity issue.

    12. Supplementary Cash Flow Information

        The Company paid income taxes during the 13 weeks ended September 27,
        2008 of $57.1 million (2007 - $47.8 million) and made interest
        payments of $14.8 million (2007 - $13.9 million). For the 39 weeks
        ended September 27, 2008, the Company paid income taxes of
        $170.6 million (2007 - $304.0 million) and made interest payments of
        $73.2 million (2007 - $57.1 million).

        During the 13 weeks ended September 27, 2008, property and equipment
        were acquired at an aggregate cost of $131.3 million (2007 -
        $165.1 million). During the 39 weeks ended September 27, 2008,
        property and equipment were acquired at an aggregate cost of
        $337.0 million (2007 - $397.9 million). The amount of property and
        equipment acquired that is included in accounts payable and other at
        September 27, 2008 was $27.7 million (2007 - $38.0 million).

    13. Legal Matters

        The Company and certain of its subsidiaries are party to a number of
        legal proceedings. The Company believes that each such proceeding
        constitutes a routine legal matter incidental to the business
        conducted by the Company and that the ultimate disposition of the
        proceedings will not have a material effect on the Company's
        consolidated earnings, cash flow or financial position.

    14. Tax Matters

        In the ordinary course of business, the Company is subject to ongoing
        audits by tax authorities. While the Company believes that its tax
        filing positions are appropriate and supportable, from time to time
        certain matters are reviewed and challenged by the tax authorities.

        The main issues challenged by the Canada Revenue Agency (CRA) relate
        to the tax treatment of commissions paid to foreign subsidiaries of
        the Company (covering periods from 1995 to 2007), and dividends
        received on an investment made by a wholly-owned subsidiary of the
        Company related to reinsurance (covering periods from 1999 to 2003).
        The applicable provincial tax authorities have reassessed and are
        also expected to issue further reassessments on these matters for the
        corresponding periods.

        The Company has agreed with the CRA to settle the commissions issue
        for the period 1995-2003, although the determination of the final tax
        liability pursuant to the settlement is subject to the verification
        by the CRA of certain information provided by the Company. The
        Company believes the provincial tax authorities will also reassess on
        the same basis. The Company does not have a significant exposure on
        this issue subsequent to the 2003 taxation year.

        The reassessments with respect to the dividends received issue are
        based on multiple grounds, some of which are highly unusual. The
        Company has appealed the reassessments and the matter is currently
        pending before the Tax Court of Canada. If the CRA (and applicable
        provincial tax authorities) were entirely successful in their
        reassessments - an outcome that the Company and its tax advisors
        believe to be unlikely - it is estimated that the total liability of
        the Company for additional taxes, interest and penalties could be
        approximately $188.3 million. Although the Company has appealed
        these reassessments, current tax legislation requires the Company to
        remit to the CRA and its provincial counterparts approximately
        $116.8 million related to this matter, of which $112.6 million had
        been remitted by the end of the quarter.

        The Company regularly reviews the potential for adverse outcomes in
        respect of tax matters. The Company believes that the ultimate
        disposition of the settlements, finalization of the commissions
        issue, resolution of the dividends received issue and other tax
        matters, will not have a material adverse effect on its liquidity,
        consolidated financial position or results of operations because the
        Company believes that it has adequate provision for these tax
        matters. Should the ultimate tax liability materially differ from
        the provision, the Company's effective tax rate and its earnings
        could be affected positively or negatively in the period in which the
        matters are resolved.

    15. Sale and Leaseback of Retail Properties

        The Company completed the sale and leaseback of 13 Canadian Tire
        retail properties to third parties during the quarter. The proceeds
        from the sale of these stores totaled $214.0 million, resulting in a
        net pre-tax gain of approximately $66.8 million. As the Company
        entered into long-term leasebacks of the 13 stores from the third
        parties, the gain will be amortized over the term of the leases. The
        unamortized gain is included in other long-term liabilities.

    16. Comparative Figures

        Certain of the prior period's figures have been reclassified to
        conform to the current year's presentation, including amounts with
        respect to securitizations and net provision for loans receivable in
        the consolidated statements of cash flows. As a result, cash flow
        from operations has been restated by $77.0 million and $223.0 million
        for the 13 weeks and 39 weeks ended September 29, 2007, respectively
        with a corresponding offset to investing activities. There is no
        impact on cash generated/used in the respective periods. In
        addition, passive interest income has been reclassified from gross
        operating revenue to net short-term interest expense on the
        consolidated statement of earnings.

        The Company's wholly-owned subsidiary, Canadian Tire Bank, began
        taking deposits from customers commencing in 2007. Previously, these
        amounts were classified in accounts payable and other in the
        consolidated balance sheets and in changes in other working capital
        components in the consolidated statements of cash flows. Commencing
        in the second quarter of 2008, these deposits are shown as current
        and long-term deposits in the consolidated balance sheets and a
        separate line in financing activities in the consolidated statements
        of cash flows. The prior period's figures have been reclassified to
        conform to the current year's presentation.

        Interest Coverage Exhibit to the Consolidated Financial Statements
        (unaudited)
        ---------------------------------------------------------------------

        The Company's long-term interest requirements for the 39 weeks ended
        September 27, 2008, after annualizing interest on long-term debt
        issued and retired during this period, amounted to $87.2 million.
        The Company's earnings before interest on long-term debt and income
        taxes for the 39 weeks then ended were $653.2 million, which is
        7.5 times the Company's long-term interest requirements for this
        period.%SEDAR: 00000534EF



For further information:
For further information: Media: Lisa Gibson, (416) 544-7655,
lisa.gibson@cantire.com; Investors: Karen Meagher, (416) 480-8058,
karen.meagher@cantire.com