Essays /

Canadian Tire Corporation Report Essay

Essay preview

November 27, 2012
Business 100, AB Investors
University of the Fraser Valley
SD College
Sector 32C, Chandigarh
Dear Business 100 – XYZ Investors,
We have responded to your request regarding an analysis of the Canadian Tire Corporation and in this report you will find the information about the Company and their recent corporate activity. We have identified various points that will be useful in your decision to invest in this company. We have included information regarding Canadian Tire’s history, the products and services offered by them, and an analysis of the internal and external factors that affect the Corporation’s operations. We have also assessed the critical issues the company is currently facing along with their major implications. In order to see the direction in which the company is head, we also evaluated their vision, mission and long term objectives and strategies, followed by a sound strategy assessment. We have also analysed the company’s marketing strategy in regards to three of the products that they offer and also an overview of the marketing mix pursued by the company in general. We collected data regarding their financials of the past three fiscal years, and checked their sources of capital. Lastly, we have provided conclusions and our recommendations about the company keeping in mind the overall shape of the company’s future operations. We hope that this report guides you in your decision to invest in this company. Sincerely,

Star Investors
2012 INVESTOR ANALYSIS
OF
THE CANADIAN TIRE CORPORATION

November 27, 2012 Written By: George Peary Star Investors BUS 100

EXECUTIVE SUMMARY
This report stems from the request for an in-depth analysis of the Canadian Tire Corporation. Through research and analysis by Star Investors and by using the internet and University of the Fraser Valley databases, we, have created a report in order to assist your decision regarding an investment in the Canadian Tire Corporation.

The Canadian Tire Corporation is one of Canada’s oldest retailers; they recently completed 90 years of service. They have six main product lines, apparel, financing, automotive, fixing, home and living products and sports and playing goods. Canadian Tire is also the country’s largest independent gasoline retailer. The mission statement of the Canadian Tire is “To be the best at what our customers value most.” The company has survived many years in the retail industry in Canada; though recently it has begun to face a few internal issues such as an extremely bureaucratic organizational functioning. Entry of US retain giant Target into Canada in 2013 poses a threat to the company as they will certainly steal some sales of the company. However they are trying to cope up with these challenged through rebranding, new advertising policy, retrofitting stores and by making more similar changes within the organization. The company is well established and its diverse product line has enabled it to become one of the most versatile retailers of the country. The heavy dependence on dealers and lack of a dynamic corporate culture are the biggest weaknesses of the company at this point in time. The company recently acquired The Forzani Group and went on a massive rebranding campaign which has opened new opportunities for the company in future. The corporation has certain long term objectives which include strengthening core retail, aligning all business units to reinforce the core, building a high-performing organization and creating new platforms for growth. Their organizational structure is departmentalized through product and function lines and that enables the company to complete tasks efficiently in order to get products to the market faster. Their Board of Directors comprises of 16 members. Stephen G Wetmore is the CEO of Canadian Tire Corporation currently. He holds a good reputation for bringing in a variety of revolutionary changes in the operations and executive body of the company, which have been very beneficial. Over 27% of retail sales at Canadian Tire stores are comprised of products marketed under brand names controlled by Canadian Tire, which brand names are either owned or licensed by the Company. CTR’s supply chain (“Supply Chain”) is responsible for managing the flow of information and goods among approximately 2,650 sources of supply, 479 Canadian Tire stores and 87 PartSource branded stores across Canada. CTR, in union with the Dealers, also builds customer awareness and traffic in Canadian Tire stores by distributing weekly promotional flyers; electronic “flyers” available over the internet; radio, television, newspaper, magazine and internet advertising; and event sponsorship. In the past three years the company has grown in revenue by 83.6%. Their stock price and EPS have also increased. Drastic changes were witnessed in the financial growth of the company in 2011 and 2012, especially after the acquisition of FGL sports. Our forecast expects the Company to grow in revenue, net profit and stock price within the next three years. Based on our analysis of various factors such as a feasible long term strategy, a stable organizational structure, rebranding and massive campaigning to promote the company’s 90 year anniversary etc. our recommendation to investors would be to either buy shares of Canadian Tire or hold them if they already have them. We also based our forecast on our analysis of stock prices and revenue which are expected to rise in future.

