* Diluted EPS C$0.71 versus analyst forecast C$0.72
* Revenue up 5 pct at C$1.98 billion
* Retail sales up 3.7 pct
* CEO says auto turnaround happening quicker than expected
* Class A shares up 1.1 percent in Toronto (Adds details from news conference; updates shares)
By S. John Tilak
TORONTO, May 12 (Reuters) - Canadian Tire Corp (CTC.TO) (CTCa.TO), which is set to expand its retail footprint through its purchase of sporting goods chain Forzani Group FGL.TO, reported a 13 percent rise in quarterly profit on Thursday.
On an earnings per share basis, however, the first-quarter earnings missed the analysts’ estimate by a penny. The results were hit by drawn-out winter weather and a late spring, particularly in Central Canada, that squeezed seasonal sales at its namesake Canadian Tire household goods stores.
After strong retail sales in January and February, unseasonable weather discouraged customer traffic and hurt sales in gardening, cycling and backyard products in March and April, the company said.
“Abnormal weather can have a big negative impact on a company like Canadian Tire because of the seasonal products at its stores,” Edward Jones analyst Brian Yarbrough said.
As long it is just weather-related and not consumer willingness to spend, it bodes well for the company, he added. “The weather will normalize.”
Retail sales slid 0.6 percent at its flagship Canadian Tire stores, which feature a wide range of automotive products, housewares, electronics and other hard goods.
First-quarter earnings rose to C$58.4 million, or 71 Canadian cents a diluted share, from C$51.6 million, or 63 Canadian cents, a year earlier.
Revenue rose 5 percent to C$1.98 billion. Total retail sales rose 3.7 percent.
Analysts on average had forecast earnings of 72 Canadian cents a share on revenue of C$1.94 billion, according to Thomson Reuters I/B/E/S.
The company’s automotive category, which has struggled and been the focus of a turnaround effort, grew year over year. Canadian Tire has been investing heavily in the segment.
“It looks like they’re finally making some headway with automotive. The automotive segment is a big part of Canadian Tire’s growth strategy,” Yarbrough said.
Chief Executive Stephen Wetmore said he was surprised at the pace of the recovery in the segment.
“The auto team is two or three quarters ahead of where I thought they would be at this stage of the game,” Wetmore told reporters at a news conference on Thursday.
“I hadn’t expected a positive growth trajectory until midway through this year,” he added.
As well as its namesake stores, Canadian Tire owns PartSource autoparts outlets and the Mark’s Work Wearhouse clothing chain. It announced on Monday it was buying sporting goods retailer Forzani for C$771 million. [ID:nL3E7G91PE]
Sales at Canadian Tire’s gas bar locations rose almost 16 percent on higher volumes and prices, while financial services saw net income jump more than 8 percent due largely to lower financing costs, the company said.
Retail sales at Mark’s stores were up 6.2 percent.
The stock took a hit after No. 2 U.S. discount retailer Target Corp (TGT.N) said in January it would enter Canada. Canadian Tire’s more heavily traded class A shares are down about 10 percent since then.
Analysts have said investors might have overestimated the impact of Target entering the market, given limited product overlap between the two companies.
The stock was up 2 percent at C$62.36 on Thursday afternoon on the Toronto Stock Exchange.
$1=$0.96 Canadian Reporting by S. John Tilak; editing by Peter Galloway