TORONTO (Reuters) - Canadian Tire Corp Ltd
The country's largest auto parts and household goods retailer said its net earnings fell to C$97.7 million ($93 million), or C$1.20 a basic share, from C$122.5 million, or C$1.50 a share, a year earlier.
The company said it expects earnings per share for 2008 will be in the range of C$4.75 to C$5.05, falling below earlier estimates of C$5.15 to C$5.40.
Shares of Canadian Tire, which also operates gasoline bars and sells financial services, slumped more than 5 percent on the Toronto Stock Exchange, making it among the day's biggest net decliners.
The company said the cut to its forecast was due to the lower quarterly earnings, an inventory adjustment at clothier Mark's Work Wearhouse, and higher retail inventory at the end of the second quarter.
"The issue is that these guys when they came out with the first quarter, they kind of had that hockey stick expectation for the back half that things would improve, and I think now it's more realistic," said Brian Yarbrough, an analyst with Edward Jones.
"If consumer spending in Canada slows even more then I think, obviously there's a risk to those numbers, but right now when I go through my model ... I think it's realistic but, once again, that depends on the environment staying like it is and not getting any worse."
Adjusted earnings fell to C$94.7 million from C$109.8 million, hurt by a C$6.4 million after-tax investment to relaunch the Options MasterCard, as well as the inventory adjustment at Mark's.
Analysts had expected a profit of C$1.35 a share before items, according to Reuters Estimates.
Gross operating revenue rose to C$2.5 billion from C$2.3 billion.
The company, which also sells sporting equipment and clothes, said retail sales at its core Canadian Tire and PartSource stores edged up 1.5 percent to C$2.2 billion, while same store sales were down 0.5 percent.
The company said retail sales across all categories were hurt by the sluggish economy, while seasonal leisure items were particularly soft due to cold, wet weather in May and June.
However, business improved in July with warmer weather, Canadian Tire said, making for a 5.1 percent increase in overall retail sales and a 3.1 percent increase on a same store basis.
Canadian Tire's more actively traded class A shares were down C$3.08 at C$49.34 in the late afternoon.
($1=$1.05 Canadian)
(Reporting by Leah Schnurr; editing by Rob Wilson)
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