Canadian Tire Corp. will step up its acquisitions of exclusive brands in 2018 as the retailer of sporting and outdoor goods continues to fend off Amazon.
The multi-banner retailer, whose shares leapt 6.5 per cent Thursday after reporting higher than expected fourth-quarter sales and earnings, has grown its sales substantially in the last two years by improving and bulking up its portfolio of house-branded goods.
“Smaller brand acquisitions offer us the opportunity to generate a lot of value,” said Allan MacDonald, executive vice-president of retail, noting the company could have been more acquisitive in 2017. “In 2018 we will be setting more aggressive targets and introducing more owned brands to our banners.”
Private brands confer a higher margin to retailer than national brands and, if they prove to be popular, ensure customer loyalty due to their exclusivity. Canadian Tire’s house brands include Noma, Mastercraft and Canvas, and the retailer has acquired a number of others in the last year, including the Paderno cookware line and premium barbecue brand Vermont Castings. In January, the retailer bought the lawn care brand Golfgreen and team sports Sher-Wood Athletics Group Inc., which manufactures hockey gear and licensed products.
Private-label goods now account for 30 per cent of revenue at Canadian Tire stores, up from 20 per cent in 2012. At the Mark’s apparel banner, the figure is 70 per cent.
Improving its assortment of products and brands, aided by research and loyalty data, has helped Canadian Tire boost its same-store sales, MacDonald said.
Frigid temperatures helped the retailer drive up profit in the period ended Dec. 30, with earnings attributable to shareholders of $275.7 million, or $4.10 per share, compared with profit of $246.8 million ($3.46) in the same period a year ago.
That beat analyst expectations of $3.80 per share, according to estimates from Thomson Reuters.
Revenue rose 9 per cent to $3.96 billion, and same-store sales, a key measure of retail performance tallying volume at stores open for more than a year, rose 3.9 per cent.
Same-store sales rose 3.5 per cent at the chain’s Canadian Tire banner, 3.4 per cent at Mark’s and 5.8 per cent at FGL Sports on robust sales of outerwear and hockey gear.
Canadian Tire’s same-store sales performance was “particularly impressive” given the same-store sales in the fourth quarter was over 8 per cent in the same period last year, said Peter Sklar, analyst at BMO Capital Markets, in a research note.
“Total Canadian Tire retail sales grew over 10 per cent, driven by warehouse shipments to Canadian Tire dealers. Overall, we would categorize the fourth quarter as a strong beat, largely due to the favourable same-store sales results at all banners. However, we believe the earnings may be slightly overstated, given that the sales were driven in part by strong warehouse shipments to dealers, as overall Canadian consumer dynamics were generally positive in the quarter.”
The company Thursday also named TJ Flood as president of FGL Sports due to the departure of Duncan Fulton. Michael Magennis is taking over Flood’s prior role as senior vice-president of consumer brands.