A Canadian retail icon is branching out into the party supply business.
Canadian Tire announced Thursday morning that it is purchasing the Canadian subsidiary of Party City for $174.4-million in cash, according to a report from BNN-Bloomberg Canada. The chain is reportedly planning to add Party City merchandise to 500 of its 1,700-plus stores across Canada, as well as add additional stand-alone Party City stores. Party City merchandise will also be available at Canadian Tire's online store.
Bloomberg reports that Party City will use the proceeds to pay down its debt.
Party City currently has one store in Windsor, plus a temporary Halloween-themed outlet that will open by early fall. The chain also has two stores in London and one in Kitchener.
Allan MacDonald, executive vice-president of Canadian Tire Corporation (CTC), said the acquiring of Party City broadens the reach the company already has for Canadians. CTC estimates that it can double Party City's sales in Canada by 2021.
"We believe the Party City-Canadian Tire partnership will drive more trips, improve our offers in micro seasons, strengthen our connection with millennials and Canadian families and expand the appeal of Triangle Rewards," said MacDonald in a news release.
The strategy seems to be working for Canadian Tire in the face of increased competition from online retailers. According to Bloomberg, net income attributable to shareholders for the second quarter of 2019 is up 14 per cent. Earnings per diluted share are up over 20 per cent to $2.87 a share.
Despite the good news with earnings, news of the Party City acquisition had Canadian Tire stock opening down Thursday morning at the Toronto Stock Exchange. It closed Wednesday at $143.13 a share.
Among the businesses currently owned by the Toronto-based Canadian Tire Corporation are Mark's, a chain specializing in industrial and casual wear; and SportChek, a sporting goods retailer.