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This Fine Canadian Retailer Will Have No Problem Fighting Off, Inc.

Many investors are opting to avoid the retail sector like the plague right now due to the rise of e-commerce disruptors like, Inc. (NASDAQ:AMZN). While many traditional retailers are suffering due to the disruption caused by digital retailers, there are brick-and-mortar retailers that continue to thrive despite harsh industry-wide headwinds.

Although I do believe e-commerce will continue to become larger as time goes on, I think investors could be missing out on deep-value opportunities by shunning the entire retail industry. There are some traditional retailers out there with capable management teams who are more than able to fight off the rising threat of e-commerce. And, in some cases, the traditional retailer may have a wide enough moat to prevent such digital retailers from stealing its piece of the pie.

Consider Canadian Tire Corporation Limited (TSX:CTC.A), an automotive, sport & leisure, and hardware retailer which is a household name across Canada.

One could argue that the hardware and auto retail segments are somewhat immune the e-commerce retailers. Sure, hardware and auto retailers have fared better compared to other retailers, but that’s not the only reason why Canadian Tire is the arguably the best Canadian retail stock to own for the long term and why the stock has soared ~14% over the past year.

“Canadian Tire is one of the oldest surviving retailers in Canada and, as a result, has developed a strong base of retail locations that offer a convenient shopping trip for most Canadian consumers,” says Peter Sklar, analyst at BMO Capital Markets. “We find many of Canadian Tire’s private-label brands have such strong awareness that many Canadians believe they are national brands.”

It’s easy for most of us Canadians to simply drive five minutes to the nearest Canadian Tire to pick up the auto or hardware device we’re looking for. And Canadian Tire is known to sell huge items that wouldn’t make too much sense to deliver, as the costs would be off the charts. Since there’s a Canadian Tire store in close proximity to the average Canadian, the convenience of the short trip often outweighs the benefits from ordering the same item online and potentially paying a great deal in shipping costs.

Canadian Tire’s brands have been “tested for life in Canada,” according to the company’s new marketing campaign. MotoMaster and Mastercraft are two such brands developed by Canadian Tire that many Canadians trust, and they’re only available at Canadian Tire locations.

Doug Stephens, founder of Retail Prophet, stated that Canadian Tire has “…done little to become a true online competitor,” and the results thus far have been sound. Going forward, management intends to beef up its digital presence as it further solidifies its moat against the likes of Amazon.

Bottom line

Mr. Sklar believes that Canadian Tire will “…prove to be more immune to the threat of Amazon than investors anticipate,” and I couldn’t agree more. Although Canadian Tire has been delivering outstanding results of late, many investors are still shunning the stock just because it’s a retailer. I think that’s a mistake, since Canadian Tire has a huge moat that Amazon will have a tough time penetrating over the next few years.

Canadian Tire is a retailer with staying power, so investors should strongly consider adding a position to their portfolio today. The company continues to stand head and shoulders above most in the industry.

Stay smart. Stay hungry. Stay Foolish.

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 Joey Frenette owns shares of Canadian Tire Corporation Ltd. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon. 

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