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Canadian Tire turns focus to autos Add to ...

Canadian Tire Corp. is shuffling its top executive deck in part to focus more on its underperforming automobile business, as consumers increasingly opt for servicing their old cars rather than buying new ones.

The giant retailer wants to cash in on the heightened demand for car parts and repairs by putting a senior official in charge of its various auto-related businesses in a bid to "significantly" shore up their sales and bottom line.

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"We have pieces of automotive [businesses]in various parts of Canadian Tire," Stephen Wetmore, who became chief executive officer at Canadian Tire at the beginning of 2009, said in an interview.

"We have not increased our market shares and I think we have every ability to increase our market share and I believe that our customer service is below where it should be," he said. "To me, not looking at that cornerstone of Canadian Tire as one piece of business [is]just not maximizing the assets we have."

The move signals a key strategy of the new CEO to build on the company's reputation as a destination for tires and other auto parts and services - giving Canadian Tire an edge over rivals such as Wal-Mart.

As part of a reorganization, Canadian Tire yesterday named Michael Medline, a nine-year company veteran, to head all the auto-related businesses. It's the first time that the retailer has put one person in charge of the auto segment, which includes its Part Source chain, gas stations, and car parts and service at its namesake stores.

Competitors such as Wal-Mart and Costco have continued to add auto-related products and services to their stores as they expanded, said Ed Strapagiel, executive vice-president at Kubas Consultants. "They do have a lot of shoppers already who just might get their dozen loaves of bread and a set of new tires."

New car dealers have also been promoting their service business more amid a decline in car buying, he said. And cash-strapped consumers are eager to spend a little more to maintain old autos rather than buy new ones, he said.

Canadian Tire also takes on chains ranging from Midas Muffler and Goodyear Tire centres to independent garages and body shops, he said. "It's not an easy market to move around."

Canadian Tire has been moving over the past year or so to improve the logistics and distribution of its car parts businesses. Part Source appeals to do-it-yourself customers and also supplies parts to the company's main stores.

Now, Mr. Wetmore is intent on benefiting even more from the auto segment. "Automotive is critical to our brand and our financial performance," he told analysts late yesterday. "We strongly believe we can outperform the market."

To help it profit more from its businesses, he will unveil a new loyalty program in 2010 and start testing it by the end of the year. It will continue to use the iconic Canadian Tire paper money, he said. But it will also expand electronically its ability to reward its best customers for their patronage.

The executive changes are part of a strategy to centralize key operations of finance, human resources, information technology, communications, government relations, legal and real estate. They include promoting Marco Marrone, president of the company's bank, to chief financial officer, and replacing him with Dean McCann, a 13-year veteran of Canadian Tire, at the helm of the financial services unit.

The company also named Huw Thomas, its chief financial officer, to executive vice-president of financial strategy and performance.

The restructuring came as Canadian Tire's financial services business was hit hard in the third quarter, ended Oct. 3, squeezed by a steep increase in loan losses. It contributed to a 21.6-per-cent overall slide in adjusted profit compared with a year earlier, but still beat analysts' targets.

The operating profit of the company's core retail business was essentially unchanged in the quarter, compared with the previous year, despite challenging market conditions and unseasonably cold, wet weather, Mr. Wetmore said. But same-store sales, a key retail indicator, dropped 3.7 per cent.

CANADIAN TIRE (CTC.A)

Close: $58.24, up 47¢

***

Canadian Tire

Q3...............................2009....................2008

Profit...........$85.4-million.....$109.1-million

EPS......................$1.04......................$1.34

Revenue..........$2.2-billion..........$2.3-billion

Source: Company reports

 
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