Canadian Tire Corp. Ltd. is ordering spring and summer products early and chartering its own cargo ships to import goods as it doubles down on an inventory strategy that’s buoyed the retailer through the pandemic. The company’s approach has helped it work around bottlenecks at ports and avoid surging spot market shipping rates, keeping store shelves stocked amid shortages elsewhere.
“We’ve once again chartered a dedicated ocean vessel and we’ve contracted it for the entire year,” president and CEO Greg Hicks said. “It gives us greater control over the supply chain and limits shipping peaks, which would otherwise expose us to spot market freight rates.” The company has also contracted an additional three charter sailings in its current quarter, he said.
It’s unclear how much added shipping costs could affect the company’s gross margins and store prices in 2022. Statistics Canada said on February 16 that prices for goods rose 7.2% in January compared with a year ago, up from 6.8% in December. At Canadian Tire, Hicks said higher prices are “moving on to the customer” but that the retailer won’t “give an inch competitively.”
Meanwhile, the company is also ordering goods early in an effort to sidestep ongoing hiccups across the supply chain. “Given the ongoing and significant supply chain challenges, we are continuing to build lead times into our supply chain processes as we assume that from sourcing to arrival at our distribution centres orders will take longer than in previous years,” Hicks said.
The retailer, which operates multiple stores including Canadian Tire, SportChek, Mark’s, PartSource and Pro Hockey Life, is also betting big on its own brand names. The retailer’s in-house brands, such as Noma, Canvas, Sherwood and WindRiver, made up 40% of the retailer’s total sales in its most recent quarter.
Canadian Tire expects rising inflation and supply issues will continue to favour those store brands. “Across the North American retail industry, scarcity of inventory and pricing have led to a tremendous amount of brand switching by customers and private labels have benefited from this trend,” Hicks said.
The retailer also benefits from an assortment that can fit to customers budgets, he said. “Over 90% of our assortment at (Canadian Tire retail) has a consumer price point of under $50, which represents 50% of our sales,” he said.
TJ Flood, president of Canadian Tire retail, added that the stores are focused on offering products at every price point.“We take great pride category-by-category making sure that we offer consumers choice at the good, better and best price levels,” he said.
Source: The Star