Canadian Tire burning rubber: drives expansion, leaves U.S. competitors in the dust

Discount Store News, May 20, 1996 by Jim Fox

TORONTO -- Stephen Bachand, Canadian Tire Corp. president and ceo, has put his foot on the gas as Canada's largest hard goods retailer pulls ahead of invading U.S. competition.

It perhaps took an American like Bachand to successfully leave in the dust some of the U.S.-based invading retailers. Canadian Tire continues to show impressive gains, despite the likes of such tailgating competitors as Wal-Mart Canada Inc. and The Home Depot.

Joining the associate dealer corporation three years ago from Hechinger Company, a Landover, Md.-based home center retail chain where he was executive vp, Bachand is driving the 424-store chain ahead with an aggressive expansion program.

He inherited control over a chain that has been a Canadian institution since 1922, but in recent years had treated its customers and dealer associates poorly. It was also his view that Canadian Tire "starved the marketplace with small and outdated stores."

Things are changing quickly, and customers are returning in great numbers.

His massive replacement/expansion program--costing $900 million (U.S.) over the next four years--will involve 250 stores nationwide and create 35 new ones. Rebuilding and renovations began in 1994 with eight stores, followed by 27 stores last year and 51 this year.

While Zellers Inc., a division of Hudson's Bay Co., is in a vicious price war with Wal-Mart, Canadian Tire comes up a winner with a distinctive mix of automotives, sports and leisure, and home products.

Year-end net earnings for 1995 were up 6.1% at $90.1 million (U.S.) from $84.9 million (U.S.) a year earlier. Revenues of $2.81 billion (U.S.) last year were up nearly 5%.

In pledging to continue this year with a fast-paced expansion program to "bring our customers more value, better service and a more pleasant shopping experience," Bachand presided at the grand opening of the first new large-format store in the Greater Toronto Area in April.

Located in Newmarket, the $8.1 million (U.S.) store covers 104,000 sq. ft. with 53,000 sq. ft. of retail space --more than double that of the store it replaced. It also has 17 service bays for car repairs and a 13,500-sq.-ft. garden center.

Added products among the 50,000 stocked are pet supplies, a plant and cut flower shop and sections merchandising pre-recorded videotapes, cassettes, compact discs and computer software. There's also a clothing boutique with the new line of J.B. Goodhue workwear, a paint gallery, a donut kiosk and Price-Look-Up kiosks with electronic bar-code readers to check prices.

The store is an example of the national expansion strategy started in 1994 to provide "outstanding depth and breadth of the merchandise selection," Bachand said.

Canadian Tire, which is also Canada's largest gasoline retailer with 199 outlets and 20 convenience stores, was on a bumpy road and appeared to be lost when Bachand joined the company.

He rejected the big box format, deciding instead to concentrate on expanding and improving the chain's existing locations, which the company said are within a 15-minute drive of 85% of Canada's 30 million inhabitants.

The 56,000 skus have been boosted to 71,000, and in each of the past three years prices and expenses have dropped through better warehousing and careful selection of products and advertising.

There's now a no-hassle return policy and a drive for more Canadian Tire credit card holders--4 million, up from 2.8 million.

One of Bachand's early decisions was to sell off the money-losing U.S. subsidiary Auto Source, but he may someday again look south.

"We have to have that ambition," he told the Financial Post newspaper. "A marketplace that size contiguous to Canada whets the appetite."