Canadian Tire Corporation, Limited announced a new integrated Strategic Plan
designed to extend and accelerate the Corporation’s growth. The plan is
targeted to position Canadian Tire Corporation for achievement of top-quartile
performance among North American retailers in Total Return to Shareholders
over a five-year outlook period (2001-2005).
“We set out to build a roadmap for Canadian Tire’s future that would
deliver increased shareholder value through consistent and superior growth of
key financial measures, and to achieve top-quartile performance among North
American retailers,” said Wayne Sales, president and chief executive officer.
“After undertaking a comprehensive strategic planning and review process
throughout 2001 we have developed a vision for growth and supporting
strategies that are compelling, achievable and financially prudent,” said
Sales.
To attain top-quartile performance among North American retailers, the
strategic plan has established compounded average annual growth rate (CAGR)
targets over the outlook period of 2001-2005 as follows:
– Revenue growth of greater than 10 per cent
– Comparable store sales growth of 3-4 per cent
– Earnings Per Share (EPS) growth of 12-15 per cent
– Earnings Before Income Taxes, Depreciation and Amortization (EBITDA) of
10-15 per cent
– Return on Invested Capital of greater than 10 per cent after tax
Sales noted: “Canadian Tire’s strong track record of success in growing
our businesses provides an excellent foundation to accelerate our performance.
We are the country’s most-shopped retailer and have a network of experienced
Associate Dealers who have a vested interest in the success of their stores
and communities. We have one of the highest volume independent gasoline
station networks in Canada and our financial services business is highly
profitable and growing. In PartSource, we have a unique specialty chain that
extends our leadership in automotive, and we also have one of the top ten
Canadian eCommerce sites, a national automobile club and several other unique
assets such as our real estate portfolio and Canadian Tire ‘Money’ — Canada’s
most recognized loyalty program.”
“Our current portfolio of businesses is very strong and this Strategic
Plan recognizes the inherent strengths we have across our organization as well
as the power of leveraging our core capabilities and unique assets to develop
new businesses,” Sales added.
Canadian Tire’s Strategic Plan focuses on three primary areas of growth,
which are:
– accelerating growth and performance in the core Canadian Tire Retail
business;
– pursuing unexploited growth in the Financial Services, Petroleum and
PartSource businesses; and
– aggressively pursuing new business growth opportunities that leverage
Canadian Tire’s core capabilities and unique assets.
The Corporation has established three distinct strategic business units
led by senior Canadian Tire executives with accountability for implementing
the Strategic Plan within their businesses and for fully leveraging business
synergies across the enterprise.
– Canadian Tire Retail, is led by President Mark Foote. Mark is a
seasoned executive with more than 20 years of retail business
experience. His scope of accountability includes Canadian Tire Retail’s
strategies, tactical marketing and merchandising initiatives for the
store network, the supply chain and Pacific Rim buying offices. He
leads a best-in-class retail team highly focused on driving growth.
– Canadian Tire Financial Services is led by President Tom Gauld. Since
joining Canadian Tire, Tom and his team have transformed Canadian Tire
Financial Services into a growing and very profitable business focused
on Canadian Tire’s brand. He has built a highly capable executive team
with extensive experience in risk management, credit marketing,
technology systems and customer relationship management.
– New Business Development, Petroleum and Partsource is led by Executive
Vice-President, New Business Development Mike Medline, who joined the
Corporation in January from Abitibi-Consolidated Inc. where he was
Senior Vice-President, Strategy and Corporate Development. Mike has a
broad mandate including development of new businesses as well as
operating accountability for Canadian Tire’s Petroleum and PartSource
businesses.
In addition, Andy Giancamilli has joined the Corporation as Executive
Vice-President, Dealer Operations. Andy brings more than 30 years of retail
operating experience to this position and was most recently President and
Chief Operating Officer of Kmart Corporation in the U.S.
