Canadian Tire revs up with new concepts, in-store operations

TORONTO —Canadian Tire is dressing up its operations with another business. The Canadian retail enigma—it sells automotive, hardware, sporting goods and housewares in a big-box format that often leaves Americans shaking their heads in confusion—is building on a test of products from its Mark’s Work Warehouse specialty stores to build an apparel business in its namesake broadline units.

This isn’t the first time Canadian Tire has added an operation. A decade or so ago, it added housewares to its former departmental triumvirate. What the company had discovered is that, although most of the products purchased from the store were intended for men, as often as not, they were purchased by women. That insight encouraged Canadian Tire to experiment with housewares, and the operation proved successful.

During an investor conference on Oct. 3, management outlined plans to build a “bigger and better” Canadian Tire and detailed the plan to launch a Mark’s store section, including the full range of the specialist’s merchandise, inside Canadian Tire outlets opening this fall in Waterdown, Ontario, and Dartmouth, Nova Scotia.

As part of a larger effort in 2008, Canadian Tire will test a new retailing concept designed for underserved markets it plans to fill in. The test units will be tailored to local market preferences and include an 18,000-square-foot to 20,000-square-foot Mark’s section in each store.

Canadian Tire spokes-woman Caroline Casselman noted that the Mark’s sections in the test stores debuting this year won’t necessarily be as large as those planned for next year, but they will provide enough room to merchandise the full assortment carried by the stand-alone units. Mark’s stores currently average 10,000 square feet to 12,000 square feet with new units opening at a standard of 14,000 square feet to 16,000 square feet. Next-generation Mark’s units will probably range a bit larger than 25,000 square feet with up to 35,000 square-foot stores possible.

Casselman said that Canadian Tire has about 25 “what we call combination stores,” where the namesake unit and Mark’s share a roof, but operate as two stores with a connecting doorway. “By the end of the year, we’re up to about 33 combination stores,” she added.

The two new test units are essentially an enhancement of the combination stores. “Mark’s is like a separate section in the Canadian Tire,” Casselman explained. “It has a separate section to itself, but you move seamlessly from the Canadian Tire retail to a Mark’s department. The one in Darmouth is about 15,000 square feet of a total of 100,000 square feet for the Canadian Tire, and it’s placed along the back wall beside [the] consumables section and outdoor recreation.”

Next year’s tests will consider new variations on how to integrate the Mark’s sections.

Building the bigger and better company will require additional efforts beyond integrating Mark’s into Canadian Tire stores. Among them are:

Introducing between 60 and 70 new retailing outlets annually across the portfolio, which includes Canadian Tire stores, Mark’s Work Warehouse stand-alone units, Part-Source automotive outlets and Canadian Tire Petroleum gas stations;

Focusing special attention on the Canadian Tire/Part-Source cornerstone automotive business through expansion of category assortments, investment in new technology infrastructure and the creation of a network of 22 Part-Source hub stores across Canada that will, as part of the operation, supply automotive hard parts on a same-day basis for up to 80% of CTR stores;

Promoting growth of the portfolio of high-margin, Canadian Tire-branded retail financial services, including new credit cards, balance transfers and credit lines, as well as continuing the test of the company’s new high-interest savings account, GICs, mortgages and One-and-Only Account banking products.

During a meeting with analysts, management revealed that results to date from the retail banking experiments have been encouraging, and testing will continue through 2008. Additionally, Canadian Tire officials noted that the company planned to broaden the assortment of merchandise within the retail network, focusing specifically on Mark’s women’s apparel.

“We remain committed to our existing and successful growth strategies, which are based primarily on network expansion, continuous renewal of our store concepts and growth in financial services,” Tom Gauld, president and ceo, told the analysts. “At the same time, we will increase our emphasis on productivity, enhancing initiatives to ensure long-term competitiveness and sustainable double-digit earnings growth. This balanced approach will create an even ‘bigger and better’ Canadian Tire for our customers and our shareholders.”