Discount tire outlet

TORONTO -- Canadian Tire Corp., Canada's largest hard goods retailer with 425 associate stores and 27,000 employees, is in the midst of an aggressive expansion and renovation as it battles an unrelenting U.S. retail onslaught.

At the wheel to drive Canadian Tire out in front of the competition is Stephen Bachand, president and ceo, who joined the company in 1993. He was previously executive vp of Hechinger Co., a Landover, Md.-based home center chain.

Under Bachand's direction, Canadian Tire has launched a national expansion program to replace or expand 240 stores over the next three years in the face of what he calls the threat from "gloves-off" high-profile U.S. retail competitors.

Canadian Tire stores, which have thrived here for 73 years, specialize in sports and leisure, automotives and home products. The chain also has 4,500 auto-service bays. In addition, Canadian Tire Petroleum has 202 gasoline outlets and is the largest independent retailer of gasoline in Canada.

When Bachand joined Canadian Tire, "powerful forces of change were buffeting the company." Recession-weary Canadians were tight with their money and looking for the best prices, selection, service and convenience.

"Many merchandisers failed to heed the wake-up call and quickly became part of retail history," Bachand said. "Consumer demands for value on their own terms also set the stage for the entry of high-performance merchandisers into Canada, mostly from the United States [notably Wal-Mart and The Home Depot]."

Canadian Tire's share price plummeted by one-third after Wal-Mart took over 122 Woolco department stores in Canada last year. Shareholders also took a beating as Canadian Tire lost $80.6 million (U.S.) on the sale of its money-losing U.S. subsidiary Auto Source last year.

Bachand told shareholders at the annual meeting in May that early results of the expansion program are "extremely encouraging," with traffic and average sales up 30% in eight stores that opened last fall. Overall, store sales are up 60%. Last year's earnings were $4.07 million (U.S.) on sales of $2.6 billion (U.S.).

Recently, stock prices hit a one-year high, up 17%, at $16 7/8 per share. Half-year results this year put profits up 5% to $40.8 million (U.S.), and revenues were up 9.5% at $1.38 billion (U.S.).

Canadian Tire's new megastore openings, now 18 outlets in total, have been "the most successful in the company's history," Bachand said.

Forty more stores or expansions are under way this year, and another 60 new stores are planned in each of the next three years for an expected total expenditure of about $888 million (U.S.).

The company's "change agenda" strategy is based on Bachand's view that Canadian Tire "has starved the marketplace with small and outdated stores."

Bachand recently took 300 vendors on a tour of the new class of stores, including a replacement outlet in London, Ontario, that has 53,358 sq. ft. compared to 17,349 sq. ft. in the former store. It has 18 auto-service bays, 430 parking spots and new product areas including pet supplies, personal security, indoor plants and flowers, pre-recorded tapes and compact discs, licensed sporting goods and a 12,000-sq.-ft. outdoor Garden Center.

Part of the strategy was to conduct a line-by-line review of every one of more than 50,000 products offered by Canadian Tire. Many categories were strengthened by adding breadth and depth and others were eliminated because they did not fit the redefinition of the core assortments.

"While analyzing and focusing Canadian Tire's product assortment, we were working concurrently on the optimum store format required to display our three core product lines-automotives, sports and leisure and home goods," Bachand said.

The plan for new stores is directly linked to the number of households in a market and the best selection of merchandise to serve that market. The projects are primarily replacement stores--expansions, rebuilds or relocations in existing markets.

Evolutionary in nature, the new stores have three sizes, serving small, medium and large markets. The largest has an average of 117,000 sq. ft., the medium-sized is 87,000 sq. ft. and the remaining group average 50,000 sq. ft.

"Today, the only realistic avenue to growth is higher absolute-margin dollars generated by higher sales," Bachand said. "That's why Canadian Tire's new store strategy is designed to grow our market share substantially from our existing base of high-profile, convenient locations."

The three priorities of the "change agenda" are focused assortments, competitive operations and a customer-driven service while driving costs down. Canadian Tire has also reduced prices on more than 10,000 items in the past two years.

Inside the stores, there are new layouts and electronic kiosks, bonus points and the popular cash-bonus "Canadian Tire money" loyalty programs, a hassle-free national returns policy and a multimillion dollar commitment by associate dealers to improve customer-service training for employees.

There's also a new purchasing policy called Source Canada that gives explicit preference to Canadian manufacturers that match foreign suppliers on price, quality and service.

The renewed success shows Bachand that customers are getting the message. There's a lot more to Canadian Tire [than tires], as promised by our advertising. It also shows that there is a lot more for Canadian Tire in Canada."