Why Rogers Communications Inc. Could Be the Next Canadian Tire Corporation Limited

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) and Canadian Tire Corporation Limited (TSX:CTC.A) have a lot in common, despite being in different industries.

| More on:
The Motley Fool

Among all the companies in the S&P/TSX 60, two in particular stand out for causing headaches among their customers: Rogers Communications Inc. (TSX: RCI.B)(NYSE: RCI) and Canadian Tire Corporation Limited (TSX: CTC.A). But these two giants have other things in common, despite being in completely different industries.

For example, both have a long history. This is very important, because that has allowed them to build up franchises that can’t be replicated by new competitors. If you don’t believe me, look at what happened when new competitors competed with Rogers (Wind, Mobilicity, Public Mobile), and Tire (Target Corporation and Lowe’s Companies, Inc.).

But there is one important difference: in the last couple of years, Tire seems to have turned the corner, and its shares have reflected that, up 58% over this time. Meanwhile, Rogers shares increased by only 7%, lagging the index. But Rogers could be the next company to turn the corner, and below are three reasons why.

1. Irreplaceable assets

If everyone hates ‘Crappy Tire’ so much, why has the company been able to survive against new competitors so gracefully? There are a few reasons, but the biggest one is its footprint; thanks to the company’s 90+ year history, it had first access to the best real estate in practically every municipality.

As mentioned earlier, Rogers also has irreplaceable assets due to a lengthy history. So the company doesn’t have to rush when improving itself, because competitors aren’t about to take it down any time soon.

2. A focus on the customer

To give Canadian Tire some credit, it did recognize its shortcomings. Poor customer service, disorganized stores, and a bad shopping experience overall were tarnishing the Tire brand. But the company made store improvements a top priority, by implementing what management calls smart stores. And the new format deserves much of the credit for Tire’s recent performance.

Likewise, Rogers recognizes its biggest shortcoming: customer service. And improvement in this area has become a top priority under new CEO Guy Laurence – it even includes a change to the organizational structure. If the company can make the same kind of improvements as Tire did, then that could be very good for both the bottom line and the stock price.

3. The right kind of investments

Tire also deserves some credit for its investment decisions, which include the purchase of Mark’s in 2001 and The Forzani Group Ltd. (best known for Sportchek) in 2011. Both were criticized at the time for their big price tags, but have performed very well since.

Rogers has also been spending heavily. Late last year, it inked a $5.2 billion deal for National Hockey League broadcast rights, and also was the big winner at Canada’s most recent wireless spectrum auction. Like Tire’s purchases, both of these have been criticized for their high price tags. But Rogers is clearly spending in growth areas – sports and wireless – which ideally will pay big dividends in the long run.

So now may be just the time to buy Rogers shares; if you missed the boat with Canadian Tire, this could be your second chance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Lowe's.

More on Investing

Canadian Dollars
Stock Market

Where to Invest $5,000 in April 2024

Do you have some extra cash to spare? Here are five companies to invest $5,000 in next month.

Read more »

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »