TORONTO -- Shares of Canadian Tire Corp. got a 5.6% boost Thurdsay after the retailer reported a steep drop in net profit but managed to beat analysts’ expectations for the quarter due to robust sales.

The retailer of housewares, sporting goods, clothes and auto parts said net income in the fourth quarter fell to $101.2-million, or $1.24 per share, from $131.3-million ($1.61) in the same period of 2007. The results included a $19.3-million after-tax expense related to interest rates, foreign exchange and equity-based compensation.

Canadian Tire, which also operates gas bars and a financial-services unit, said sales rose 6.8% to $3.2-billion. Analysts said performance was particularly solid in its retail division, where sales rose 9.1%, given that Canadian Tire carries a mix of essential and discretionary household items, analysts said.

Same-store sales, a key retail bellwether tallying volume at locations open for more than a year, rose 7.3%. Same-store sales at the retailer’s Mark’s Work Wearhouse apparel division rose 3.9% in the quarter.

The quarter generated the best quarterly same-store sales performance at its retail division in the past two years while improving its gross margins in merchandise, said Stephen Wetmore, chief executive.

But Canadian Tire, which has 475 stores, will not provide an outlook for the rest of the year "given the unprecedented volatility in our markets," and the potential impact of rising unemployment and declining consumer confidence on retail sales and in its financial services division. "We’ll see a heightened focus on aggressively managing our working capital" in the year ahead, the CEO added, noting the company was focusing on efficiency and productivity.

For the year, retail sales increased 3.8%, while same-store sales were up 1.8%. Adjusted earnings before taxes were $275.6-million, compared with $291-million in 2007.

Excluding one-time items, the company said it earned $1.59 per share, besting analyst mean expectations of $1.52, according to Thomson First Call.

Canadian Tire completed 36 of its larger-format stores during the fiscal year and opened six new-concept smaller stores in Ontario and will finish another 40 store expansion projects in 2009, growing square footage by about 2%. The retailer projected capital expenditures would be a more modest $380-million to $400-million this year, compared with 2008 expenditures of $472-million.

“Across the board it was a pretty good-quality quarter,” said Brian Yarbrough, analyst at Edward Jones. “You saw good results at Mark’s and in the financial-services division, and that’s the one everyone was worried about. You are really seeing this diversified mix pay off in this type of environment.” Financial services reported an increase in adjusted net earnings of 29%.