BUSINESS

Canadian Tire's New CEO, Michael Medline, Prepares For 'New World' Of Retail

10/09/2014 03:55 EDT | Updated 10/09/2014 03:59 EDT

TORONTO — Future growth at Canadian Tire depends on the retailer staying young, the company's new top manager predicts.

The Toronto-based company's incoming chief executive says Canadian Tire (TSX:CTC.A) will be focused on targeting a younger clientele across all of its brands over the next three years.

Growth will depend on whether Canadian Tire can move from the "old world into the the new world'' of retail and succeed with its plan to appeal to a "generational shift,'' said Michael Medline, Canadian Tire's president, who will officially succeed CEO Stephen Wetmore on Dec. 1.

Instead of running TV ads of a father staining his deck, Medline says, commercials would show a young dad with his son staining a treehouse in the backyard.

The new customer will be 30-49 years old with young families who will spend money on their kids' sports equipment and small home renovation projects, Medline says.

Canadian Tire stores are already beginning to reflect this customer shift, with an updated product assortment that includes a new housewares line and the recently revamped version of the Canadian Tire loyalty program that includes a digital option as well as the company's traditional Canadian Tire Money.

This younger focus will also be seen across Canadian Tire's other brands. Sport Chek will continue to target the 18-34 year old athlete, while Mark's will focus on 35-50 year old men.

Medline said of the change will depend on the retailer's continued investments with digitializing the business, particularly a shift in to digital ads instead of paper flyers at Sport Chek.

These investments have been costly but will pay off, he said.

"It's like redoing the plumbing in a house. It's not sexy but it's necessary,'' said Medline.

Canadian Tire plans to invest an average of $575 million each year on business improvements between 2015 and 2017, with money going to new digital technology as well as expansions and upgrades to its store network.

The Toronto-based company founded in the 1920s is one of Canada's largest retailers, operating under banners that include its Canadian Tire automotive and household goods stores, the Mark's clothing stores and various sports stores such as Sports Chek.

Among other things, the company aims to grow Canadian Tire's revenue by three per cent a year on an annualized basis. It expects faster growth at Mark's (five per cent average annual growth) and FGL Sports (nine per cent).

Shortly after the parent company's statement, Sport Chek - part of FGL Sports - announced a strategic partnership with the SCENE loyalty program run by Canada's largest theatre chain, Cineplex (TSX:CGX), and Scotiabank (TSX:BNS).

The SCENE point program will launch nationally in mid-November at more than 180 Sport Chek stores.

Besides the capital investments, Canadian Tire says it also intends to buy back an additional $400 million of its class A non-voting shares by the end of 2015, and will maintain its current dividend policy.

Canadian Tire A shares closed Wednesday in Toronto at $117.08 - near the high end of their 52-week range. At that price, Canadian Tire's market value is just under $8.8 billion.

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