TORONTO -- Canadian Tire Corp. has updated the investment community on its strategic direction for the 2008-2012 period. During an investor conference, Canadian Tire's management team outlined its plans to build a bigger and better Canadian Tire through a continued focus on growth and productivity.
Canadian Tire plans to pursue a number of avenues for growth over the next five years, including:
Growth of each of its retail businesses through ongoing expansions and store upgrades. On average, the corporation expects to introduce a total of between 60 [image-nocss] and 70 new retailing outlets annually across Canadian Tire Retail tire stores, Mark's Work Wearhouse clothing stores, PartSource automotive parts stores and Canadian Tire Petroleum gas stations. Growth of the Canadian Tire Retail/PartSource cornerstone automotive business through the expansion of category assortments, investment in new technology infrastructure and the creation of a network of approximately 22 PartSource hub stores across Canada to supply automotive hard parts on a same-day basis for up to 80% of Canadian Tire Retail stores. Continued expansion of Canadian Tire Financial Services' portfolio of high-margin, Canadian Tire-branded retail financial services, including new credit cards, balance transfers and credit line expansion. Financial Services will also continue to test its new high interest savings account, GICs, mortgages and One-and-Only Account banking products. Management has indicated that results to date from the retail banking test markets have been encouraging and testing will continue through 2008. A broadened assortment of merchandise within the whole retail network, with a specific focus on Mark's Work Wearhouse women's apparel.These initiatives are expected to result in store network growth of at least 5%, averaged over five years, and retail revenue growth of 6% to 8% over the same time period.
Canadian Tire plans to improve its overall productivity and customer service levels by streamlining its operations and improving its organizational structure. Plans include:
Leveraging the financial and operating benefits gained from the improved dealer agreement including cost-sharing arrangements on marketing expenses, shared savings from store-based energy initiatives and participation in the growth of dealer profits. Streamlining organizational structures and processes at Canadian Tire Retail, Canadian Tire Petroleum and PartSource through simplified business practices and a continuous focus on enhancing productivity. Strengthening overall operational capabilities by investing in critical areas of the supply chain, automotive and technology infrastructure in order to deliver future productivity improvements across the retail businesses. Continued expansion of the global sourcing program to support margins, competitive pricing and to access innovative products. At Canadian Tire Retail, these efforts will be supported by the development of automated marketing processes for pricing and inventory management controls. Continued enhancements to Canadian Tire's customer service programs across each of the business units.These initiatives are expected to generate double=digit earnings growth over the next five years. In addition, the after-tax return on invested capital (ROIC) is expected to exceed 10% over the outlook period. The estimated capital expenditures required to support the 2008-2012 initiatives is forecast to be in the range of $2.6 billion to $2.7 billion. These expenditures will support continued expansion of Canadian Tire's various retail store networks and financial services business, revitalization of the core retail infrastructure and improvements to overall productivity. Capital expenditures will be funded through growing operating cash flows, multiple sources of capital and committed lines of credit.
We remain committed to our existing and successful growth strategies, which are based primarily on network expansion, continuous renewal of our store concepts and growth in Financial Services, said Tom Gauld, president and CEO. At the same time, we will increase our emphasis on productivity enhancing initiatives to ensure long-term competitiveness and sustainable double-digit earnings growth. This balanced approach will create an even bigger and better' Canadian Tire for our customers and our shareholders.
Management has indicated it has moved to a five-year rolling strategic planning format so that it may provide the investing public with ongoing visibility to its long-term outlook and growth plans.
Toronto-based Canadian Tire operates more than 1,100 general merchandise and apparel retail stores, gas stations and car washes in an inter-related network of businesses engaged in retail, financial services and petroleum. It has 468 Canadian Tire Retail stores; 67 PartSource stores; 64 gas bars, 256 convenience stores and kiosks and 75 car washes under the Canadian Tire Petroleum brand; and 341 Mark's Work Wearhouse stores in Canada. Canadian Tire Financial Services manages more than 4 million Canadian Tire MasterCard accounts and markets related financial products and services for retail and petroleum customers.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.