If you can’t beat ’em, buy ’em—Canadian Tire acquires Sport Chek
Big news from the Canadian sporting good retail world today: Canadian Tire struck a deal worth a reported $771 million to buy Forzani Group, the parent company of Sport Chek. With the impending entry of Target into the Canadian market, Canadian Tire is racing to find new areas of growth, and acquiring Forzani’s more than 500 stores and $1.4 billion in annual sales is certainly a step in that direction.
The Globe and Mail has the story:
“The transaction will establish Canadian Tire as Canada’s ultimate authority in sports, with more than 1,000 combined retail sports outlets across the country,” the company said in a statement…
Canadian Tire is under pressure to improve its results. Faced with mounting competition and the arrival in Canada of U.S. discounter Target Corp. in 2013, the retailer has vowed to bolster its sales and return-on-investment under Stephen Wetmore, who became chief executive officer more than two years ago.
That Canadian Tire is “under pressure” is a bit of an understatement. As Canadian Business noted a few weeks back, its ownership model makes major overhauls more difficult than in other companies. More fundamentally, the core of its retail business is its auto parts division, an area Wetmore is targeting for the next big attempt the company makes to change the way it operates. Ever wonder why people shop for small kitchen appliances with a company whose bread and butter is selling tires and mufflers? We do—but so far investors seem pretty happy about it.
But while the Canadian icon goes into a defensive huddle in the retail market, it can at least count on one (unsuspecting) ally: local neighbourhood activists. They’re adamant the competition—Wal-Mart and Home Depot, to name a few—shouldn’t be allowed to build new downtown stores. What’s interesting is that their largely effective activism against any and all new big box developments has the unintended consequence of acting as a kind of incumbent protection program. But it’s probably worth asking whether Canadian Tire, for one, deserves the help.