* Q4 EPS C$2.03 vs C$2.07 last year
* Sales up 21 pct at C$3.71 bln
* Canadian Tire banner same-store sales up 1.8 pct
* Shares rise more than 4 pct on TSX (Adds quotes, detail from conference call)
TORONTO, Feb 9 (Reuters) - Canadian Tire Corp , whose seasonal products include snowblowers and hockey sticks, reported higher quarterly sales and stronger than expected earnings on Thursday, even though most of the country is enjoying an unusually mild winter.
Shares of the diversified retailer rose more than 4 percent after it said overall sales gained 21 percent to C$3.71 billion ($3.71 billion), thanks in part to the acquisition of the Forzani sporting goods chain, now called FGL Sports.
Earnings, which topped analyst estimates, were also helped by the company’s financial services business.
“When you think about it, weather is a big deal for Canadian Tire, when it comes to snowblowers and automotive parts and then on the Forzani Group side ... skiing and outerwear,” said Edward Jones analyst Brian Yarbrough, who called the results stronger than expected.
Despite higher sales overall, inventories of winter-related goods could pose a risk at FGL, he said.
On a conference call, Chief Executive Stephen Wetmore conceded that because of the warm weather, the company started December discounts earlier than usual to manage inventory.
“We’re now focused on clearing winter inventory that should not be carried over, with a close eye on protecting profitability,” he said.
The company is one of the country’s biggest and best-known retailers. Its flagship Canadian Tire outlets - a fixture in towns from coast to coast - sell housewares, sporting goods and automotive products. The company also operates the Mark’s clothing chain, as well as gas bars.
Financial services saw income before taxes rise 34.6 percent to C$55.7 million, thanks to higher revenue and lower expenses.
Asked about reports that it is has decided against expanding into the highly competitive grocery business, Michael Arnett, who heads up the Canadian Tire banner, said nothing had been decided, and a 17-store trial will continue.
“Quite frankly, the results of the trial are not obvious,” he said. “While it’s been very successful in generating traffic into the stores, the results in terms of converting that increased traffic into higher sales across the store have been mixed.”
Net income fell to C$166.3 million, or C$2.03 a share, from C$169.3 million, or C$2.07, in the same quarter last year. Excluding the tax settlement, earnings per share came in at about $1.40.
Analysts, on average, had expected earnings of C$1.89 a share, according to Thomson Reuters I/B/E/S.
To be sure, the warm weather hurt sales of winter tires, light auto parts and outdoor tools, the company said. Even so, sales under the Canadian Tire banner rose 2.7 percent, and same-store sales, a key measure for retailers, rose 1.8 percent.
Same-store sales were 0.7 percent higher at FGL, and 3.1 percent higher at Mark‘s.
Canadian Tire’s heavily traded class A shares closed up 4.2 percent at C$66.15 on Thursday on the Toronto Stock Exchange.
$1=$1 Canadian Reporting By Allison Martell; Editing by Frank McGurty and Rob Wilson