Canadian Tire ousts CEO, reinstates predecessor in surprise shakeup

Share

Canadian Tire Corp. Ltd. says it sees a brighter future with former chief executive officer Stephen Wetmore than with the man who replaced him less than two years ago in the top job, Michael Medline.

In a stunning decision that took many industry players and observers by surprise, the Toronto-based company said on Wednesday it has reinstated Mr. Wetmore – who was CEO for about six years between 2009 and 2014 – as the person best suited to deal with the myriad challenges of a rapidly changing, uncertain retail environment.

Canadian Tire's board was concerned the company's digital retail strategy was inadequate in the face of fast-moving competitors such as Amazon.com, according a person close to company.

Mr. Wetmore is seen by the board as better equipped to execute a plan to ensure Canadian Tire thrives in a retail market increasingly moving online, the person said.

Desjardins Securities analyst Keith Howlett agreed that the company's immediate priorities are finding and implementing the right strategy in the rapidly growing and fiercely competitive online shopping channel.

The shakeup is needed "at a time of unprecedented change in the retail industry," said Canadian Tire chairwoman Maureen Sabia, without providing specifics on what issues need to be addressed.

"While the short-term priorities are delivering results, the board's responsibility is the long-term success of Canadian Tire," she said in a statement.

The board "has given me a clear mandate to take our iconic brand to the next level," Mr. Wetmore said.

"Every day, our customers are demanding more control over their shopping experience. We must continue to rapidly evolve the Tire to exceed both our customers' and our shareholders' expectations."

Ms. Sabia's comments indicated that the company views the company's current satisfactory performance as the result of work done by Mr. Wetmore before Mr. Medline's arrival.

"Stephen transformed our company during his previous tenure and laid the foundation for our current performance. We believe he is uniquely qualified to lead the company through the increasing complexities of the new world of retail. His appointment as President and CEO is neither an interim, nor a short term, appointment."

Mr. Medline, a 15-year veteran at the company, became president in 2013 and CEO in 2014.

Mr. Howlett said the board and Mr. Wetmore – as deputy chairman – "likely disagreed with Mr. Medline over one/all of the following: (1) the appropriate digital strategy, (2) the pace of its implementation, or (3) the role of acquisitions in implementing the company's digital strategy."

Short-term earnings weakness – expected in the second quarter of 2016, to be reported next month – is not likely the underlying cause for the CEO shakeup, Mr. Howlett said.

But "the change in the CEO does reflect that traditional retailing paradigms are under stress and must evolve."

Bringing back Mr. Wetmore is good news, RBC Dominion Securities credit analyst Andrew Calder said in a research note.

"While surprising, we expect investors to react positively to this change. Investors widely consider Mr. Wetmore's previous tenure to be a success, which included the transformational purchase of [sports retailer] Forzani.

"In our view, in addition to the online channel which the organization has rolled out successfully in the Sportchek banner, the core Canadian Tire Retail banner is facing increasing competitive threats by way of Wal-Mart, Amazon, Costco and other innovative players with online ordering and home delivery of hard goods and other core work/life/play products."

Michael McLarney, president of industry publication Hardlines, said the return of Mr. Wetmore may signal a renewed focus on corporate strategy, such as boosting the stock price and making more acquisitions to fuel growth.

In his last go-around as Canadian Tire CEO, Mr. Wetmore – a New Brunswick native and former CEO of Bell Aliant – spearheaded the acquisition of sports retailer Forzani Group Ltd., whose banners include Sport Chek, and streamlined administrative functions at head office.

Mr. Medline was viewed as more concerned with improving the customer experience, Mr. McLarney said. "Under Medline, Canadian Tire really reinforced its brand and really focused on merchandise, on being a better retailer."

Mr. Medline had also been leading a major expansion of Canadian Tire's online presence, including the testing of different e-commerce strategies. But the company "had several hiccups on that front," Mr. McLarney said.

Back in 2009 – when Mr. Wetmore was CEO – Canadian Tire exited online sales completely, then later reversed that decision and had to play catch up in the e-commerce space.

The company said on Wednesday that Mr. Wetmore will step down as deputy chairman of the board but stay on as a director.