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Canadian Tire dreams of wintry weather to help boost seasonal sales

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A Canadian Tire store is seen in North Vancouver, on May 10, 2012. THE CANADIAN PRESS/Jonathan Hayward

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TORONTO - Many Canadians may dread the thought, but Canadian Tire Corp. Ltd. is hoping wintry weather will soon blanket the entire country to help it sell enough snow blowers, winter tires and other seasonal items to surpass strong sales a year ago.

The Canadian hardware retailer needs a boost in sales during the crucial fourth-quarter holiday shopping period to beat last year's earnings after reporting a dip in third-quarter profits on Thursday.

Canadian Tire said part of the reason for the year-over-year decline was a dent in revenue due to slower shipments of winter products — during a time when parts of Western Canada were already beginning to see unseasonably cold weather.

"What we're waiting for is some weather in the eastern part of Canada. We have it out West and we're waiting for some of that in the eastern part of Canada," said chief operating officer Marco Marrone, adding that sales trends have been responding positively in parts of Canada that have already seen tastes of winter weather.

"I actually talked to some dealers out West and they were telling me what was happening in their stores with respect to the winter weather and what they were seeing and so it's a positive if that kind of weather would come east."

However, while meteorologists call for early and cold wintry weather in Western Canada, temperatures are expected to remain above normal in the East.

During the fourth quarter of 2011, sales of winter tires, auto parts and outdoor tools, as well as men's and women's wear sales at Mark's, were hit by an unseasonably warm winter in parts of Canada.

CEO Stephen Wetmore has said that Canadian Tire was positioning itself for a difficult final half of 2012 in a tough retail environment, as competitors undergo liquidations and closures — in particular Zellers.

The retailer also said it expected to face pressure from other companies that are expanding, including Walmart.

Canadian Tire (TSX:CTC.A) said Thursday that net earnings in the three months ended Sept. 29 were $131.4 million or $1.61 per diluted share, down from $1.67 per diluted share in the comparable year-earlier period.

Despite the decline in profits, the company also announced it is boosting its dividend almost 17 per cent. The new quarterly dividend — up five cents to 35 cents per share — is payable March 1, 2013, to shareholders of record as of Jan. 1.

During the quarter, consolidated retail sales were up eight per cent at $3.17 billion from $2.94 billion, while consolidated revenue increased 4.6 per cent to $2.83 billion from $2.7 billion.

The company credits the inclusion of FGL Sports revenue for 13 weeks compared to six weeks in Q3 2011 as well as revenue growth at its Mark's clothing outlets and higher petroleum sales and financial services revenue.

However, consolidated net income declined 3.7 per cent compared to the prior year. Included in net income in the third quarter of 2011 were net benefits related to the acquisition of FGL Sports, reduced income tax expense and interest income received related to resolution of tax matters.

Excluding these items, net income would have increased 3.5 per cent in the most recent period.

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 employing some 68,000 people.

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.

Shares in Canadian Tire fell 3.26 per cent or $2.32 to $68.84 Thursday on the Toronto Stock Exchange.

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