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Canadian Tire adds big appliances to the mix

After focusing on tires and auto parts, Stephen Wetmore is turning his attention to the kitchen at Canadian Tire Corp.

The chief executive officer is plotting a dramatic makeover of Canadian Tire's home section by expanding into appliances and beefing up kitchen and other goods.

The company faces a tough rival in that home segment: U.S. discounter Target Corp., which is set to arrive in Canada by 2013.

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As a result, Mr. Wetmore is rushing to draw more women more often to Canadian Tire with a wider array of kitchen, home-storage and patio goods, including more upscale brands. And he's betting on big-ticket appliances, trying to cash in on a highly competitive field and carving out a space in which Target doesn't play.

It all fits into the retailer's expanding "living" department, on which company executives are still putting the final touches for a store pilot later this year.

"We know our living category could come under increased competitive pressure, but we'll be ready," Mr. Wetmore said on Thursday. "We will be transforming this section of the store in terms of product assortment [offering]in-store experience and marketing. … It's a massive market and we have an excellent strategy."

Since taking the top job in 2009, Mr. Wetmore has been concentrating on attracting more male shoppers by returning to Canadian Tire's auto product roots. He's beginning to enjoy the fruits of his labour: After eight straight quarters of negative or flat sales growth, the retailer's auto division has seen a turnaround since late last year, the company said.

Now Mr. Wetmore is using the auto division as a model to boost other Canadian Tire businesses - starting with the chain's "living" sections of kitchen, home organization and patio and barbecue products - all areas that tend to draw more women shoppers and which are all areas of strength at Target.

Canadian Tire is looking for a boost. While it's aiming for annual sales growth of 3 to 5 per cent in its flagships' retail division over five years, last year those sales rose just 1.4 per cent. In the first quarter of 2011, they dropped 0.6 per cent.

Canadian Tire's research underscores the challenge. It shows that the retailer is already the country's No. 1 seller of kitchen and home organization products, but ranks only fifth or sixth as the destination among women for those products. In other words, women often purchase a kettle or shelving unit at Canadian Tire simply because they're already in one of its stores picking up a gardening tool or bicycle, not because the retailer was top-of-mind for those home products.

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Mr. Wetmore believes he can bolster sales by getting women to head to the retailer specifically for home goods, rather than buying them as an afterthought. The strategy includes the addition of large appliances to the mix, such as refrigerators and washing machines, because they are the types of products for which shoppers make a special trip.

Still, moving into large appliances has its risks, said Wendy Evans of retail specialist Evans & Co. Consultants. Gross margins for appliances are relatively small - about 30 per cent compared to closer to 50 per cent for housewares, she said.

Canadian Tire is taking on a wide array of competitors that stock large appliances, such as Home Depot, Future Shop and Sears Canada, often prompting the need for heavy discounting to gain sales, which cuts into margins, she said. And, without a complete selection of appliances, Canadian Tire may struggle to lure these shoppers.

Nevertheless, Canadian Tire is being proactive by expanding its home section now - before Target gets here, she said.

Canadian Tire tested a select array of appliances in 11 stores last year and will roll them out to most outlets in 2011. A wider makeover of the stores' home - or living - section will first appear as a store pilot later this year and launch at all outlets next year, executive vice-president Mike Arnett said.

The appliances won't replace other products, a company spokeswoman said. Mr. Wetmore is building on a strategy to make better use of the stores' existing space. Last year, sales per square foot increased to $370 from $367 in 2009.

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The retailer's expansion of home goods will include more upscale items, such as a fuller line of Cuisinart barbecues and housewares, executives said. It is looking at other possible gaps in its offerings, including stainless steel appliances.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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