BUSINESS

Incoming CEO of Canadian Tire sees 'new world' of retail, 'generational shift'

10/09/2014 08:19 EDT | Updated 12/09/2014 05:59 EST
TORONTO - The future at one of the country's oldest retailers depends on it staying young, says the new head at Canadian Tire.

Incoming chief executive Michael Medline said the retailer is focused on targeting younger shoppers across all of its brands as part of a three-year growth plan.

Canadian Tire is chasing a "generational shift" in customers, said Medline, the company's president who takes over as chief executive from Stephen Wetmore on Dec. 1.

In the past, the company was not targeting any specific customer base and tried to sell everything to everybody, Medline said.

"We weren't appealing to young families with children as much as we needed to," he said in an interview following the retailer's presentation to investors.

Now with its new agenda, Canadian Tire will try to reposition itself as a number of specialty retailers with a solid focus on young couples just coming into their own independence, buying homes and growing their families.

"When you target (a group), you get a sharper message, you carry the right products and you have the right operations in your store," he said.

The company expects to spend an average of $575 million annually over the next three years to beef up on new digital technology as well as expansions and upgrades to its store network.

Some of the changes coming to Canadian Tire (TSX:CTC.A) include the addition of hundreds of new items on its shelves. The retailer will soon stock a children's sleepover kit with a tent and other accessories to snow paint, so kids can create art on those snowy Canadian days.

Medline said the retailer's new target customer is someone between 30-49 years old with young children, who is looking to spend money on their kids' sports equipment and small home renovation projects.

The ads coming from the retailer will also have a different look.

In the past, Canadian Tire would show a father staining his deck, but now marketing for the same product will show a father and son staining a treehouse in the backyard.

Canadian Tire stores are already beginning to reflect the shift with an updated product assortment that includes a new housewares line and a digital version of its much-loved Canadian Tire Money loyalty program.

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 Sport Chek.

All of those brands will also shift more attention towards younger shoppers with Mark's moving away from appealing to the over 50 crowd to focus on 35-50 year old men.

Canadian Tire aims to grow its revenue by three per cent a year on an annualized basis. Its clothing store Mark's has a target of five per cent average annual revenue growth, while sporting goods retailer FGL Sports is expected to grow nine per cent.

Much of the retailer's plan is contingent on whether it can move from the "old world into the new world" of digital presence and data analytics.

Medline said the company will continue to improve its Canadian Tire website, including using local weather data to stay relevant to consumers. When a snow storm hits Calgary, for example, customers there will soon be shown a limited time deal on boots and shovels through a digital flyer.

Further investment in the company's digital infrastructure has been costly but will pay off, said Medline.

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

Meanwhile, Sport Chek — part of FGL Sports — also announced a new strategic partnership Thursday with the Scene loyalty program run by Canada's largest theatre chain, Cineplex (TSX:CGX), and Scotiabank (TSX:BNS).

Medline said eventually, the retailer will promote offers such as movie tickets with every shoe purchase over $100, for example.

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

The company said 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.

Its shares climbed nearly three per cent, or $3.42, to close at $120.50 on the Toronto Stock Exchange — slightly below the new 52-week high of $120.53 per share reached earlier in the day.

Canadian Tire has over 1,700 retail and gasoline outlets across the country, including various banners under FGL Sports, such as Hockey Experts, Sports Experts, National Sports, Intersport and Atmosphere.

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Note to readers: This is a corrected story. A previous version said Canadian Tire holds investor presentations annually.