TORONTO - Canadian Tire Corp. (TSX:CTC.A) says it's shuffling the leader of its financial services division to another role after posting a 22 per cent slide in overall profits partly because of higher loan losses in its banking business.
Chief executive Stephen Wetmore said Thursday that an internal management reorganization would move several executives to new positions in an effort to "drive customer-focused growth across the entire company."
Marco Marrone, who has been president of Canadian Tire Financial Services and both president and CEO of Canadian Tire Bank, will now become the company's chief financial officer, marking one of several changes in the executive ranks on Thursday.
Huw Thomas, who has been chief financial officer, has been named executive vice-president for financial strategy and performance. He'll act as a senior strategic adviser to the chief executive.
The announcement came as the retailer, which sells a broad range of hardware, housewares, clothing and gasoline, reported a slide in overall net income to $85.4 million or $1.04 per share, from $109.1 million or $1.34 per share in the third quarter of 2008.
Revenue tumbled six per cent to $2.45 billion from $2.61 billion a year ago.
Adjusted earnings, which are more widely tracked by analysts, fell to $1.11 from $1.42.
The company's performance beat analyst estimates of $2.15 billion in revenue and $1.08 per share of adjusted earnings, according to figures compiled by Thomson Reuters.
In retail, Canadian Tire quarterly sales slipped 2.3 per cent as unseasonably cool, wet weather dampened sales of garden and camping equipment. The tighter economy also slowed purchases of decor, electronics and storage products.
The financial services division reported earnings before income taxes dropped to $40.7 million from $52.7 million on higher loan losses partly related to bankruptcies.
"Despite the significant decrease in earnings at financial services, I continue to believe we are doing a good job in a very difficult operating environment," Wetmore reassured analysts in a conference call.
"While the costs of writeoffs and bankruptcies are up significantly in the third quarter, our performance in this area continues to be better than virtually all of our peers due to our conservative growth strategies over the last two years and strong risk management capabilities."
He added that the company is undergoing a plan to optimize margins, lower working capital - particularly its inventory - and meet funding requirements through to the end of the year.
"We still have our most important quarter to go before we get a clear idea of how our businesses are performing," he said.
"We are currently completing the annual review of our operating plans and expect to share details with you in the first quarter of 2010. Our strategic direction will not radically change because we believe we are already doing a lot of the right things," he added.
In other changes, Michael Medline has been appointed president of Canadian Tire Automotive and Dealer Relations, responsible for plans to instill a "strategic clarity" to all aspects of the company's automotive business.
Genuity Capital Markets analyst Candice Williams said the the biggest change at Canadian Tire will come from a more careful deployment of capital.
"If (Thomas, the new CFO) is capable of focusing all of his efforts on that kind of work, and drops some of the day-to-day financial reporting... and focus on the capital deployment and returns, it should be positive in the long term. These things just take a long time to turn around," Williams said.
Shares in the company rose 47 cents to close at $58.24 on the Toronto Stock Exchange, with a 52-week high of $60.75 and low of $36.56.
In other divisions, sales volumes at its gasoline pumps grew 4.6 per cent as prices started to pull back, tightening its gross operating revenues by 22 per cent to $403.6 million. Overall adjusted pre-tax earnings grew 13 per cent to $8.6 million on higher concession sales.
At Mark's Work Wearhouse clothing stores, pre-tax losses amounted to $3.8 million from $100,000 a year earlier. Total retail sales slid 2.5 per cent to $189.6 million as sales weakened in British Columbia and Alberta.