Canadian Tire Corp will open more than 100 new Sport Chek sporting goods stores and Atmosphere outdoor gear shops over the next five years, while shutting down 115 unprofitable outlets operated under different banners by its FGL Sports unit. Canadian Tire acquired FGL Sports, formerly Forzani Group Ltd, last year.
Canadian Tire announced its expansion strategy at an investor presentation on Wednesday.
As part of the strategy, FGL Sports will expand its footprint significantly, Canadian Tire said in a statement. Outside of Quebec, Sport Chek will be the key “super brand.” The company will also grow Atmosphere as its outdoor lifestyle banner across the country. In total, FGL Sports intends to add more than 100 new Sport Chek and Atmosphere stores or more than two million square feet of new retail space under those banners over the next five years – equivalent to more than 50 percent more retail space. In particular, new concept, large, urban flagship Sport Chek stores will be opened, starting in 2013. As part of the announcement, a number of under-performing, non-strategic corporate banners are also being closed.
“Our vision is to create unparalleled access and customer connections to make our banners the conduit to the best sports brands in the world,” said Michael Medline, president of FGL Sports. “To achieve this goal, we are concentrating on our core banners. To date, the acquisition and integration of FGL Sports have been seamless. Sales and profitability of FGL Sports have been strong and synergies are on target. Now, we're going on offense to strengthen our store network.”
The company said in a statement that the retail expansion will also include an aggressive “super branding” strategy to build brand affinity and customer loyalty. This will be established through the development of an emotional connection between the customer and the brand, while continuously improving customer service and the in-store experience, all to drive sales. It includes significant growth across Canada, notably in Ontario and specifically in the Greater Toronto Area, where FGL Sports has been historically underrepresented.
“Our growth strategy will further position Canadian Tire and FGL Sports as the ultimate authority in sports in Canada,” continued Medline. “In our work leading up to the acquisition of Forzani, it was clear that banner closures would be necessary and that was built into our financial modeling. These banners are expected to be generating unprofitable sales at the time they are closed and are not strategically well-differentiated in the market. This plan allows us to focus on our core banners in order to maximize results for FGL Sports.”
In order to focus and invest in the fastest growing and most profitable banners, stand alone corporate locations for Sport Mart, Athletes World, Nevada Bob's Golf, Hockey Experts, Fitness Source and Econosports will either be converted to a Sport Chek or Atmosphere store or will be closed by the end of Q1 2013.
National Sports, a Southern Ontario based retail banner consisting of 18 team sports and hockey stores is well-differentiated and will continue to operate in the Ontario market. FGL Sports' current specialty stores – Nevada Bob's Golf and Hockey Experts – will continue to evolve into 'concept stores' within Sport Chek, an initiative that has been underway for several years.
While 115 corporate stores in total will be closed, approximately 20 of these locations will be converted to either Sport Chek or Atmosphere, resulting in a net closure of roughly 95 corporate stores. These closures will be offset by more than 100 new corporate stores that are planned to open over the next five years. In total, growth of over two million new square feet of retail space is expected, or approximately 1.4 million square feet net of the planned closures and conversions. For all store closures, the company will undertake efforts to retain as many employees as possible through transfers to converted or new stores.
The closures announced today do not impact any of FGL Sports' franchise banners or franchise store locations, which will remain operating as usual. FGL Sports will look to grow and develop Sports Experts, its largest franchise banner in Quebec, as well as all other franchise banners.
The pre-tax costs associated with the store closures are estimated to be approximately $26 million. It is expected that the majority of these costs will be recognized in Q2 2012.
