TORONTO \u2014 Canadian Tire Corporation Ltd.’s $985 million purchase of Helly Hansen gives the retailer access to a lucrative global marketplace without the overhead risk of a large new bricks and mortar store network, executives said Thursday.<\/p>\n
The most significant acquisition for Canadian Tire since it bought sporting goods retailer Forzani Group in 2011 and casual apparel chain Marks in 2001, the purchase of the premium sportswear brand comes at a time of investor trepidation about the future of store-based retail amid the rise of online shopping.<\/p>\n
\u201cYou don\u2019t want to go outside your country unless it is a business model that you know you can handle,\u201d Stephen Wetmore, Canadian Tire\u2019s chief executive, said in an interview after the retailer\u2019s annual general meeting of shareholders on Thursday. \u201cThis is a wonderful way to go around the world and expand our horizons without having to be capital intensive.\u201d<\/p>\n
The company stock surged 5.3 per cent on the day to close at $268.50 on the Toronto Stock Exchange.<\/p>\n
Founded in 1877 and based in Oslo, Norway, Helly Hansen has annual revenue of $500 million and is sold in over 40 countries around the world including the U.S. at stores such as Nordstrom and REI, as well as the U.K., Sweden, Germany, Spain, Russia and Australia. In Canada, the brand sells workwear, outerwear, ski and sailing apparel and footwear at retailers including Hudson\u2019s Bay and Sporting Life, though Canadian Tire is its biggest customer through Sport Chek and Marks.<\/p>\n
Currently owned by the Ontario Teachers\u2019 Pension Plan, Helly Hansen has a global e-commerce platform and 57 small stores, including nine in Canada, though its primary business is wholesale. The brand had compound annual revenue growth of 12 per cent in last three years and compound annual operating earnings growth of 36 per cent, executives said.<\/p>\n
This is not Canadian Tire\u2019s first international business foray. The retailer of housewares and auto parts bought Texas-based automotive chain White Stores in 1982 before selling it at a loss four years later. It later opened an auto parts chain in the early 1990s in Indiana and expanded to surrounding states, but closed it in 1995 after disappointing sales at its ten stores.<\/p>\n
Since those bruising experiences, Canadian Tire has been very cautious about making international moves, said Alex Arifuzzaman, partner in Toronto-based retail real estate specialist InterStratics Consultants.<\/p>\n
\u201cFrom a strategic point of view, (Helly Hansen) looks like a really good acquisition for them,\u201d he said. \u201cThis gives Canadian Tire more of a global presence with minimal cost or risk. On the wholesale side, they will be able to increase their margins because the business will be vertically integrated.\u201d<\/p>\n