November 12, 2009 / 4:14 PM / 9 years ago

UPDATE 2-Canadian Tire profit drops as financial unit skids

* Adjusted EPS C$1.11 vs analyst forecast C$1.08

* Revenue falls 6 pct to C$2.45 billion

* Same store sales drop 3.8 percent

* Shares up 0.8 percent at C$58.25

(Adds analyst and company comments)

By Scott Anderson

TORONTO, Nov 12 (Reuters) - Canadian Tire Corp (CTC.TO) (CTCa.TO) reported a lower quarterly profit on Thursday as weak same store sales and growing loan loss provisions in its financial services business cut into profits.

Canada’s biggest auto parts and household goods retailer said third quarter profit dropped almost 22 percent despite flat sales on the weak financial services division.

It said new credit card legislation due in 2010 would bring a pre-tax hit of between C$8 million and C$10 million because of the impact on interest charges, payment allocation methodology and credit limit increase approvals.

But Chief Executive Stephen Whetmore said he expected the division to recover.

“As consumer spending moves, so does financial services. It resets based on where the economy is and grows from here,” he told Reuters in an interview.

The financial services division reported a 50.9 percent drop in adjusted earnings, compared with a flat performance from its Canadian Tire retail division.

Overall, the company earned C$85.4 million ($81.5 million), or C$1.04 a share, in its third quarter, down from C$109.1 million, or C$1.34 a share, in the same period a year earlier.

Adjusted to exclude nonoperating losses, earnings were C$91 million, or C$1.11 a share.

Revenue fell 6 percent to C$2.45 billion.

Analysts had expected, on average, a profit of C$1.08 a share, before items, and revenue of C$2.15 billion, according to Thomson Reuters I/B/E/S.

Same store sales dropped 3.8 percent.

Canadian Tire shares have shown resilience in the tough economic environment and are up 27 percent in the past year. They were up 0.8 percent at C$58.25 on Thursday on the Toronto Stock Exchange.

“The results might have been in line with expectations, but people are taking a hard look at financial services and trying to interpret whether some of the hits are going to stick around for the coming quarters,” said Candice Williams, a retail analyst at Genuity Capital in Vancouver. ($1=$1.05 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson)

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