* Q4 operating EPS C$1.51 versus expectations C$1.54
* Q4 revenue tops estimates
* Sales rise 2.4 percent
* Shares down 2 percent
(Adds comments from conference call, updates shares)
By S. John Tilak
TORONTO, Feb 10 Canadian Tire Corp (CTC.TO)
(CTCa.TO) said on Thursday quarterly earnings rose on improved
margins and lower interest costs, but the retailer missed
analyst forecasts because of a tax reporting change.
The company, which operates 482 Canadian Tire stores,
reported a 2.4 percent rise in consolidated retail sales. But
sales at stores open a year or longer, a key measure for
retailers, fell 0.4 percent.
The more heavily traded class A shares dropped 1.7 percent
to close at C$64.75 on the Toronto Stock Exchange.
The retailer said pre-tax earnings more than doubled at its
Canadian Tire stores, which feature automotive products,
housewares, electronics and other hard goods.
The company also operates gas stations and the Mark's Work
Wearhouse clothing chain.
Canadian Tire has been revamping its stores, turning them
into what it calls "smart stores," as it tries to boost sales.
"Canadian Tire continues to make headway. It's two steps
forward and one step slightly back," Edward Jones analyst Brian
Yarbrough said. "But longer-term we like the story."
This spring, it plans to launch a consumer campaign,
pitching itself as a home-grown retailer that has been in
Canada for 89 years.
The campaign comes amid rising competition in the Canadian
retail market, where more U.S. retailers are set to challenge
Walmart Canada, a unit of Wal-Mart Stores Inc (WMT.N), has
expanded rapidly, and Target Corp (TGT.N) plans to enter the
"Target may take some share, but they're going to have
little impact on Canadian Tire just because there's not a lot
of product overlap," Yarbrough said, adding that Canadian Tire
has fared well since Walmart entered Canada in 1994.
The company noted intensifying competition and aggressive
price cutting in the holiday season.
"In a marketplace that sought deep discounting toward the
end of last year, we made a deliberate choice to manage our
promotions," Chief Executive Stephen Wetmore said on a
conference call with analysts.
He acknowledged that its same-store sales were not quite
where they could be, but the automotive business did well.
"Looking at automotive, for the first time in six quarters
I can say we had a good quarter," Wetmore said.
BY THE NUMBERS
Fourth-quarter earnings rose to C$181.1 million ($181.1
million), or C$2.22 a share, from C$96.2 million, or $1.18
Canadian cents a share, a year earlier.
Operating earnings rose to C$1.51 a share. Analysts, on
average, had forecast earnings of C$1.55 a share.
A change in the tax treatment of stock options reduced
after-tax earnings by 10 Canadian cents a share.
Gross operating revenue rose 4 percent to C$2.54 billion,
with growth in all segments, just beating analyst expectations
of C$2.53 billion.
Consolidated retail sales rose 2.4 percent to $3.1
(Editing by Janet Guttsman)
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