Canadian Tire Corp.'s acquisition of the country's largest sporting goods retailer and its renewed focus on its auto roots are showing early signs of paying off.
In its third quarter, Canadian Tire's profit jumped almost 36 per cent to $136.5-million or $1.68 a share, while revenue rose 19.4 per cent to $2.7-billion. The results were bolstered by Canadian Tire's acquisition of Forzani Group, which includes Sport Chek and other chains; excluding Forzani, revenue rose 11 per cent.
"I'm pleased with the positive results in the quarter," said Stephen Wetmore, chief executive officer at Canadian Tire. "Customers responded to our offerings, we managed our expenses effectively and continued to execute our strategies. The strong cash flow from our operations and our underlying confidence in our business has resulted in an increase to the quarterly dividend."
The retailer of hard goods, sporting goods, home decor and apparel raised its quarterly dividend 9.1 per cent to 30 cents a share on each common and Class A non-voting share, up from 27.5 cents a share. The dividend is payable on March 1, 2012 to common and Class A shareholders of record as of Jan. 31, 2012.
Canadian Tire's acquisition of Forzani is progressing well and the transition is meeting the company's targets, in sales and savings, he said.
The basic operating profit-per-share of $1.68 beat analysts' consensus estimate of $1.40 a share and the $1.44 forecast at Desjardins Securities, said its retail analyst Keith Howlett. Adjusted to a normalized tax rate, the profit-per-share was $1.50, he said.
At Canadian Tire's key retail division, sales increased 3.2 per cent, while same-store sales at outlets open a year or more – a key measure of retail health -- gained 2.3 per cent. Its kitchen, outdoor recreational activities and cycling product lines performed particularly well, the company said. The auto category "continued its growth trajectory in the quarter," helped by its launched of an e-commerce site for tires.
Business at its apparel chain, Mark's Work Wearhouse, was pinched by the late arrival of colder weather this fall. Sales at the division rose 2.8 per cent while same-store sales were up 2.7 per cent.
The company's gas sales jumped 27.4 per cent from the previous year, driven by a significant increase in fuel prices from a year earlier and a 4.5 per cent gain in volume.
The financial services division saw its revenue increase 0.5 per cent to $243.1-million; excluding the auto club services, which had shifted to the retail division, financial services revenue increased 2.7 per cent, mainly because of higher interest income on credit card receivables.
Financial services' profit before taxes picked up 18.3 per cent from a year earlier because of the increased revenue, a reduction in loan loss allowance as a result of improved portfolio aging, declining insolvency and unemployment rates and continued management of operating expenses.