CANADIAN TIRE CORP. $122 - Toronto symbol CTC.A

CANADIAN TIRE CORP. $122 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 75.0 million; Market cap: $9.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.canadiantire.ca) has 495 Canadian Tire stores, which sell automotive, household and sporting goods. Franchisees run most of these outlets. Other operations include 297 gas stations and 91 PartSource auto parts stores. Canadian Tire also owns Mark’s, which sells casual and work clothing through 379 stores, and the Forzani Group, which offers sporting goods and athletic clothing at 428 outlets, mainly under the Sport Chek and Sports Experts banners. In the quarter ended October 3, 2015, Canadian Tire earned $199.7 million, up 15.9% from $172.2 million a year earlier. Earnings per share rose 20.5%, to $2.62 from $2.17, on fewer shares outstanding. The latest quarter included just 80% of the company’s financial- services division following last year’s sale of 20% to Bank of Nova Scotia (Toronto symbol BNS). The move reduced the latest earnings by $0.18 a share. Canadian Tire also sold some real estate for a $0.33-a-share gain. Overall sales rose 1.9%, to $3.13 billion from $3.07 billion, as increases at the company’s stores and financialservices division offset lower gasoline revenue. Same-store sales at the Canadian Tire chain rose 3.4% on stronger demand for kitchenware and summer merchandise, like camping gear. The sporting-goods stores saw a 7.0% same-store sales rise thanks to higher demand for shoes and clothing. Mark’s reported a 0.2% same-store sales decline, as layoffs at Alberta oil producers hurt sales of work clothes and shoes. As part of a new growth plan, Canadian Tire is adding and upgrading stores and growing online. It will spend between $600 million and $625 million a year on these initiatives from 2015 to 2017. The plan aims to raise annual sales by 3% at Canadian Tire locations and 9% at its sportinggoods stores. However, Mark’s may have trouble achieving its goal of increasing annual sales by 5%. Canadian Tire’s earnings will probably improve from a likely $8.04 a share in 2015 to $8.59 in 2016. The stock trades at 14.2 times the 2016 forecast. It also recently raised its dividend by 9.5%. The new annual rate of $2.30 yields 1.9%. Canadian Tire is a buy.