Canadian Tire Corp. Ltd. is cutting costs with the goal of reaching more than $200-million in annualized savings by 2022.
The retailer will seek to trim expenses across its portfolio of stores, which include Canadian Tire, SportChek, Mark’s and now Party City after the closing of that acquisition on Oct. 1.
Canadian Tire Corp. is hoping to eliminate duplicate operations by consolidating distribution centres to make them more efficient. It will also get rid of old infrastructure by updating its warehouse management system.
“We’re going to push very hard,” chief executive Stephen Wetmore said on a conference call Thursday morning to discuss his company’s third-quarter results.
The company announced the plan as it reported a profit of $227.7-million or $3.20 a share, compared with $231.3-million or $3.15 in the same period last year. Revenue from its retail segment fell by 0.4 per cent, while overall revenue was up slightly to $3.64-billion in the three months ending Sept. 28. The company also announced on Thursday that it would raise its quarterly dividend, the eleventh time it has done so in 10 years.
“This is intended to be a transformative effort for CTC, which upon completion should see the company in its entirety run far more efficiently,” Bank of Nova Scotia retail analyst Patricia Baker wrote in a research note. “The build of CTC into a one-company organization over the past several years has unearthed an opportunity to seriously eliminate duplicated efforts.”
The 97-year-old retailer is working to compete with the growth of e-commerce giants such as Amazon.com Inc. and Walmart Inc. SportChek has led the way on e-commerce growth, executives said on the call. Mark’s also lends itself well to e-commerce sales, and online shopping varies for Canadian Tire depending on the product category. The company expects e-commerce growth to continue, but is looking at building scale in order to find opportunities to manage the cost of order fulfillment and shipping.
"Distribution in Canada is expensive," Allan MacDonald, executive vice-president of retail, said on the call. "It's a scale play.”
Comparable sales at Canadian Tire stores, which represent the company’s biggest store network, rose 2.4 per cent in the quarter. This measure counts sales at stores open more than a year, removing the effect of store openings and closings on the financial numbers; it also excludes the company’s petroleum business and Helly Hansen brand. Comparable sales were up 4.6 per cent at SportChek and 1.2 per cent at Mark’s.
With the Party City acquisition now complete, Canadian Tire stores are planning to roll out broader offerings in party supplies, and the company expects a meaningful presence in its stores by this time next year, Canadian Tire Retail president Greg Hicks said on Thursday.
Mr. MacDonald also mentioned that the company is seeing more customers shopping across its different store banners, which he attributed to growing traction of the Triangle loyalty program launched last year.
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