* Q2 EPS C$1.47 vs C$1.27 a year earlier
* Same-store sales up 0.8 percent
* Retail sales C$2.86 billion vs C$2.79 billion
* Shares drop 2.5 pct
(Updates with details, analysts comment, shares)
By Solarina Ho
TORONTO, Aug 12 Canadian Tire Corp Ltd
(CTC.TO), one of the country's biggest retailers, posted a
nearly 16 percent rise in quarterly profit on Thursday, helped
by a recovery in its financial services division.
But shares dropped more than 2.5 percent after the
Toronto-based company posted sales at its flagship retail chain
that at least one analyst said were disappointing.
Sales at stores opened a year or longer, a key performance
measure for retailers, climbed 0.8 percent. At the Canadian
Tire chain, sales of cleaning, gardening and backyard products
offset weakness in the automotive category.
"Overall, it was a good quarter. There was obviously certain
areas you could poke a hole at: the sales at Canadian Tire
retail was a little bit weaker than what was expected," said
analyst Robert Cavallo of Mackie Research Capital.
Net earnings rose to C$119.9 million ($114.2 million), or
C$1.47 a share, for the second quarter ended July 3. That
compares with C$103.7 million, or C$1.27, for the same period a
Excluding nonoperating gains and losses, profit rose 14.8
percent to $118.4 million, or C$1.45 a share, from C$103
million, or C$1.26, in the year-before quarter.
Analysts had forecast earnings of C$1.34 a share, according
to Thomson Reuters I/B/E/S.
Total retail sales rose 2.5 percent to C$2.86 billion.
Earnings at Mark's Work Wearhouse, Canadian Tire's work
clothing chain, dropped 47 percent despite higher operating
revenues, partly due to higher inventory shrinkage expenses.
"This is the second time this has occurred in the last two
years. That part does kind of bother me," said Brian Yarbrough,
an analyst with Edward Jones.
Gross operating revenue from its financial services
division rose 2.1 percent as a result of an increase in
interest earned from above average balances on consumer credit
cards. Canadian Tire said it reduced its provisions for loan
write-offs as fewer clients defaulted on credit card payments.
"With these write off rates starting to come down and
bankruptcy slowing in Canada, the profitably of that division
should start to do much better in the coming quarters," said
Canadian Tire shares fell C$1.40, or 2.5 percent, to
C$54.33 on the Toronto Stock Exchange midafternoon.