TABLE OF CONTENTS
1. Introduction ………………………………………………………………………………… 6 2. Company Overview ……………………………………………………………………....7 3. Company Situation
3.1 SWOT Analysis ………………………………………………………..........................8 3.2 Critical Issues ……………………………………………………………………………9 3.3 Major Implications ………………………………………………………………………11 4. Strategic Direction
4.1 Mission, Vision, Value Statement ……………………………………………………..12 4.2 Long Term Objectives …………………………………………………........................14 4.3 Key Strategies …………………………………………………………………………. 16 5. Organizational Structure

5.1 Organization of the Company……………………………………………………..…...18 5.2 Board of Directors ………………………………………………………………………19 5.3 Meet the CEO –Stephen Wetmore………………………………………………….. 20 5.4 Compensation Comparison …………………………………………………………. 21 6. Marketing Strategy

6.1 Overall Marketing Strategy ……………………………………………………………22 Product Analysis ……………………………………………………………………………24 7. Financial Performance
7.1 Three Year Trend Analysis …………………………………………………………….26 7.2 Financial Comparison …………………………………………………………………..27 7.3 Sources of Capital ……………………………………………………………………....28 8. Company Outlook
8.1 Our Forecast …………………………………………………………………………....29 8.2 Analysts’ Forecast ……………………………………………………………………...30 9. Recommendation ……………………………………………………………31 10. Appendices
10.1 Appendix A – SWOT Analysis ……………………………………………………….32 10.2 Appendix B – Organizational Chart ………………………………………………….34 10.3 Appendix C – Board of Directors ……………………………………………………..35 10.4 Appendix D – Marketing Strategy …………………………………………………….36 10.5 Appendix E– Comparative Financial Analysis over 5 Years ……………………….37 References……………………………………………………………………………………...38 LIST OF FIGURES

Figure 1: SWOT Analysis ………………………………………………………………………8 Figure2: Committees and their functions……………………………………………………..19 Figure 3: CEO Compensation Comparison …………………………………………………...21 Figure 4: Product Analysis ………………………………………………………………………24 Figure 5: Three Year Trend ……………………………………………………………………..26 Figure 6: Comparative Financial Analysis in 2011 …………………………………………...27 Figure 7: Market Analysts’ Forecast……………………………………………………………..31

INTRODUCTION
This report was prepared as a response to the need of a detailed analysis of the Canadian Tire Corporation in order to assist future investors in determining a recommendation regarding investment into the company. Through research done using resources such as the corporation’s website as well as other information found on the internet and from databases supplied through the University of the Fraser Valley, we have taken the collected research and our own knowledge and analysis, to create this report. We have outlined important facts about the company. The goal of this report is to educate the reader about Canadian Tire and bring attention to the factors that are affecting the company. It first contains information regarding an overview of Canadian Tire, including specific products and services that are produced by them. Second, the report contains information pertaining to the internal and external environment that affects the business, such as trends, competition, major implications and an analysis of how they are trying to overcome these issues. As well as an analysis of the company’s vision, mission and value statements in addition to a glimpse of their long term objectives and strategies. Finally, we have analysed their organizational structure, marketing strategy and financial performance in order to give a sound investment recommendation.

COMPANY OVERVIEW
Canadian Tire Corporation is a retailing icon. The company operates more than 1,242 general merchandise and apparel retail stores and gas bars. The company primarily operates in Canada. It is headquartered in Ontario, Canada and employs about 57,000 people. The company began operation in 1922 when two brothers, Alfred J, and John W Billes, with a combined saving of $1800 bought Hamilton Tire and Garage Ltd., in Toronto. They opened their first store at Hamilton and gradually expanded their business and began operations in many fields. The Canadian Tire general merchandise stores are run by a network of associate dealers across Canada. Today after 90 years of operations, their stores touch communities coast to coast, offering automotive and hardware products, home décor items, sporting goods, clothes for work or play, convenient gas bars and financial services. Their tagline “Canada’s store” reflects the fact that the company has survived for a long time in the retail industry in Canada and has been a part of the lives of many generations of Canadians. Canadian Tire services over 10,000 cars a day and the fact that more than 90% of the population lives within 15 minutes of a Canadian Tire store is evidence to its huge presence in the country. Its Canadian Tire Petroleum subsidiary is one of the country's largest independent gasoline retailers. The company recorded revenues of C$8,980.8 million ($8,714.1 million) in the financial year ended December 2010 (FY2010), an increase of 3.4% over FY2009. The operating profit of the company was C$700.3 million ($679.5 million) in FY2010, an increase of 11.8% over FY2009. The net profit was C$453.6 million ($440.1 million) in FY2010, an increase of 35.4% over FY2009. According to a recent survey by the Canadian Business Network, Canadian Tire ranks no.6 in the top 10 highly regarded companies in Canada.

