How Canadian Tire and Scotiabank will work together

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Michael Medline has spent 14 years at Canadian Tire Corp. Ltd. in a whole host of senior roles. In 2001 he was part of the team that oversaw the acquisition of Mark's. He is currently president. But on Dec. 1 he will assume the top spot, taking over as chief executive officer, something he describes as a "big responsibility."

Mr. Medline and Duncan Fulton, chief marketing officer with Sport Chek (Canadian Tire acquired Sport Chek in its 2011 purchase of the Forzani Group) sat down Friday with the Globe and Mail's editorial board for a fireside chat. (Okay, we don't have the fire on yet, but in a couple of weeks we may well have).

Mr. Medline discussed the recent sale of a 20 per cent stake in Canadian Tire's financial services business to Bank of Nova Scotia. Scotiabank wasn't the only interested party; Mr. Medline confirmed that there was interest "from more than one buyer." We also learned more on why Canadian Tire decided to only sell only 20 per cent, and why it settled on Scotiabank as the buyer.

While the deal brought in a nice wad of cash ($500-million), having extra money in the bank wasn't the main priority. Mr. Medline stressed repeatedly that Canadian Tire's balance sheet is in great shape, so there was no urgency to sell the unit strictly to raise cash. A bigger rationale was to have access to quick funding should Canadian Tire need it. Scotiabank will provide up to $2.25-billion in loans to Canadian Tire's credit card business, should a crisis hit. That's a nice security blanket. But another aspect of the deal cited by Mr. Medline and Mr. Fulton is the marketing and cross-promotional opportunities that are on the table when a retailer and a bank come together.

Case in point: Scotia and Cineplex Inc's "SCENE" credit card and entertainment rewards program. SCENE has six million members and Canadian Tire clearly views these folks as potential customers. SCENE members used to be able to cash in rewards points only for Cineplex Entertainment movies, but yesterday Canadian Tire announced a new "strategic partnership" with SCENE that means members will also be able to use those points for Sport Chek's merchandise. Mr. Fulton says most SCENE members are digitally-savvy and under 45, the "sweet spot" for Sport Chek customers. Even if SCENE members make only one more trip per year to a Sport Chek store, that has the potential to have a "significant impact" on its top and bottom line, Mr. Fulton said.

Meantime when asked if Canadian Tire customers will soon start seeing mini-Scotiabank outlets popping up inside Canadian Tire's stores, (akin to the President's Choice Financial kiosks one often finds in Loblaw Companies Ltd. Stores), the incoming CEO didn't seem too keen on the idea. While Mr. Medline won't rule Scotiabank kiosks out, he says the plan is to start small. Even putting a Scotia ATM into every Canadian Tire store isn't a given – Mr. Medline says they take up too much space.