Canadian Tire, known for its automotive and home goods, has itself seen big changes over the past few years under Mr. Wetmore, including the takeover of the country’s largest sporting goods retailer, which operates Sport Chek, as well as the spinning out of its real estate into a real estate income trust. It also is expanding its fledgling e-commerce after having dropped it altogether in 2009 soon after Mr. Wetmore became CEO.
Now the company under Mr. Medline will need to bolster its digital strategies while strengthening its core flagship stores as U.S. giants, including Wal-Mart Stores Inc., Target Corp. and Lowe’s Cos., race to shore up their businesses here. Canadian Tire will also look at possible acquisitions to expand in its “heritage” areas such as auto parts although will remain “incredibly picky and slow to the trigger,” Mr. Medline told analysts on Thursday.
“We are digitizing retail as well as anyone is doing out there. This is going to be a big change to face our industry and a big challenge ... This is not the sleepy retail industry of decades ago.”
Canadian Tire also said its second-quarter profit rose to $178.9-million or $2.12 a share from $154.9-million or $1.91 a share, a year earlier. Sales rose 4.8 per cent to $3.17-billion from $3.02-billion. In the latest period, Canadian Tire beat analysts’ estimate of a profit-per-share of an average $2.02, according to Thomson Reuters I/B/E/S.
Keith Howlett, retail analyst at Desjardins Securities, said Canadian Tire’s decision to name Mr. Medline as CEO as well as president is not unexpected, only the timing had been uncertain. Mr. Medline will lead an investor day on Oct. 9 which “is timely as it will provide Mr. Medline with a forum to outline his vision for the company,” Mr. Howlett said.
Canadian Tire’s second-quarter results were driven by strong sales in the context of a “tepid” retail environment in Canada, Mr. Howlett said. Same-store sales at outlets open a year or more – a key retail measure – increased by 2.8 per cent at Canadian Tire stores, 8.2 per cent at its FGL sporting goods division and 3.2 per cent at its Mark’s clothier.
A number of non-operational gains and losses “appear to have largely offset one another,” Mr. Howlett said. They included gains on real estate sales to third parties, gains and costs of legal settlements and costs of early redemption of debt.
Mr. Medline has been a senior executive at Canadian Tire for more than 13 years, having led many of its key initiatives, including the acquisition of Mark’s Work Wearhouse in 2002 and the acquisition of Forzani Group Ltd., which includes Sport Chek, in 2011. He also played a big part in Canadian Tire’s purchase of Pro Hockey Life and, this year, teaming up with Scotiabank to run its financial services.
He led a number of Canadian Tire’s divisions, including its auto and gas businesses, sporting goods and clothing chain Mark’s, before being appointed president last November.
As president, Mr. Medline has focused on an array of areas, including digital and improving Canadian Tire’s home repair and sporting goods department after having worked to fix its ailing automobile parts and service section.
He’s also beefing up its sporting goods section, following healthy gains at its standalone sporting goods chains. The company is applying a specialty-retail business model to its generalist merchant format, aiming to refresh its departments one by one to gain an edge in an increasingly crowded retail market.
“Our efforts are paying off by shifting our focus to thinking more like a group of specialty retailers and less like a general merchant,” Mr. Medline said.
He said Canadian Tire will focus on gathering more customer data, mainly by launching this year a digital loyalty card after having tested it for a couple of years. And he said he plans to shift more flyer advertising to digital versions after a successful pilot at Sport Chek.
His team is working to “weather-proof” the Mark’s clothing business to focus more on categories such as jeans and footwear to soften the blow of poor sales of highly seasonal goods in unseasonal weather, he said.
Mr. Wetmore pledged he would not interfere with the CEO’s role once he moves into the non-executive deputy chairman’s position in December. “The day that I ever interfere with the chief executive officer and president’s role is the day that I leave,” he told analysts. “They were probably trying to make feel better by giving me a title.”
Mr. Wetmore started looking for improvements at the retailer’s biggest and highest margin department – auto-related businesses. Last year, the division enjoyed its strongest results in the segment in five to seven years, Mr.Medline has said. It meant a big investment in new systems and computers as well as a 40-per-cent turnover of its auto service staff and, more recently, a new head of the division who came from the U.S. specialty auto sector.
Canadian Tire is taking lessons from Sport Chek and applying them to its business, he said. It launched a prototype “digital” Sport Chek store in West Edmonton Mall. The latest store features multiple digital screens and product information, aimed at drawing younger customers.
Sport Chek is working on reducing print flyers and shifting to more digital promotions. It recently tested ditching its Sport Chek print flyer for two weeks and using the funds in its digital marketing instead.
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