UPDATE 3-Canadian Tire sees profit rising on core focus

Wed Apr 7, 2010 5:52pm EDT

* Sees annual operating earnings growth of 8-10 pct

* Sales growth in Canadian Tire Retail of 3-5 pct

* Capex to remain at C$280 mln-C$300 mln

* Shares down 0.1 pct at C$55.94 (Adds background and company comments)

By Scott Anderson

TORONTO, April 7 (Reuters) - Canadian Tire Corp (CTC.TO) (CTCa.TO) on Wednesday said it expects earnings per share to grow by as much as 10 percent over the next five years by focusing on its traditional retail stores and automotive supply business.

The company, which operates Canada's biggest household goods and automotive supply chain, said its future lies in its core areas, rather than its more recent forays into credit cards and work clothes retailing.

It said it plans to limit the number of new store openings while boosting performance of its existing outlets, in part through reconfiguring some of them.

"We have made huge investments in our core retail operations at Canadian Tire Retail, both in terms of building the network out and all that supporting infrastructure and it's time to start driving performance," Chief Executive Stephen Wetmore said following an investor presentation in Toronto.

"The best way is to focus on shareholder value and numbers. ... We want to do that primarily through Canadian Tire Retail."

Canadian Tire, which has 479 stores across the country, sees capital spending holding steady at about C$280 million ($280 million) to C$300 million a year.

It will open only seven new stores this year and boost total square footage by 1 percent to 2 percent. Instead it will boost the number of outlets using its Smart Store concept.

These stores feature wider aisles, more signage and a narrower focus on lifestyle products such as sporting goods and recreation, as well as hardware, automotive products and food items.

It currently has 36 such stores and has another 60 planned for 2010.

The company sees sales growth of about 3 percent to 5 percent a year in its flagship Canadian Tire stores, with a return on invested capital of about 10 percent. Canadian Tire's retail sales in 2009 fell 2.8 percent to C$7.62 billion.

It also targets sales growth of between 4 percent to 6 percent in its automotive department aided by better customer service and greater access to automotive parts.

Canadian Tire's shares fell 5 Canadian cents to C$55.94.

While turning its attention back to the key retail and automotive operations, Wetmore said the company remains committed to its financial, Mark's Work Wearhouse and PartSource divisions.

He also shot down the idea of spinning off some of the divisions as separate entities.

"I can't see spinning off any of the divisions and I'm quite happy with what we have got," he said.

"I think there are examples of things that we could potentially do in the future in term of more divisions."

($1=$1.01 Canadian) (Reporting by Scott Anderson)

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