Canadian Tire’s Helly Hansen deal could be launchpad for global expansion: CEO

TORONTO — Canadian Tire Corp. views its $985-million acquisition of Norwegian outdoor clothing and gear maker Helly Hansen as a “major step forward” to diversify its offerings at home and launch new opportunities in international markets.

CEO Stephen Wetmore said the Toronto-based retailer has long been one of Helly Hansen’s biggest customers and the deal announced Thursday will bolster a number of its product categories, including camping, hunting and fishing, at both Canadian Tire department stores and Mark’s clothing chain.

Helly Hansen, which was founded in Oslo in 1877 and is now sold in more than 40 countries around the world, has “successfully and profitably entered many markets” globally with its outdoor adventure, sailing, skiiing and casual industrial brand, Wetmore said.

“This too will serve as a foundation for us to build upon in future years with existing or new owned brands,” Wetmore told analysts on a conference call.

Canadian Tire identified the Norwegian brand as an acquisition target shortly after it established its consumer brands division, seeing it as an opportunity to strengthen some of its most “strategic and brand-sensitive categories,” but the deal took 18 months to come together, Wetmore said.

“The journey wasn’t easy and worthy pursuits rarely are,” he said.

“And while we would have liked to have been faster, the result was worth the wait.”

The outdoor brand will continue to be sold in multiple retail stores in Canada, not just Canadian Tire stores, the Toronto-based company said.

Wetmore thanked Helly Hansen’s current Canadian owner, the Ontario Teachers’ Pension Plan, for helping to expand the brand internationally. Teachers’ acquired Helly Hansen in 2012.

Canadian Tire will assume $50 million in debt under terms of the deal. Helly Hansen CEO Paul Stoneham and the management team, based in Norway, are expected to continue to lead the business.

“(Canadian Tire) provides us with the ideal platform to further accelerate our growth trajectory and also strengthen our Canadian presence. This is a great opportunity for Helly Hansen and our team,” Stoneham said.

“As a Canadian, I am particularly proud to say that Canadian Tire is the new home for Helly Hansen.”

The deal is expected to close in the third-quarter and Helly Hansen is expected to add value to Canadian Tire’s profits this year, said Canadian Tire’s chief financial officer Dean McCann.

However, Canadian Tire class A shares fell by around five per cent to $166.06 on the Toronto Stock Exchange after the deal was announced and the company reported first-quarter profit that slipped compared with a year ago due to one-time accelerated depreciation charge.

Retail analyst Peter Sklar said he believes the $985 million price tag for Helly Hansen was expensive and that the deal might be unnecessary to accomplish some of Canadian Tire’s most immediate goals. He also mused about whether managing a high-end, high-growth international brand is too far outside Canadian Tire’s wheelhouse.

“While the acquisition gives Canadian Tire a platform for the international wholesale distribution of existing Canadian Tire house brands, Canadian Tire is not planning on capitalizing on this opportunity for at least several years,” he wrote in a note.

“Canadian Tire’s immediate plans are to instead focus on deepening the relationship with HH by carrying a fuller offering of HH products at all of its banners, which we believe could have been accomplished without acquiring the brand.”

Canadian Tire reported Thursday a first-quarter profit attributable to shareholders of $78 million, or $1.18 per share for the quarter, down from $87.5 million, or $1.24 per share a year ago. Analysts had expected earnings of $1.38 per share. However, Sklar calculated that earnings adjusted for the one-time charge were closer to analysts’ estimates at $1.37 per share.

Revenue totalled $2.81 billion, up from $2.72 billion in the same quarter last year.

Consolidated same store sales were up 5.2 per cent in the quarter as Canadian Tire gained 5.8 per cent, Mark’s added 3.4 per cent and FGL, which includes the Sport Chek banner, gained 3.9 per cent.

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