Canadian Tire Corp. Ltd. will roll out lockers for online order pick-ups at hundreds of its stores in the coming year, as the company works to convince online shoppers to visit its stores.
The retailer tested the pick-up points in 2019 to positive response from customers. Its e-commerce business is growing – on Cyber Monday in December, the company had its biggest single day of online sales in its history. In November, Canadian Tire announced that it had generated more than $500-million in e-commerce revenue for the previous 12 months. In the last three months of 2019, business from ship-to-home orders was roughly double the same period the year before. But e-commerce is also an expensive business to run thanks to rising shipping costs across the industry and the logistics of managing inventory to get orders to customers efficiently.
“We collectively believe ... that in-store pick-up continues to be the best way for customers to have orders filled. It’s always the fastest and the cheapest option,” Greg Hicks, president of Canadian Tire Retail, said on a conference call to discuss the company’s fourth-quarter results on Thursday. “... We’re really working with the dealers now on rolling out more automated pickup solutions, to improve the customer experience and the dwell time for the customer.”
The 97-year-old retailer, which also owns store banners including Sport Chek and Mark’s, has been facing growing competition from e-commerce players such as Amazon.com Inc. and Walmart Inc. In addition to cost-cutting, the company is working on improving operations to manage the costs of online order fulfillment and shipping. That includes managing inventory to avoid “split shipments” where different items have to be shipped from different locations at higher cost. It is also competing against rivals that in some cases entice online shoppers with free shipping.
“From a free-delivery standpoint ... to the degree that freight is a more attractive acquisition tool than discounting product, I’d imagine that’s something that we’re going to look at with the dealers. But at this point in time, we don’t really see a need,” Mr. Hicks said.
The Toronto-based retailer had an encouraging end to the year during the crucial holiday shopping period.
On Thursday, Canadian Tire reported revenue of $4.3-billion for the 13 weeks ended Dec. 28, 2019, up from $4.1-billion in the 2018 period. The company attributed the disappointing 2018 results to unseasonably warm weather that hurt its sales of items such as snow blowers and shovels. Overall sales at existing stores were flat that year.
In the fourth quarter of 2019, comparable sales at Canadian Tire stores open more than a year – an important retail metric – rose 4.8 per cent, excluding petroleum sales. That represented a “meaningful” growth in market share for the flagship stores, executives said on the conference call. At Sport Chek, comparable sales grew 2 per cent in the quarter, and at Mark’s, comparable sales growth was 1.8 per cent.
“Our traffic was up substantially. Our sales from our high-value customers and our loyal customers are up substantially. Our web traffic is up substantially. All other things being equal, up against the competition, we had to steal market share,” chief executive officer Stephen Wetmore said on the call.
Canadian Tire reported fourth-quarter net income of $365.9-million or $5.42 per share, up from $278.2-million or $4 per share in 2018.
In November, the company announced it would begin cutting costs across its portfolio of stores, in a push to save $200-million annually by 2022. That effort is gaining momentum, Mr. Wetmore said on Thursday.
The company is working on cost-cutting at call centres and distribution centres, partly through increased automation. Late last year, the company decided to shutter its underperforming Paderno stores. The project also includes work to improve the efficiency of the company’s operations, for example by consolidating its transportation management, digital marketing and website platforms for all store banners.
Strength in Canadian Tire’s credit-card business also contributed to the company’s fourth-quarter earnings. Revenue in the financial-services segment grew 3.2 per cent to $333-million in the quarter. In the CT REIT segment, property revenue grew 3.7 per cent to $123.7-million.
For the full year, Canadian Tire reported its overall revenue rose 3.4 per cent to $14.5-billion. Comparable sales for all of 2019 rose 3.8 per cent at Canadian Tire, 3.3 per cent at Sport Check and 2.5 per cent at Mark’s. Net income was $894.8-million or $12.60 per share, compared to $783-million or $10.67 per share the year before.
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Editor’s note: A previous version of this story stated that Canadian Tire opened nearly 60 new stores last year. In fact, it added new Party City stores through its acquisition of the chain, which the company counts under its Canadian Tire banner in financial reporting.