By Tom Ryan
In a shocking turn, Canadian Tire, the parent of Sports Chek and one of the largest retailers in Canada, ousted its CEO, Michael Medline, less than two years into the job.
The retailer’s board replaced him with his predecessor, Stephen Wetmore. The changeover, which was driven by the retailer’s board, took effect immediately.
“The board has taken a unanimous decision to change the leadership of the company at a time of unprecedented change in the retail industry,” Maureen Sabia, chairman, said in a statement July 14.
Wetmore, who was CEO from January 2009 to December 2014, will step down as deputy chairman of the board, but remain a director. He will also take the title of President.
Medline has been with the retailer for 15 years and took over as CEO on December 1, 2014, replacing Wetmore, who became deputy chairman at the time. Shares of the Toronto-based company gained about 10 percent since Medline took over after soaring 141 percent under Wetmore’s leadership.
Since Medline became CEO, oil prices have plunged to below U.S. $50 a barrel, creating economic hardship in Western Canada. At the same time, Canadian Tire has faced new U.S. competitors such as Walmart and Lowe’s, which recently merged with home renovation retailer Rona. Like many stores in the U.S., revenues across its banners in the recent fourth quarter was impacted by the mild winter.
The change comes as Canadian Tire’s FGL Sports’ segment has largely thrived over the last two years with the expectation of the weather-challenged holiday quarter.
In the recent first quarter, Sport Chek’s same-store sales jumped 12.3 percent. Overall, same-store sales for Sports Chek jumped 6.3 percent in 2015 following gains of 10.6 percent in 2014 and 10.3 percent in 2013. The FGL Sports’ segment also includes Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere.
Recent results have been in line with expectations given the challenging marking conditions, however analysts felt the change was due to disagreements over the digital strategy of the company, which also owns the Canadian Tire chain and Mark’s, which sells work and casual wear. These include concerns over the pace of implementation as well as tactics.
“While our short-term priorities are delivering results, the board’s responsibility is the long-term success of Canadian Tire,” added Sabia. “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.”
Wetmore previously led the acquisition of Forzani Group Ltd. (FGL). He also accelerated investment in the company’s technology infrastructure and introduced a number administrative changes at Canadian Tire’s head office. At the time of initially stepped down as CEO in late 2014, Canadian Tire said he “led the evolution of the Canadian Tire brand and introduced a brand-led culture to the company, while building a creative, innovative management team – all resulting in one of the company’s most exciting and fastest periods of growth in its history.”
He said he originally left because he had completed many of his original objectives since taking over as CEO.
“The board of directors has given me a clear mandate to take our iconic brand to the next level,” stated Wetmore in a press release July 14. “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.”
In the past few years, the retailer has been expanding its digital focus, including introducing a number of interactive stores as well as in communications. It released a Canadian Tire print catalogue that had interactive capabilities, experimented with digital flyers and targeted social media ads for Sport Chek.
Canaccord Genuity analyst Derek Dley wrote in a note, “In our view, both Wetmore and Medline were major contributors to Canadian Tire’s success over the majority of the last decade, and we are surprised by the abruptness of today’s announcement.”
Other analysts felt the board trusted Wetmore more with positioning Canadian Tire to capitalize on the rapid shift toward online selling and digital engagement.
RBC Capital Markets analyst Irene Nattel said in a note to clients, “Looking back at Mr. Wetmore’s tenure, it was under his leadership that the current strategy was developed, and it was he who put the team in place that is now delivering the performance we are seeing at CTC.”
Desjardins analyst Keith Howlett stated in a note, “We consider CTC’s digital strategy and its rapid implementation as the rightful top priority. The future is now.”
Photo courtesy Canadian Tire
