CANADIAN TIRE CORP. $56 Toronto symbol CTC.A

CANADIAN TIRE CORP. $56 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $4.6 billion; SI Rating: Above average) operates 473 stores that specialize in automotive, household and sporting goods. It also operates gas stations, casual clothing stores (Mark’s Work Wearhouse) and auto parts stores (PartSource). Canadian Tire has had great success in the past few years with its re-designed stores, which improve customer satisfaction and encourage repeat visits. It now plans to test two new formats this year: a store for smaller cities and rural markets that is about one-third the size of a typical Canadian Tire outlet; and a “smart” store featuring in-store boutiques and self-service checkouts. Meanwhile, higher fuel costs and harsh winter weather hurt customer traffic in the company’s core markets of Ontario and Quebec. In the three months ended March 29, 2008, earnings before unusual items fell 4.2%, to $0.68 a share from $0.71 a year earlier. Revenue rose 5.9%, to $1.8 billion from $1.7 billion, mostly due to strong gains at its gas station and finance operations. Same-store sales fell 4.0%. The company’s unique product mix, new store formats and strong brands should help it stay profitable in a slowing economy. Canadian Tire will probably earn $5.17 a share in 2008, which implies a p/e of just 10.8. The $0.84 dividend yields 1.5%. Canadian Tire is a buy.

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