Canadian Tire money borders on legal tender: Moody’s

It could be time to start gathering up that Canadian Tire money you have stuffed in the kitchen drawer and your car’s glove compartment: The mock currency Canadians sometimes take for granted is garnering some new attention, and from Americans, of all people.

A report from a pair of New York-based analysts at Moody’s Investors Service says Canadian Tire money “could almost be described as a ‘sub-fiat’ currency,” because of its acceptance at some retailers beyond Canadian Tire.

The Moody’s report is largely about Target’s troubles in Canada, but its flattering description of Canadian Tire – and its Canadian Tire money loyalty program - is what has people talking.

Moody’s calls Canadian Tire, “one of Canada’s most powerful retailers,” and a “concept that is completely foreign to U.S. retail.” That includes the five-cent, 10-cent, 25-cent, 50-cent, $1 and $2 bills first introduced at gas bars in 1958.

The report goes on to discuss Canadian Tire’s “hold” over Canadian consumers as being “often both misunderstood and underestimated.”

This positive portrayal of the storied Canadian retailer might have seemed off the mark a few years ago, but Canadian Tire has been busy rebuilding its brand, and in turn, its loyalty. That’s proven by its steadily rising revenues and profits in recent years.

The changes started with the acquisitions of Mark’s back in 2001 and FGL Sports in 2011, which includes Sport Chek and Atmosphere stores. That helped to build its blue-collar clothing and sporting goods image. Then, more recently, Canadian Tire started to revamp a number of its stores and poured money into improving its automotive departments.

The company is now ramping up its online business and recently said it would sell 20 per cent of its financial services business to the Bank of Nova Scotia, which will offset some of the risk of dealing with consumer credit.

A recent RetailTrack mystery shopping survey said Canadian Tire saw the biggest improvement in customer service, as compared to a handful of Canadian department stores over the past two years.

“The tremendous increase by Canadian Tire is very impressive, although not entirely surprising,” stated Shaun Belding, CEO of RetailTrack parent, The Belding Group of Companies.

He cited pressure from “very savvy and aggressive U.S. and Canadian retailers,” as being a driver of change at Canadian Tire, alongside other retailers in Canada.

“The increased overall performance [among all department stores] is a reflection of the effort and focus that all companies, globally, have been putting on customer experience over the last few years.”

Investors have also taken a shine to Canadian Tire. The stock is up 30 per cent over the past year and hit a record high of $111.59 on May 9.

It’s no wonder Moody’s seems smitten.

That said, the rating agency isn’t giving up on Target’s aggressive move into Canada, even if it has been rocky so far.

“We still believe that Canada remains a potentially lucrative market for Target over the longer term, but that it will take more time than most expected to achieve,” says the report from vice president and senior analyst Charles O'Shea and associate managing director Janice Hofferber.

They argue the Canadian retail market is different from the U.S. “with many subtleties that are difficult to capture.”