(Reuters) - Canadian Tire Corp Ltd <CTCa.TO> topped estimates for holiday-quarter profit on Thursday as the diversified retailer benefited from its high-margin credit card business, sending its shares higher by more than 6%.
The company's financial services unit, which operates its credit card business and offers cashback at its stores such as apparel retailer Mark's and gas stations, accounts for about a third of the company's profit.
"Financial services segment performance was outstanding ... The credit metrics is still definitely strong. We're not seeing an indication of a slowdown in the economy," Chief Financial Officer Dean McCann told Reuters.
Canadian Tire's results come at a time when economists polled by Reuters hint at a revival in the domestic economy after it shrunk for the first time in eight months in October before posting a surprise growth in November.
Income before income taxes from the financial services unit rose to C$109.5 million ($82.67 million) in the fourth quarter ended Dec. 28, from C$92.1 million a year earlier.
The company has been investing to expand its portfolio through acquisitions, including Party City's <PRTY.N> Canadian operations, and boost its digital presence to fight competition from Amazon.com <AMZN.O> and Walmart <WMT.N>.
Revenue from its core retail unit, which sells products ranging from shovels to parkas, rose 4.5% to nearly C$4 billion, with same-store sales excluding petroleum increasing 3.9%.
Net income rose 31.5% to C$365.9 million, or C$5.42 per share.
Excluding items, the retailer earned C$5.53 per share, beating the average analyst estimate of C$5.40, marking its first beat in a year.
Revenue increased 4.5% to C$4.32 billion but missed analysts' estimate of C$4.41 billion, according to IBES data from Refinitiv.
Canadian Tire shrugged off near-term impact from the coronavirus outbreak in China, saying it was well-stocked and that it would watch the situation in the coming weeks.
The novel flu-like virus has claimed more than 1,300 lives so far and forced retailers across the globe to warn of a hit to their earnings.
Shares of the 98-year-old company were up 2% at C$147.72.
(Reporting by Praveen Paramasivam and Aditi Sebastian in Bengaluru; Editing by Subhranshu Sahu)