The Corporation believes the Associate Dealer model is a key competitive
strength due to the level of commitment to our success that comes from the
significant investment all Associate Dealers have in Canadian Tire as
shareholders, as well as in their businesses. Associate Dealers have
considerable retail expertise compared to other retail models. The Associate
Dealers and their more than 30,000 store team members, many of whom are also
shareholders, represent the front-line face of Canadian Tire to retail
customers. They are highly motivated and committed to the success of the
organization. The Strategic Planning process identified ways to leverage this
competitive advantage in order to accelerate our growth and performance and to
improve the consistency of the shopping experience across the network. Andy
Giancamilli and his team will be focused on working with our Associate Dealers
to achieve these goals throughout the outlook period.
The Strategic Plan incorporates several initiatives that have been
categorized under the umbrella of “Strategic Imperatives”. These imperatives
and supporting strategies follow:
Strategic Imperative No. 1: Strengthen and accelerate growth and
performance in Canadian Tire’s core retail business
Canadian Tire Retail has significant opportunities to strengthen and
accelerate its growth and performance during the outlook period (2001-2005).
Several initiatives have been targeted to accomplish that goal.
Strategy Initiatives:
– New Format/Next Generation Stores: Canadian Tire’s new-format store
program continues to be a key strategic driver of both comparable store
and total sales growth. The Strategic Plan calls for a total of 40-50
incremental stores over the outlook period, bringing the total retail
network to between 480-490 Canadian Tire Associate Stores. 350-370 of
this number will be new-format stores.
The pace of new store builds will be evaluated on a yearly basis, and
in 2002 approximately 20 new-format stores will open. This pace, while
lower than 2001, is the largest ongoing retail expansion in the
country, and will allow the Corporation to focus investments on higher-
return projects, including focusing on in-filling strategic markets
such as Toronto. Lower investment levels in 2002 for new-format stores
will also provide additional financial flexibility to allow us to
integrate new retail concepts into the new-store format and invest in
other key corporate growth initiatives.
– Customer Values: A series of initiatives have already been introduced
under the “Customer Values” banner to drive customer service
improvement and comparable store sales growth. Focus has been directed
towards the in-stock position in Canadian Tire Retail and programs to
ensure friendly, knowledgeable staff are available to serve customers.
Significant progress has been made in this area, including the
introduction of 160 English and French web-based customer service and
product knowledge learning modules to the more than 30,000 store team
members across Canada.
– Business Simplification: Canadian Tire Retail has identified
significant opportunities to take costs out of corporate and store
operations and to drive comparable store sales growth. For example, up
to 40 per cent of new-format store space is currently allocated to
warehousing products. New initiatives have been planned to determine
optimal ways to reduce the amount of square footage devoted to product
storage in order to convert this space into retail square footage
across the store network. Significant simplification and cost
opportunities exist in areas such as merchandise flow, inventory
management and supply chain ordering processes.
– Concept Renewal: Since 1994 Canadian Tire has embarked on an aggressive
national store expansion program that has to date introduced more than
250 new-format stores into the marketplace. As part of our Strategic
Plan, Canadian Tire Retail will undertake a process of concept renewal
under which new retail approaches and innovations will be introduced.
The Strategic Plan envisions a much broader positioning of the Canadian
Tire brand including new categories of business, services offered
within stores and fundamental merchandising changes. Concept renewal is
a core strategy designed to drive comparable store sales.
– Improving Execution: Several areas of enterprise-wide execution have
been targeted for improvement. Working with our Associate Dealers and
with vendors, the Corporation will be introducing a process of testing
and certifying marketing programs to improve the cost, speed and
consistency of program execution across the store network. Other
initiatives designed to enhance execution include further improvements
in Canadian Tire Retail’s promotion programs, and vendor and category
management processes.
– Auto Service: Canadian Tire enjoys Canada’s largest share of the
automotive aftermarket maintenance and repair market, and has 5,400
service bays representing approximately 11 per cent of the market
total. A series of initiatives has been established in the Auto Service
business, led by Associate Dealers and supported by the Corporation, to
consistently improve the customer experience and grow market share in
line with the scale of our presence in in-bay auto service and to
improve consistent auto service delivery.
– CustomerLink: This initiative is a multi-year program as part of a
supply-chain wide improvement effort that will directly result in mutli-
channel capabilities in a regional replenishment supply chain system,
reducing costs and increasing store service levels. This initiative is
also a key program in ensuring the Corporation’s supply chain capacity
continues to respond to additional growth.
