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Pedestrians pass a Canadian Tire store in downtown Toronto.

MARK BLINCH/Reuters

Canadian Tire Corp. Ltd. is scaling back its capital spending significantly this year and next as it looks to invest less in its physical stores in a digital age.

Stephen Wetmore, who returned from retirement in the summer as Canadian Tire's chief executive officer, said on Thursday he did a "deep dive" into the retailer's capital-spending initiatives and found that his priority will be to invest in e-commerce and digital efforts while keeping a sharp eye on store upgrades.

"However we will be more strategic with our real estate decisions with an eye to making our existing assets more efficient while ensuring that we keep our network current," he told an analyst conference call after the company released better than expected third-quarter results.

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Retailers increasingly are moving to moderate their physical store expansion as consumers shift more of their spending to e-commerce, putting pressure on merchants to beef up their digital operations.

Canadian Tire said it plans to reduce its overall capital spending this year, to between $475-million and $500-million from a previously announced range of $625-million to $650-million. It cited fewer real estate opportunities than anticipated and "the inclusion of a reserve for productivity spending in our original guidance that has not been needed," a spokeswoman said.

In 2017, it expects to spend even less – between $400-million and $425-million. And its guidance for its annual three-year expenditures has dropped to between $450-million to $500-million from a previous $600-million and $625-million from 2015 through 2017.

"This is well below what was implied by the targeted 2015-17 average," Mark Petrie, retail analyst at CIBC World Markets, said in a note.

The retailer's revised capital-expenditure guidelines exclude spending on distribution centres, acquisitions by the Canadian Tire Real Estate Investment Trust or future initiatives tied to efficiencies and productivity.

The spending has included converting 12 former Target stores whose leases Canadian Tire bought last year for $17.7-million. U.S.-based Target Corp.'s Canadian division got court protection from its creditors last year, selling off many of its store leases and closing all the outlets.

In unveiling its lower spending plans, Canadian Tire also said it was increasing its quarterly dividend to 65 cents a share from 57.5 cents a share while buying back $550-million of its Class A non-voting shares by the end of fiscal 2017 (subject to regulatory approval).

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In its third quarter, Canadian Tire's profit fell to $197.8-million or $2.44 a share from $219.9-million or $2.62 a share, due to a year-before real estate gain. Its earnings beat analysts' average estimate of $2.38 a share, according to Thomson Reuters I/B/E/S.

The retailer's revenues were about the same at $3.1-billion.

Investors seemed content, pushing Canadian Tire's Class A shares up more than 4 per cent to close at $137.62 on the Toronto Stock Exchange.

Mr. Wetmore said the company is putting a big push on its private-label and exclusive lines of products as a way to take on the more intense online and physical-store competition. He said Canadian Tire's own brands, including Noma lights, Canvas home-decor items, Mastercraft tools and Frank consumer products, give it an edge in taking on rivals.

Canadian Tire will also look at acquiring more of its own brands "that have runway for growth and development" as well as complementing its existing portfolio of products, he said.

And in tipping his hat to Mary Turner, head of Canadian Tire's financial-services division who is retiring at the end of 2016 after 25 years with the company, Mr. Wetmore quipped: "For good reason, Mary has not asked me for any advice on how to enjoy her retirement."

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