BUSINESS

Canadian Tire Profits Ring In At $2.5 Billion In Q1, Gas Sales Fizzle

05/14/2015 09:24 EDT | Updated 05/14/2016 05:59 EDT
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TORONTO - Everything you thought you knew about e-commerce is in flux and the head of Canadian Tire says retailers better get used to it.

Michael Medline said Thursday that the days of offering limited options for shoppers are over and retailers need to start thinking about how to stay nimble both in stores and online.

"This is going to get really fluid," Medline said after the company's annual meeting in Toronto.

"You've got to be flexible. What might work today will be totally different two years from now."

Canadian retailers have been slow to adapt to the changing digital expectations of consumers but, unlike some of its peers, Canadian Tire has experimented with new ideas like innovative viral campaigns on social media and interactive digital flyers.

Canadian Tire scrapped its e-commerce platform in 2009 when sales were lagging and is still working on getting a revamped version back online in a meaningful way.

Others Canadian retailers have lagged even further, like Shoppers Drug Mart, which finally this month launched a smartphone app for its Optimum loyalty card program. Shoppers' parent company Loblaw (TSX:L) has tested a "click and collect" model at one of its supermarkets that lets buyers select their groceries before swinging by the store.

Canadian Tire is a little further ahead when it comes to technology. Right now, customers can use the Canadian Tire website to reserve items for pickup in local stores, while its Sports Chek brand has started to roll out what is essentially a beta version of its online store.

"The site will be good, but not great," Medline told shareholders during the annual meeting, promising that it was a work in progress.

Retail analyst Brynn Winegard said Canadian Tire, by the nature of its product offerings, has been given some leeway in developing its e-commerce business.

"They don't have a very robust online offering, but they're not struggling for it," she said.

"There is less expectation."

Garden hoses and lawn mowers aren't the first thing most shoppers would think of buying online, which almost certainly bought Canadian Tire some extra time to tinker with its digital business.

But Winegard suggested millennials are quickly becoming a larger part of the hardware and home renovations market, which adds more pressure on Canadian Tire to get its plan in gear.

A study released this week by international consulting firm Deloitte says shoppers and retailers are caught in the middle of a "drastic digitally driven change" where the consumer's digital behaviour and expectations are moving faster than retailers can respond.

"Our projection for the future of retail is that the concept of online is dead," Deloitte said in the report, called "Navigating the New Digital Divide," which focused in particular on the U.S. market.

"When everyone is online all the time, when digital is pervasive — there is no offline. When no one is offline, then the concept of online is not necessary."

The report argues that consumers still shop in bricks-and-mortar stores, but that they do it with the help of devices like their smartphone to research information about products and load digital coupons, which lead them to buy more overall.

Earlier Thursday, Canadian Tire Corp. (TSX:CTC.A) reported weaker first-quarter profits as a decline in gasoline prices at its fuel stations flattened what was otherwise a strong growth period for the company's retailing operations.

Canadian Tire's net income was $88.3 million, up from $75.6 million last year, but earnings per share were steady at 88 cents.

Overall sales and revenue through the Canadian Tire group were about $2.5 billion, little changed from last year. Excluding the impact of petroleum, Canadian Tire said its retail sales were up 5.3 per cent from last year.

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