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UPDATE 2-Canadian Tire profit jumps on credit cards, acquisition
May 10, 2012 / 1:20 PM / 6 years ago

UPDATE 2-Canadian Tire profit jumps on credit cards, acquisition

* Q1 EPS C$0.87 vs year-earlier C$0.71

* Revenue up 23 pct at C$2.44 billion

* Canadian Tire banner’s same-store sales up 3.3 pct

May 10 (Reuters) - Canadian Tire Corp reported a quarterly profit on Thursday that was well above expectations, helped by its acquisition of a sporting goods chain, growth in its financial services division and a lower tax rate.

Much of the earnings growth at the company, one of the country’s biggest and best-known retailers, came from its credit card business, but it also posted strong sales at established stores, a key measure of performance in the industry, and its shares rose.

At the flagship Canadian Tire banner, which sells housewares, sporting goods and automotive products, same-store sales rose 3.3 percent. The company said good weather in March boosted sales of products such as bicycles and gardening equipment.

“The results were just very strong, much better than we expected,” said Edward Jones analyst Brian Yarbrough. “These guys continue to execute. I mean, you’ve got to give (Chief Executive) Stephen Wetmore credit.”

At the company’s sporting goods chain, FGL Sports, same-store sales rose 7.0 percent, and at clothing retailer Mark’s they were up 5.8 percent.

Retail revenue rose 26.5 percent compared with the same quarter last year. Excluding FGL, formerly Forzani Group Ltd, which Canadian Tire acquired last year, the company’s revenue from retail rose 6.7 percent.

Revenue gains, however, were held back by discounting of seasonal goods, higher sales of lower margin products and higher operating expenses. Overall, the retail segment’s income before income taxes fell 23 percent to C$24.5 million ($24.4 million).

But financial services’ income before taxes rose 44 percent to C$73.0 million due to higher credit-card interest income and fees and a reduction in impairment losses on loans.

Canadian Tire’s first-quarter profit rose to C$71.0 million, or 87 Canadian cents a share, from C$58.4 million, or 71 Canadian cents, a year earlier. Analysts, on average, had expected earnings of 79 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue also topped expectations, rising 23 percent to C$2.44 billion, compared with the average forecast of C$2.37 billion.

Canadian Tire’s heavily traded class A shares were up 3.5 percent at C$69.80 on Thursday morning on the Toronto Stock Exchange.

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