COMPANY SITUATION
STRENGTHS | WEAKNESSES | THREATS | OPPORTUNITIES |
Brand strength and reach | Employee retirement benefit obligations | Lower spending on automotive repairs and maintenance indicating a sluggish aftermarket | Acquisition of Forzani Group | Diversified store base | Legal issues and contingencies | Counterfeit products | Growth in automotive parts and equipment market | Innovative products and services | Product recalls damaging the company’s reputation | Supply chain disruption risk | Growing apparel market in Canada will improve sales at Mark's | Successful loyalty program | | | Scope for gaining market share in credit cards segment | Robust supply chain management | | | |

SWOT Analysis (Sources: Business Source Complete, 2011)
We have briefly identified the various internal (organizational) and external (environmental) factors in the SWOT analysis. A complete description of the same has been provided in Appendix A.

CRITICAL ISSUES
Canadian Tire is a 90 year old company and has been running operations in the Canadian market for a long time. However, there are various critical issues that the company has faced from time to time in order to keep up with the changing times, customer preferences and demands, etc.

The few serious issues that the company is currently facing are:

* Lack of dynamism and creativity
Despite being a huge and established company for many years now, Canadian tire in the recent years is becoming “out-dated” in many ways. In today’s times where new business are coming up every day and all of them try to bring in something new, in order to establish a unique identity in the market, Canadian tire seems to be lagging behind. The organisation relies heavily on planning and its old departmentalized functioning which is making it lethargic. Compared to the other retailers, there is less initiative and motivation among workers leading to lesser creat...

