Canadian Tire wants to do a better job of selling you tires, as well as clothing, gas and financial services.
And it’s going to do so without opening a lot more stores, relying instead on better technology to boost customer service and make the stores more productive and efficient.
The retailer is looking to shorten store lineups, make better use of the Internet, and introduce more innovative products, the company said during a presentation to investors Wednesday that outlined its vision for the next three to five years.
The initiatives include helping customers choose the right tire online before buying it in a Canadian Tire store, adding more innovative features, such as salt-resistant winter boots, to the clothing sold in its Mark’s Work Wearhouse stores, and opening its first gas bars on the high profile 400 series of provincial highways.
The company also has plans to restore its financial services division to its historically high levels of profitability by selling customers more financial products, such as installation financing and product warranties.
But at the centre of the growth plan is tires, automotive parts and services, the company said, a market it dominates.
“The strength of our core brand is at the heart of all of our growth strategies,” said president and chief executive officer Stephen Wetmore. “All of our businesses have to be focused on serving one valuable customer as one great company - centred on the Canadian Tire retail business.
“It’s totally unacceptable not to have the service running at peak performance. After 88 years, surely we can install a set of tires and have the customer go away happy,” Wetmore said in response to an analyst’s question about customer complaints about the retailer’s level of tire service.
The only reason those complaints don’t hurt Canadian Tire is customers’ expectations of any tire retailer are so low, the analyst noted.
The company said it plans to wring eight to 10 per cent higher annual profit on three to five per cent higher sales by focusing on its core business, customer needs and efficiencies. Such figures will boost shareholders’ annual return on equity by 10 to 12 per cent, Canadian Tire also said.
“We have the capacity to grow without large investment in retail supply chain and infrastructure,” chief financial officer Marco Marrone told investors.
The company acknowledged it hasn’t achieved its desired return on invested capital in the past.
“We have invested billions of dollars in recent years building a world-class infrastructure and store network,” Wetmore said. “We need to drive a greater return for our shareholders on those assets while significantly strengthening our brand and improving the consistency of customer service across the network.”
To achieve these goals, Wetmore said the company had recently overhauled its executive compensation plan to closely tie bonuses more directly to specific goals.
For example, part of Mike Arnett’s bonus as president of Canadian Tire Retail is tied to customers’ “price perception” in the stores, Wetmore said.
The retailer, which recently consolidated all of its automotive businesses under one executive, said it will do a better job of providing parts, service and road-side assistance through better technology that reduces the time it takes an employee to respond to a customer’s needs.
The company, which is famous for its Canadian Tire “money,” one of the oldest customer loyalty programs in retailing, plans to introduced a new loyalty program in 2011. It provided few details.
However, it recently hired the British firm Dunnhumby Ltd. to help it better link customer data to marketing and purchasing decisions.
The company said it can achieve its performance goals without increasing its capital expenditures from their current annual level of about $280 to $300 million a year.
The retailer said it will continue to focus on its new “smart” store and “small market” store concepts.
The “smart” stores are more productive, have better layouts, clearer signage and allocate more space for high-growth categories, such as backyard furniture, fitness equipment, kitchen, storage, tools and paint, the company said.
Outside of its core automotive business, the company says it’s counting on things like food, household cleaners and pet care to drive frequent customer visits.
As a chain, the stores need to be more consistent, the company also said, noting that its worst performing stores are three times more likely to be out of stock and incur six times as many customer complaints as its best-performing stores.
The retailer said it plans to use its Mark’s Work Wearhouse chain, which dominates the industrial clothing market, to bolster its Canadian Tire stores through more co-locations. The clothing chain, with a $1 billion in sales, also plans to attract more men’s and women’s casual clothing customers.
Mark’s president Paul Wilson said it’s gaining women customers, who spend more on clothing than men. But it needs to do a better job of communicating its strengths as a retailer of technically advanced clothing.
“People tell us we’re one of the best kept secrets.” One of its stores features a cold chamber where customers can test how well a winter jacket performs, for example. It plans to expand that feature to three more stores this year.
In financial services division, it’s aiming for a 4.5 to five per cent return on receivables, up from 3.6 per cent last year, the company said. The division will offer in-store financing and use the Canadian Tire credit card to attract more customers.
The Toronto Star
