Canadian Tire sales jump 21 per cent on back of Forzani acquisition

TORONTO – Canadian Tire Corp. (TSX:CTC.A) revenues jumped 21 per cent in its fourth quarter, boosted by strong retail sales in the holiday shopping season despite unseasonably warm weather.

“Across all stores, the weather delayed sales that would normally take place during the fourth quarter,” Canadian Tire president and CEO Stephen Wetmore told a conference call with financial analysts.

“We are now focused on clearing winter inventory that should not be carried over with a close eye on protecting profitability.”

The Toronto-based hardware, sporting goods and general goods retailer said Thursday that its fourth-quarter profit was $166.3 million, or $2.03 per share. That was down from $169.3 million, or $2.07 per share in the same quarter of 2010, which included the impact of a positive tax settlement.

Canadian Tire said excluding that tax impact, earnings per share were up 43 per cent.

Revenues jumped 21 per cent to $3.1 billion from $2.6 billion in the quarter a year earlier.

Analysts polled by Thomson Reuters had predicted average earnings per share of $1.89 on $3.1 billion in revenue.

For the full year, earnings were up 17.4 per cent to $5.17 per share and revenue rose 12.7 per cent to $10.4 billion.

The company’s stock got a boost from the performance. Shares closed up 4.2 per cent or $2.65 at $66.15 on the Toronto Stock Exchange.

Sales in the company’s retail segment jumped 23.6 per cent to $2.9 billion, with the recently acquired FGL Group driving much of the increase.

Canadian Tire now owns the No. 1 and No. 2 sporting goods retail chains in the country after buying The Forzani Group Ltd. (TSX:FGL) in a $771-million deal last year.

Excluding sales from the division, retail revenues grew 5.3 per cent.

Same store sales grew 1.8 per cent, driven by especially strong sales in the retailer’s living, fixing and playing categories.

While kitchen, home organization, paint and tools did well, sales of winter tires, light automotive parts and outdoor tools were hit by the unusually warm winter.

Auto division sales were down slightly in the quarter but showed growth over the full year.

Clothing and accessory sales at Mark’s grew 3.1 per cent, driven by industrial wear. However, the unseasonable weather hit men’s and women’s casual wear sales and Mark’s had to offer promotions to attract shoppers.

At FGL Sports, which includes some 500 stores under various banners, including Sport Chek, Athletes World and Atmosphere, corporate same store sales were up 3.8 per cent.

But franchise same-store sales fell five per cent, largely due to weather in Quebec, the company said. Still, sales were up 0.6 per cent overall.

Revenues from Canadian Tire’s gas bars jumped 10.3 per cent over the quarter last year due to higher gasoline prices.

The company’s financial services segment, which includes its credit cards, saw revenue increase 1.6 per cent.

Operating expenses were up 30.5 per cent, largely due to the inclusion of FGL sports.

Canadian Tire is attempting to overcome sluggish retail sales after spending years trying to brand itself as a general goods retailer. It sells everything from automotive parts and repairs to household appliances, hardware, clothing and sporting goods.

Meanwhile, Canadian Tire’s automotive sales have been hit by weaker consumer demand, more competition and a deteriorating reputation in a business that once built the brand.

The retailer underwent a major overhaul in its executive suite last year and is refocusing on its core automotive and retail businesses instead of other divisions like financial services and clothing sales at Mark’s Work Wearhouse.

Part of that strategy is to revamp its store design, transforming layouts into “smart stores” – which direct customers more easily around the stores and highlight the automotive division.

Canadian Tire also plans to launch a pilot test for a long-awaited loyalty program, but it didn’t provide details of what it is or how it will work.

And the company is considering expanding on its recent entry into the home services market, such as garage door opener and central vacuum system installation, as a new source of revenue.

It also plans to introduce new strategies to become more efficient and reduce costs.

Canadian Tire is one of Canada’s leading retailers and the country’s largest sporting goods retailer, with more than 1,700 retail and gasoline outlets from coast-to-coast and more than 58,000 employees.