Read more

Keywords

-12 -13 /2012/05/02/canadian-tire-courts-outdoorsmen-with-new-hunting-and-fishing-gear /2012/05/10/canadian-tire-profit-soars-on-strong-sales/ /blog/post/1050169--how-to-get-a-refund-from-canadian-tire /blogs /en/investors/financialreports/annual%20reports%20 0.53 0.54 0.57 0.58 0.87 000 032 037 06 09 1 1.16 1.2 1.37 1.41 1.52 1.65 1.67 1.81 1.96 10 10.07 10.1 10.2 10.3 10.4 10.5 100 1000lb 101 103 10387.1 105.8 11 11.6 11.8 12 13.53 133.7 14 15 16 18 1800 19 1922 1934 1980 1998 1st 2 2.01 2.57 2.99 20 2003 2004 2006 2007 2009 2010 2011 2012 2013 21 22 23 23rd 24 24.31 242 249 249.90 25 250 26 27 27000 28 29 2nd 3 3.1 3.2 3.3 3.4 3.88 3.9 30 306 31 314 32 326 32c 335 335.0 34 35 35.4 36 364 37 38 389 39 4 4.1 4.2 4.28 4.3 4.5 400 418 440.1 444.2 45.19 453.6 467 467.0 47.71 476 479 485 487 49.17 493.70 499 4s 5 5.07 5.1 5.2 5.26 5.3 5.4 54.14 55.05 562 564 57 57.50 6 6.1 60 65.90 650 679.5 68.19 7 7.1 7.2 7.3 700.3 714.1 79.08 8 8.1 8.2 83.6 8686.5 87 879 9 9.1 9.52 90 90th 916 9213.1 942 952 955 98 980.8 989 a.f a.j ab abil abl absolut access accessori accident accommod accord account accumul accur achiev acquir acquisit across action activ actual ad add addit adopt adult advertis advisori affair affect aftermarket age ago agre agreement ahead aim aisl aitchison alan albikin alfr aliant align all-weath alloc allow almost along alreadi also alter altern america american among amount analys analysi analyst anniversari announc annual anoth apparel appeal appendic appendix appoint approach appropri approv approxim april area aris arrang articl aspect aspir assess asset assist associ assort assumpt athlet atmospher attent audienc audit auditor august austen author auto autom automot avail avenu averag avoid awar award away b background balanc bank banner bar barbequ base basi basic batteri becom began begun behind believ bell benefici benefit besid best better beyond big big-box biggest bile bill billion bn board bob bod bodi bonus boom boost booth borrow bought bound box brace bracket brampton branch brand briefli bring broad broker brookfield brother brought build bulk bureaucrat bus busi business.financialpost.com business.financialpost.com/2012/05/02/canadian-tire-courts-outdoorsmen-with-new-hunting-and-fishing-gear business.financialpost.com/2012/05/10/canadian-tire-profit-soars-on-strong-sales/ button buy c ca cajol calcul calendar calvin came camp campaign canada canadian capabl capac capit captur car card care career carrier cart cash catalyst catchi categori cater celebr centr centric ceo certain cfo chain chairman challeng chandigarh chang characterist chart check cheerlead chef chek chequ chief children choic choos christma christoph cio circul claud clear clifford close cloth cm coast cobort code cohes collect colleg combin come comfort commerc commerci commit committe common communic communiti compani compar comparison comparit compens compet competit competitor complet complex compli complianc composit comprehens compris comput computer-control computer-driven concentr concept concern conclus condit conduct confid connect consid consist consolid consult consum contain content conting continu contractu contribut control conveni convert conveyor convinc coordin cope copley core corp corp.canadiantire.ca corp.canadiantire.ca/en/investors/financialreports/annual%20reports%20 corpor cost could counterfeit countri coupl cover coverag craft creat creativ credit critic cross cross-busi cross-shop crucial ct ctr ctsfl cuisinart cultiv cultur curb current custom customer-centr customer-driven d daili damag data databas date day deal dealer dear death debbi debit debt decad decemb decid decis decor decreas dedic defer defin definit delay deliv deliveri demand dental depart department depend deposit depot depth deriv descript design despit destin detail determin develop differ digit dimens direct director disabl discount discov discrep dismal dismember display disrupt distinct distribut divers diversifi divid dividend divis dm dmitrieva dn domest domin done draft dramat drastic drawn dream drive driven driver drove due dynam décor e e-commerc earlier earn easi easili ecommerc educ effect effici effort either elabor electron element ellen emb embark emerg emerson emot emphasi employ employe enabl encourag end engag enhanc enjoy enough ensur enter enterpris enthusiasm enthusiast entir entitl entri environ environment ep equip equiti especi establish estat estim etc evalu even event ever everi everyday everyon everyone-men evid exact exampl exceed exclud exclus execut exert exist expand expans expect expenditur experi expert explain explor expos extend extens extern extraordinari extrem eye eye-level f face facebook.public facil facilit facility-wid fact factor failur fair faith famili far fast fast-pac faster favourit feasibl featur fee feedback feel fell femal fertil festiv fgl field fierc figur figure2 final financ financi find firm first fiscal fish fit five five-year fix flaw flex flex-abl flexibl flier flood floor flow flyer foam focus focuss follow foot footwear forecast foreign foremost form formal format foroum forward forzani found foundat four framework franchis frank fraser free freedom frequenc fresh friend front front-lin fuel full function fund furlong furnish futur fy2009 fy2010 g g.a gain garag garfield gargantuan gas gasolin gb gear general generat geopolit georg gestion get giant gic gift gigant give given glimps globe go goal golf gone good goodfellow govern gradual graham grassroot great greater grew group grow grown growth guarante guid guy h hamilton hand hankook hard hardwar head headquart health heavi heavili held help henc heritag heureux high high-perform higher