ITS Giant Tiger division has lost some of its roar, and Winnipeg's North West Company wants to get it back.
President and CEO Edward Kennedy told the discount retailer's annual shareholders meeting in Winnipeg Tuesday that its 10-year-old, 35-store Giant Tiger division hasn't been performing up to company standards for the last three or four years. That's especially true in the last 18 months. Same-store sales have been essentially flat, he said, versus strong growth in the first six or seven years.
He blamed the poorer performance on increased competition, particularly in the fashion segment where it butts heads with retail heavyweights such as Walmart, Old Navy, Joe Fresh (Loblaws) and Forever 21.
"We need the fashion side to complete the picture at Giant Tiger. Selling food is not enough," Kennedy said. "But it is a more crowded marketplace now."
And it's about to get even more crowded in 2013 when another U.S.-based retail heavyweight -- Target Corp. -- begins opening stores across the country at converted Zellers sites.
So over the next year or so, NWC will be conducting an in-depth assessment of Giant Tiger's product offering, pricing schedules, and its long-term growth prospects.
That includes working with the Ottawa-based Giant Tiger chain -- NWC only has the rights to open and operate Giant Tiger stores in Western Canada -- to ensure they have the right fashion offering in their stores.
It will also continue to look for ways to improve operating efficiencies, he said, which will drive down costs and enable it to offer even better prices.
In a conference call with analysts, Kennedy was asked if the company would consider unloading its Giant Tiger stores if it concludes it can't significantly improve their performance. He said it's too soon to speculate on what it might do.
Kennedy stressed the Giant Tiger division is still profitable. It's just not as profitable as it was in the early years. "And we have an optimistic view that this could still be a very profitable business," he added. "It's not defanged. It's not a pussy cat. It's just lost a bit of its roar."
NWC operates 231 retail stores in rural and urban neighbourhoods under the banners Northern, NorthMart, Giant Tiger in Canada, AC Value Centre in Alaska, and Cost-U-Less in the South Pacific and Caribbean.
Its Giant Tiger stores are located mainly in southern cities in Manitoba, Saskatchewan and Alberta. Kennedy told shareholders the firm's stores in Northern Canada and Alaska, where there are fewer competitors, continue to perform well.
North West Company's profit took a hit in the first quarter of this year, and the Winnipeg-based retailer blames it on the taxman.
Company president and CEO Edward Kennedy told the firm's annual shareholders meeting that first-quarter net earnings plummeted by 30.3 per cent to $12.4 million, or 26 cents a share, from $17.8 million, or 37 cents a share, during the same period last year.
And virtually all of the decline was due to the company's Jan. 1 conversion from an income trust to a share corporation, he said, which means paying more income taxes. That alone sliced 10 cents off of the earnings per share.
Kennedy said earnings before interest, income taxes, depreciation and amortization were essentially flat -- $28.4 million versus $28.3 million. And sales rose by 1.8 per cent to $346.3 million in spite of an unseasonably cold spring, which hurt sales of spring and summer products and fashion items.