– Canadian Tire Online: The Strategic Plan process reinforced Canadian
Tire Online’s as a key marketing vehicle. Canadian Tire’s web store
www.canadiantire.ca drives synergies between Canadian Tire’s various
businesses, and is one of the country’s top ten eCommerce sites. The
site was upgraded in September 2001 to prepare for the holiday selling
season. Canadian Tire Online will achieve break even performance on an
operating basis in 2002, and continues to drive incremental sales
online and in-store traffic. Canadian Tire will continue to support
growth of this vehicle as part of the Strategic Plan.
Strategic Imperative No. 2: Pursue unexploited growth and profit
opportunities in Financial Services, Petroleum and PartSource
Canadian Tire’s second strategic imperative establishes key growth
initiatives across its Financial Services, Petroleum and PartSource
businesses. Canadian Tire Corporation represents a diversified group of
businesses that enjoy tremendous synergies. Each of these businesses makes
important contributions to the success of Canadian Tire as a whole.
Canadian Tire Financial Services has refocused its operations on core
Canadian Tire-branded products and has built world-class processes and systems
including its call centres and processing platform. Canadian Tire Financial
Services currently contributes approximately one-third of the Corporation’s
annual pre-tax net earnings. As the largest non-bank issuer of MasterCard in
Canada, Canadian Tire Financial Services has extensive experience in credit
card risk management.
Substantially increased earnings and revenues in Canadian Tire Financial
Services are a cornerstone element of our Strategic Plan.
Strategy Initiative:
– Accelerate Options MasterCard Growth: Canadian Tire Financial Services
currently has more than 1.2 million Options MasterCard holders and 3.6
million retail card holders. Options MasterCard customers enjoy use of
the card not only in Canadian Tire stores but also worldwide, where
they can collect Canadian Tire ‘Money’ to shop in Canadian Tire stores,
further driving comparable store sales. Options MasterCard represents
more than one-half of all outstanding receivables.
The Strategic Plan includes accelerated roll-out of Options MasterCard,
allowing Financial Services’ to play a more active role in the $35
billion bank card market. It is anticipated the majority of these new
receivables would be securitized, reducing funding requirements. Other
growth opportunities are also being explored such as warranty and
insurance products to leverage core strengths. Financial Services
enjoys a proven loyalty platform in Canadian Tire ‘Money’, low-cost and
high volume in-store account acquisition and extensive operational and
risk management capabilities. Tender shift to Canadian Tire-branded
credit card products provides attractive returns and additional
synergies with our retail network.
Canadian Tire Petroleum sites enjoy a much higher average volume of
gasoline pumped compared to other gasoline stations driven primarily by brand
recognition and the Canadian Tire ‘Money’ program. As a result, this business
provides strong revenue and earnings contributions as well as providing
significant cross-merchandising opportunities and excellent return on invested
capital.
Two key growth initiatives in Canadian Tire’s Petroleum business will be
pursued as part of the Strategic Plan.
Strategy Initiatives:
– New Gas Bars and Re-branding Partnerships: Canadian Tire will continue
to open new gas stations adjacent to its new-format stores, leveraging
existing real estate holdings. In addition, Canadian Tire will explore
partnership opportunities to re-brand lower-volume sites of other
gasoline retailers. Canadian Tire can offer lower-volume sites of other
gasoline retailers competitive advantage by driving higher volumes by
converting these sites to the Canadian Tire brand, offering Canadian
Tire ‘Money’, and operating these sites with our low cost model.
– Car Wash Network: Canadian Tire Petroleum currently operates a network
of 18 car washes. These operations provide excellent return on invested
capital and create the added competitive advantage of providing
customer convenience, cross-merchandising opportunities and fit with
the brand. Canadian Tire will pursue the addition of new car washes
taking advantage of existing real estate holdings wherever possible.
PartSource is a national specialty automotive chain focused on the
wholesale and heavy do-it-yourself markets. PartSource is performing well with
a double-digit increase in comparable store sales year to date. The chain is
comprised of 30 stores and the Corporation expects PartSource to achieve
profitability on an operating income basis in 2002. The pace of growth for the
chain will be based on performance and its ability to compete for capital.
