Canadian Tire Corp. says it's boosting its dividend after third-quarter profit rose 21 per cent, despite a previously announced restructuring charge.
The big hardware and home goods retailer said Thursday its quarterly dividend payments would increase to 27.5 cents next year from 21 cents each quarter this year.
The move comes after the company reported quarterly profits of $103.2-million, or $1.46 per share, when factoring in a restructuring charge of $14.7-million. That's an increase from $85.4-million, or $1.11 per share, in the same three-month period a year earlier.
Operating revenue improved slightly, rising 1.6 per cent to $2.2-billion.
Canadian Tire's results easily beat analysts expectations for earnings of $1.21 per share on $2.23-billion in revenue.
Shares of the company gained more than nine per cent in early trading Thursday, rising $5.36 to $64.26 on the Toronto Stock Exchange.
"Over all, our business is performing well" said Stephen Wetmore, president and CEO of Canadian Tire in a release.
"We have managed conservatively through challenging economic conditions and we have confidence in our continued performance which is reflected in our decision to increase our dividend payout and to repay $300-million in debt that matured this quarter."
Retail analyst Robert Cavallo says the strong results will likely boost Canadian Tire's share price.
"Given the earnings beat and dividend increase, we could see the share price react fairly strongly," he said in a note.
"However, we still see some reason for caution with retail results which are still soft and financial services which is growing its share of the consolidated results."
Retail sales at Canadian Tire stores rose 2.5 per cent to $2.51-billion. The company's financial services division posted a 175-per-cent rise in earnings before income taxes to $51.3-million.
At retail stores open more than a year, sales grew 1.4 per cent.
Sales of merchandise in key categories, including backyard, cleaning, exercise and outdoor recreation grew over last year.
In its automotive division, growth came in light maintenance parts and auto pride and accessories, but that was offset by slower sales in heavy auto maintenance parts, auto fluids and tires.
Sales at its Mark's Work Warehouse clothing division grew 4.5 per cent.
The $14.7-million restructuring charge recorded in the third quarter was the result of a shakeup in the company's executive suite and decision to shift its separate units under one corporate umbrella to eliminate unnecessary duplication and bloated costs.
The company hopes the changes will result in a better customer experience, bringing more bodies into its stores, it said in September when it made the announcement.
The company is in the midst of a store conversion program as part of a "store renewal" plan announced at an investors day in April. It aims to direct customers more easily around the stores and highlights its automotive division.
The company is trying to refocus on its automotive business that helped build Canadian Tire into a household brand, but expects weakness in that area to continue throughout 2010.
Canadian Tire announced at an investors conference in April that it plans to focus on the auto parts business that helped build it into a household brand, adding it will concentrate store renewal on expanding its "smart stores."
It says it is on track to open three new smart stores, three smaller stores and complete 59 smart store conversions in 2010.
Canadian Tire has a work force of 58,000 and operates 273 gas stations and 482 retail stores across the country.