Canadian Tire Corp. $79 - Toronto symbol CTC.A

CANADIAN TIRE CORP. $79 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $6.4 billion; SI Rating: Above average) operates 468 retail 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). Most of the company success in the past few years is due to a major upgrade of its stores that made them more attractive to shoppers. Thanks to this plan, income before unusual items in the first quarter of 2007 grew 24.2%, to $0.82 a share from $0.66. Revenue rose 5.9%, to $1.8 billion from $1.7 billion. These re-modeled stores now account for 78% of Canadian Tire’s total chain. The company now plans to base all of its new stores on its Concept 20/20 format, which features better lighting and wider aisles than its older store designs. The format is also more flexible, so local store managers quickly replace slow-selling goods with faster-selling merchandise. Customers tend to remain in Concept 20/20 stores about 40% longer than they did in the older store format. That helps explain why same-store sales at Concept 20/20 stores rose 6.6% in the first quarter, compared with 1.3% for the overall chain. Canadian Tire continues to expand its financial services division, which now accounts for 10% of its total revenue. Besides loyalty credit cards, the company offers mortgages, personal loans, insurance and savings accounts. Canadian Tires cuts its credit risk by selling up to 80% of its loans to third parties. The stock trades at 16.1 times the $4.91 a share it should earn in 2007. The $0.74 dividend yields 0.9%. Canadian Tire is a buy.

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