Strategic Imperative No. 3: Develop and explore new business
opportunities
Canadian Tire Corporation is committed to pursuing new businesses and
growth channels that leverage our core capabilities and unique assets. A
standardized decision-making process has been established to review new
business opportunities, several of which are currently being evaluated as part
of that process.
Examples of business opportunities that will go through this decision-
making process include new formats, acquisitions and joint ventures, strategic
alliances and expansion in markets outside of Canada. All of these potential
new business opportunities must meet stringent operating and financial
hurdles.
The Corporation’s Strategic Plan establishes a set of assessment
parameters under which new business growth initiatives will be rigorously
reviewed in order to proceed. These parameters include, but are not limited,
to:
– Managing risk by employing a staged “test and learn” approach wherever
possible for any new initiative before full roll-out;
– Ensuring that core capabilities and privileged assets are being
leveraged;
– Strictly reviewing the financial potential of each opportunity,
including its ability to drive value-creation, accretiveness to
earnings and synergies with our existing businesses;
– Managing growth prudently by limiting impacts on balance sheet ratios;
– Assessing the impacts on our shareholders and existing businesses.
Strategic Imperative No. 4: Enhancing financial flexibility through
capital and cost productivity
Canadian Tire is committed to managing growth and execution of its
Strategic Plan in a financially prudent and balanced fashion. Several
initiatives will ensure a structure that will maintain a strong balance sheet
and manage impacts on the Corporation’s financial flexibility. These
initiatives include:
– Reducing working capital requirements, including inventory reductions
and other initiatives to further improve receivables and payables
performance.
– Reducing capital in new-format stores and improving return on capital
employed, through major process and design enhancements, resulting in
improved comparable store sales growth
– Determining the optimal level of capital expenditures, and prioritizing
investment among those initiatives that provide timely and strong
levels of return on invested capital.
– Whenever possible, pursue new growth initiatives that require minimal
corporate capital support and leverage existing assets and core
capabilities.
– Establishing specific targets for cost reduction and cost productivity
initiatives.
“We are confident our growth vision and strategy for the future will
result in Canadian Tire becoming an elite performer among North American
retailers, and we are committed to achieving this goal in a financially sound
manner that delivers superior returns to shareholders,” said Huw Thomas,
executive vice-president and chief financial officer.
“Our team is energized by the magnitude of the opportunities, the clarity
of our growth roadmap and our ability to become a top-quartile performer while
managing our financial flexibility and strength,” added Sales.
2001 FORECAST
In light of uncertainty in the global marketplace, Canadian Tire wishes
to provide investors with some insight into our current business trends. While
retail sales were somewhat impacted by tragic events in the United States,
they have recovered to normal levels. Based on current trends Canadian Tire
today reaffirms its forecast for an increase in gross operating revenues of
six to eight per cent in 2001 and an increase in consolidated net earnings in
the range of seven to nine per cent, excluding gains from the securitization
of credit charge receivables.
This forecast reflects our financial performance to date and the nature
of our product mix which provides Canadians with essential products and
services. While there is still uncertainty about the future impact of the
extraordinary events in the United States, we are actively monitoring,
managing and adjusting our business initiatives as required in response to the
situation. The Corporation will adjust and communicate any changes to our 2001
forecast if required.
Canadian Tire Corporation, Limited (TSE: CTR.a, CTR) — the country’s
most shopped retailer — offers a unique mix of products and services through
three distinct, yet inter-related businesses. Canadian Tire Retail and the
Associate Dealers together form one of Canada’s best-known and most successful
retailers, offering customers the convenience and leadership of three
specialty stores under one roof — Automotive, Sports and Leisure, and Home
Products. Canadian Tire’s online marketing channel www.canadiantire.ca , offers
Canadians a way to shop online for automotive, sports, leisure and home
products. Canadian Tire Financial Services manages related financial products
and services for retail and petroleum customers, and also markets other value-
added products to our customers. Canadian Tire Petroleum is one of the
country’s largest independent retailers of gasoline, with 203 outlets. With
443 Canadian Tire Associate Stores serving communities nationwide, Canadian
Tire Corporation, Limited and the Associate Dealers together employ more than
38,000 Canadians.
