* Adj EPS C$1.26 vs forecast C$1.02
* Revenue drops 5.4 pct to C$2.79 billion
* Same store sales down 2.7 pct
* Sees economic uncertainty for next two quarters
* Shares rise 2.5 pct to C$57.27 (Adds analyst comments, background, updates share price)
TORONTO, Aug 13 (Reuters) - Canadian Tire Corp (CTC.TO) (CTCa.TO) reported a higher quarterly profit on Thursday despite a drop in sales as it benefited from improved gross margins and lower expenses.
The sales drop was a result of the economic downturn and a cold and wet spring that kept consumers from buying outdoor goods such as barbecues and patio furniture, it said.
The company, Canada’s biggest auto parts and household goods retailer, said weak consumer confidence and unpredictable weather conditions would influence its results for the next two quarters. It stopped providing financial guidance late last year due to the economic uncertainty.
Analysts also remained cautious for the remainder of the year.
“I do think the third- and fourth-quarter operating environment will be better than what you saw in the first and second quarters. The consumer is getting a little more confidence and the economy is starting to improve a little bit, but I still don’t think it will be back to levels you saw in 2007 or 2008,” said Brian Yarbrough, an analyst at Edward Jones in St. Louis, Missouri.
“It will remain challenging, but I don’t think it will be quite as challenging as you saw in the first and second quarter.”
As well as its retail stores, Canadian Tire also operates gasoline bars and a financial services unit. It is also the parent of clothing chain Mark’s Work Wearhouse.
The company said it earned C$103.7 million ($95.6 million), or C$1.27 a share, in its second quarter, up from C$97.7 million, or C$1.20 a share, in the same period a year earlier.
Adjusted earnings, which exclude nonoperating losses, were C$103 million, or C$1.26 a share.
Revenue fell 5.4 percent to C$2.79 billion.
Analysts had expected, on average, a profit of C$1.02 a share, before items, and revenue of C$2.29 billion.
Same store sales dropped 2.7 percent.
Canadian Tire shares, which have shown resilience in the tough economic environment and have risen 5.6 percent so far this year, were ahead 2.5 percent at C$57.27 on Thursday on the Toronto Stock Exchange.
$1=$1.09 Canadian Reporting by Scott Anderson; editing by Rob Wilson