highest highway hire histori hit hockey hold holder holli home homeown hope household housewar howev ht hub huge human hung hunting.their i.e iain icon idea ideal ident identif identifi imag impact impair implement impli implic import impress improv in-aisl in-depth in-floor in-stor inbound inc incent incid includ incom incorpor increas independ indic individu industri influx inform infrastructur initi innov inspir instanc instead insuffici insur integr intend interconnect interest intermod intern internet interrel introduc introduct intuit inventori invest investig investor involv issu issuanc item j jack jame januari job john johnson joint juli julia jump jumpstart june k keep key kf kid kitchenaid know knowledg known krashinski ks l label labour lack lag lagostina larg larger largest last late launch lawn layout lead leader leadership leagu learn leas least led legal leisur len less lesser letharg level leverag liabil licens life light like limit line liquid list lit live living.benefits load local locat long long-term longer look look-up loss low lower lowest loyalti ltd m ma made magazin mail main mainstream maintain mainten major make manag mani manner manufactur marco margin mark market marketing.public marron mart martha mass mass-merchandis massiv mastercard match matter maureen maximum may mcdonald mctyre mean measur mechan media medic meet member men mention mentor menu merchandis method miel might million mind minimum minut miss mission mix mm mode modern moment money month montreal motiv mr mr.wetmore mt much multipl must n.d name nation nationwid natur navig near necessari need net network nevada new newspap next nich no.6 non non-execut nonetheless noteworthi novemb number object oblig observ octob offer offers.public offic offman often old oldest one onlin online/digital ontario open oper opinion opportun optimo option option-bas order organ organis organiz orient ottawa out-dat outbound outdat outdoor outlet outlin outlook outperform outsid overal overcom oversight overview owen own owner p pace packag page paid pallet paper part particip particular partner partnership partsourc pass past pasternak pay payment peari penetr peopl per perform perhap period permit person persuad pertain peter petroleum pick pick-to-conveyor place plan plastic platform play player pleas plummer plus point pois polici popul popular port portfolio pose posit possess possibl post potenti potter power practic predict prefer prepar prescrib presenc present presid previous price primarili princip prior priorit prioriti privat private-brand probabl problem process produc product profil profit program project promot prompt proof proport propos prospect proven provid ps public pump purchas purpos pursu pursuant put pw qualif qualiti quarter quick quit r radio railway rang rank rate rather ratio ration rational rc re re-emerg re-merchandis re-posit reach read reader real realis realiz reason rebat rebrand recal receiv recent recept recognit recommend record recreat recreation.benefits recruit redeem redempt redesign reduc refer reflect refocus refresh refund regard region regular regulatori reinforc relat relationship relev reli reliabl reliant remain remind renew renov repair replac report reput request requir research reserv resid resourc respect respond respons restructur retail retain rethink retir retriev retrofit return reuter reveal revenu review revolutionari reward rid riley rim rise risk roadsid robust roic role roll roll-out rollout roman room roseman rossi run s.b sabia safeti safety/baby salari sale sandi satisfact satisfactori satisfi saunder savag save scheme school scope sd sear search season second sector securit see seem seen segment select selector self self-reli sell septemb seri serious serv servic set shape share share-bas sharehold shaw shelv ship shoot shop shopper short shovel show showcas shown signag signal signific similar simoniz simplifi sinc sincer site situat six sixteen size skill slight slogan slow sluggish small smart smooth snow soar social sold solid solidifi solut solv someon someth sophist sortat sound sourc sp space special specif specifi spend spent sponsor sponsorship sport sports-rel spot squar stabl stack staf staff stand standard star state statement status stay steal stem step stephen stock stood storag store strateg strategi strength strengthen strict strive strong stronger structur struggl stumbl style sub sub-tot subsidiari success suck suggest summari suppli supplier support surpris survey surviv sustain swivel swot syndic synergi system tabl tactic taglin take taken target task tax team team-ori technic techniqu technolog televis term termin test therebi therefor thing thomson thorough though thought threat three time timothi tire tiresom titl today told tool top toronto toronto-area total touch tough toward towlin track traffic trailer train transform transit transport travel travi treasur tree tremend trend tri truck true truli trust tv two two-year ultim unabl uncertain undergon undertaken union uniqu unit univers unmatch untap up-to-d updat upgrad urgent us use util vacat vallanc valley valu vari varieti various vast vehicl ventur versatil victim view viewer vill viral virtual vision volatil volum volunt w wait wal wal-mart wall walmart want way weak wear wearhous weather web websit week well well-craft well-known went wetmor whatev wheel wherea whether wide wider winnipeg wit within women work worker workplac world would written www.canadiantire.ca www.canadiantiresucks.net www.canadiantiresucks.net/blogs www.moneyville.ca www.moneyville.ca/blog/post/1050169--how-to-get-a-refund-from-canadian-tire www.nytimes.com www.theglobeandmail.com xyz yahoo year yet york younger