Some Milk with Those Goodyear Tires?

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Some Milk with Those Goodyear Tires?

TORONTO -- Canadian Tire, the Canadian chain that sells a wide range of hardline products from automotive aftermarket goods to household hardware and sporting goods, is now plunging into the convenience grocery business.

As Canadian consumers cut back on discretionary spending, retailers are increasingly adding more necessities and opening smaller stores, Canadian Tire CEO Stephen Wetmore said to investors at a CIBC World Markets conference in Toronto.

According to a report by the Toronto Star, Wetmore said customers are putting more groceries into their baskets at the two stores where the chain is experimenting with fresh and frozen food. Canadian Tire plans to add food in two more stores, in Hamilton and Sarnia, this spring, according to the report. The existing test stores are in Welland and the Ottawa suburb of Orleans.

Most of the floor space at Canadian Tire is devoted to products like automobile tires, motor oil, pet food, laundry detergent, fishing rods and lawn mowers. In the test stores, about 2 percent of the floor space is being given to such food products as milk, frozen hamburgers, packaged cookies and other grocery products.

"It's a very small experiment," said Wetmore. "I don't think Loblaw has anything to worry about."

Food is just one of the new categories Canadian Tire is testing as it tries to wring more sales and profit out of some of its larger stores, said Perry Caicco, an analyst with CIBC World Markets, according to the Star.

The food is "very competitively priced, as if they're a discount chain," Caicco said in an interview with the Star. "They're not talking about whether they're making any money on it. At those prices, it would be difficult to do."

But it attracts a lot of attention, he said. The retailer is also testing ready-to-assemble furniture and made a bigger investment in hockey equipment, Caicco noted.

The report noted food retailing is one of the biggest and most recession-proof retail segments, but it isn't easy predicting what thrifty consumers will buy as they trade up in some categories and down in others, said a leading supermarket operator at the conference.

"It has become more important than ever before to have your finger on the pulse of changes in the household," said Bill McEwan, president and chief executive officer of Sobeys Inc., the country's second-largest food retailer after Loblaw.

McEwan noted supermarkets are benefiting from consumers spending less time eating out at restaurants. "We're seeing profound changes in the way people shop," he said.