Canadian Tire now seen as the last northern fortress

"They're such a Canadian icon," says retail consultant Richard Talbot of Talbot Consultants International. "It probably wouldn't work anywhere else in the world. It certainly didn't when they tried to take it down to the United States."

The Globe and Mail
August 14, 2004

Canadian Tire now seen as the last northern fortress
National 'icon' earns praise for its ability to adapt to new competitive pressures
Janet McFarland

As Canada's department store icons topple, Canadian Tire Corp. may be left as the only historic retailer to handily stave off competition from U.S.-based retailers such as Wal-Mart while still remaining independent and Canadian-owned.

Canadian Tire has reported soaring profits in the past four years, earning praise from analysts and consultants for its ability to adapt to new competitive pressures in the important housewares, sporting goods and hardware sectors.

"They're such a Canadian icon," says retail consultant Richard Talbot of Talbot Consultants International. "It probably wouldn't work anywhere else in the world. It certainly didn't when they tried to take it down to the United States."

The historic Eatons department store chain has disappeared from Canada's retail landscape, and now Hudson's Bay Co. is rumoured to be up for sale to a U.S. buyer, which could further thin the ranks of Canadian-owned department stores. Sears Canada Inc., meanwhile, is majority owned by U.S.-based Sears Roebuck and Co., and many other large-format retail chains — such as Wal-Mart, Home Depot and Best Buy — are U.S. owned.

But Canadian Tire has survived as a Canadian-owned chain in this hotbed of competition, offering a unusual mix of product lines bolstered by an extremely profitable Canadian Tire MasterCard and financial products division.

Mr. Talbot says the 82-year-old company — known for issuing its own colourful Canadian Tire money — has immense brand loyalty and is top of mind for Canadian shoppers, especially those who want to shop quickly and don't want to walk the long aisles of larger stores, such as Home Depot.

Indeed, the Major Market Retail Report published annually by Kubas Consultants of Toronto shows Canadian Tire is consistently Canada's "most shopped" retailer on a national basis. The latest report, published in June, found that 90 per cent of consumers surveyed have been to a Canadian Tire store in the past 12 months.

For Canadian Tire, success has required investment. In recent years, it has been revamping older, dingy stores that have been too small to accommodate a broader range of offerings, such as home decor products and plants.

In 2002, it bought the Mark's Work Wearhouse clothing store chain, and has recently begun to build larger, new Concept 20/20 brand stores, some of them combining Canadian Tire and Mark's Work Wearhouse outlets.

At the retailing level, the company has developed sectors with little competition, such as automotive parts, or has found niches that work in competitive sectors.

Many of its sporting goods, for example, are offered at lower prices than specialty stores, making Canadian Tire popular with parents looking for basic products, such as children's hockey gear and skates. In the hardware sector, it has competed with huge retailers like Home Depot for those customers who want a simpler venue to find products for smaller projects.

Canadian Tire has also had big success with distinctive television ads that explain the benefits and uses of new products, such as tools and camping equipment.

Retail analyst Irene Nattel of RBC Dominion Securities Inc. says she expects the retail sector in Canada to remain "intensely competitive," but says Canadian Tire is poised to do well with its broad product mix and huge consumer loyalty.

"We anticipate that the company's built-in buffers of strong consumer identification with the brand, a longer selling season and varied product assortment should enable the company to continue generating solid earning growth going forward," she said in a report this week.

But, ultimately, retailing skill may not be the key factor to determine whether or not Canadian Tire remains Canadian owned.

Unlike HBC, which is widely publicly owned, Canadian Tire's ownership structure contains a major impediment to a takeover by a U.S. competitor.

The company's voting shares are 61 per cent owned by Toronto businesswoman Martha Billes, a member of the chain's founding family. This means a takeover bid could not succeed unless she supported it. And — so far at least — she has expressed no desire to sell her family's legacy asset.


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