canadian tire

BCE INC. $37.30, Toronto symbol BCE, earned $0.57 a share in the three months ended march 31, 2008, up 9.6% from $0.52 a year earlier. These figures exclude restructuring costs and gains on the sale of investments. Most of the increase was due to savings from the restructuring, as well as lower taxes and interest expenses. Revenue crept up to $4.39 billion from $4.38 billion, as growing demand for BCE’s wireless and Internet services offset lower revenue from its traditional telephone operations. The stock is now trading 13% below the $42.75 a share that a group led by the Ontario Teachers’ Pension Plan has offered for the company. That’s because investors fear that problems in the debt markets will force the consortium to delay, reprice or scrap the deal. However, we feel the takeover will go through by the end of the year. BCE is still a buy....

CANADIAN NATIONAL RAILWAY CO. $50 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 485.2 million; Market cap: $24.3 billion; SI Rating: Above average) is the subject of a $270 million lawsuit accusing it of failing to pay overtime to 1,000 current and former employees. However, any award is likely to be modest next to CN’s 2007 cash flow of $2.6 billion or $5.12 a share. CN Rail is a buy. CANADIAN TIRE CORP. $66 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $5.4 billion; SI Rating: Above average) plans to phase out the print version of its catalogue, which it publishes twice a year. That’s because more people are now shopping online rather than using catalogues. Canadian Tire will invest the money it now spends on paper and printing in its own website and direct marketing campaigns....

METRO INC. $25.25, Toronto symbol MRU.A, earned $58.1 million in its second quarter ended March 15, 2008, down 6.0% from $61.8 million a year earlier. Per-share earnings fell 3.8%, to $0.51 from $0.53, on fewer shares outstanding. If you exclude restructuring costs in the year-earlier quarter, earnings per share fell 8.9%. Sales in the quarter crept up to $2.37 billion from $2.36 billion, while same-store sales rose 0.3%. Strong price competition continues to hurt profits at Metro’s Ontario stores. However, the company is beginning to realize the benefits of a new computerized information system. A new distribution warehouse will also improve efficiency at its Quebec stores. Metro is a buy for aggressive investors....

AGRIUM INC. $72.10, Toronto symbol AGU, has gained nearly 25% in the past month, partly due to a new energy bill in the United States that mandates a five-fold increase in the production of biofuels by 2022. As a major supplier of fertilizers, Agrium should profit from higher production of crops, such as corn, for use in ethanol production. The new bill may also help Agrium re-open its plant in Kenai, Alaska, which it recently shut down due to a lack of natural gas supplies. Agrium is studying a plan to convert coal into natural gas, and could receive subsidies that would offset the costs of a new facility. However, relying on the largely politically inspired ethanol boom for growth adds to Agrium’s risk. The company is also vulnerable to rising natural gas prices....

CANADIAN TIRE CORP. $73 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $6.0 billion; SI Rating: Above average) is one of Canada’s leading retailers. Its 468 Canadian Tire stores sell a unique mix of automotive, household and sporting goods. The company also operates smaller retail chains Mark’s Work Wearhouse (casual clothing) and PartSource (auto parts), as well as 265 gas stations. In the mid-1990s, Canadian Tire began a major overhaul of its stores to make them more friendly to shoppers, including wider aisles and better signage and lighting. This helped it compete with big U.S. retailers such as Wal-Mart and Home Depot....

CANADIAN TIRE CORP. $74 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $6.0 billion; SI Rating: Above average) earned $1.30 a share before unusual items in the third quarter of 2007, up 12.1% from $1.16 a year earlier. The gains came mainly from cost savings, as same-store sales at its core Canadian Tire stores fell 2.7%. Warmer-than-usual weather in central Canada hurt demand for fall and winter goods. However, overall revenue rose 1.5%, to $2.05 billion from $2.02 billion. The stock has moved down from its recent peak of $87 on fears of softening retail conditions in Ontario and Quebec, which account for 65% of the company’s total revenue. However, higher oil prices will improve profits at Canadian Tire’s gas stations. Earnings are also growing strongly at its financial operations. Canadian Tire should earn $4.75 a share in 2007, which implies a p/e of 15.6. The $0.74 dividend yields 1.0%....

CANADIAN TIRE CORP. $84 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $6.8 billion; SI Rating: Above average) has enjoyed great success in the past few years with its Concept 20/20 stores, which feature wider aisles and a central customer service desk. The company is now modifying the Concept 20/20 format for smaller markets. It plans to bring forward an even newer format in 2009 to replace Concept 20/20. Canadian Tire is also building two pilot stores with full-sized Mark’s Work Wearhouse casual clothing stores inside them. Putting more clothing inside its regular stores should help Canadian Tire compete with Wal-Mart....

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....

It’s easy to enter the retail industry, and easy to go broke in it if your business concept fails to build and maintain a loyal clientele. However, the industry provides highly rewarding investment opportunities if you stick as we do with well-established companies that have strong brands and other hidden or little appreciated assets. Canadian Tire is a good example. Its famous “Canadian Tire Money” and big new stores continue to encourage repeat visits. Loblaw has stumbled lately, but its recent setback follows a dozen years of huge gains. Investments in new inventory systems and unique food products should help it thrive again....

CANADIAN TIRE CORP. $78 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $6.4 billion; SI Rating: Above average) plans to expand its selling space in 2007 by 10%. Most of these new stores will use the company’s unique Concept 20/20 format, which makes it easier to stock faster-selling merchandise. Central customer service counters, wider doors and better signage also help encourage repeat visits. Canadian Tire aims to have over 40% of its stores operating under the Concept 20/20 format in 2007, up from 27% in 2006. The company should also profit from its entry into the banking business. It now offers a variety of financial services, including mortgage loans, credit cards and savings accounts. Like other retailers with banking subsidiaries, Canadian Tire will probably focus on Internet-based services, which cost less to administer than traditional branches. That should let the company offer more competitive interest rates than regular banks. The stock has gained 25% in the past year, but still trades at a reasonable 16.2 times the $4.82 a share it will probably earn in 2007. The $0.74 dividend yields 0.9%....