TORONTO — Canadian Tire Corp. says it is revving up its presence on the auto racing circuit as part of its renewed focus on driving growth in its core automotive business.
“Automotive is the cornerstone of our business and now we’re going to act it,” Canadian Tire’s (TSX:CTC.A) president and CEO Stephen Wetmore told the company’s annual meeting Thursday in Toronto after it reported relatively flat first quarter earnings.
“Racing fans, you should also take notice as we return to prominence in Formula One, NASCAR, and Indy racing over the coming months,” he added.
Wetmore said the affiliation with auto racing is key to showing customers Canadian Tire is the authority in the automotive business.
“If you’re in automotive, you’re in automotive, and therefore you have to be in the racing game,” Wetmore added.
The chain already sponsors a NASCAR race, but is interested in embarking on sponsorship or other partnerships in more types of racing in order to make the affiliation between Canadian Tire and autos top of mind to consumers.
The Toronto-based retailer said more details on its plan to increase its presence on the circuit will be revealed in the coming months.
“The more we look at automotive, the more opportunity we see,” he said. “In 2011, we will fundamentally change the customer experience in our customer auto centre.”
Canadian Tire is investing in one of its largest information technology upgrades in order to streamline how the company orders and moves auto parts and improve customer service. It has already embarked on reorganization, which has resulted in a doubling of the assortment of parts it offers.
“The goal is to always say ’yes’ to a customer request,” Wetmore added.
The company saw little change in its first-quarter profits as sales at its flagship hardware and auto parts stores merely edged ahead as an economic recovery slowly chugs into gear, though it is optimistic that consumer spending will pick up in the spring.
The iconic retailer reported Thursday net earnings or had $49.4 million or 61 cents per share, virtually unchanged from the same time last year. Operating revenue improved slightly, rising about four per cent to $1.8 billion.
Consolidated retail sales rose 5.7 per cent to $1.89 billion, with sales at its Canadian Tire retail outlets up 2.1 per cent, while sales at the Mark’s brand clothing division were up 3.8 per cent and the company’s gas bars increased sales by 19.5 per cent on higher oil prices.
“We saw positive trends return to all our businesses... however there are still several quarters to go until we see a top-line increase in sales that is satisfying to me,” Wetmore said.
The chain’s financial services business charged ahead with growth of 41.8 per cent over last year, a performance that stood out in the quarter because it is most tied to shifts in the economy and consumer spending, Wetmore said. The business is now looking at introducing new products, including extended payment plans, instant credit, and warranties and insurance.
“Market conditions over the past 18 months have demonstrated that we cannot and should not primarily rely on financial services or Mark’s to drive growth,” he said, adding that the core retail chain was the core to ensuring growth.
He said the chain plans to focus on “customer-centric” retailing to transform the way the company does business.
“The opportunities are there for us to capture, now it’s all about staying on course,” Wetmore said, adding that he is confident the store can achieve it’s goal of up to 10 per cent growth over the next five years.
Wetmore said the chain will introduce is much-anticipated loyalty program—that he promises won’t do away with the popular Canadian Tire money— in early 2011.
Canadian Tire said its adjusted earnings before taxes were up 13 per cent in the quarter at $74.7 million or 63 cents per share, factoring out the impact of a tax gain in the first quarter of 2009 related to capital gains resulting from the sale of its shares in MasterCard in 2006 and 2007.
Same-store sales at Canadian Tire retail outlets, a measure of performance in the retail industry, were up 1.7 per cent compared to the same period last year, marking “a very slow start to the quarter due to soft sales in weather-related categories and in automotive, stronger sales in March positively impacted total first quarter results.”
Mark’s stores saw same-store sales rise 1.5 per cent, helped by a 4.1 per cent sales increase in industrial wear “as resource-based customers returned to work” in the wake of the recession.
The company said its financial targets remain unchanged with an eye to growing retail sales between three and five per cent over the next five years, with adjusted earnings per share growth between eight and 10 per cent.
Shares in Canadian Tire were up $1.95 at $58.45 in afternoon trading on the Toronto Stock Exchange.