American Greetings Corp posted a third-quarter profit, helped by portfolio changes, operational improvements and cost cuts, sending its shares up as much as 5 percent to a year high.

The company expects to gain space against competitors like Hallmark Cards only in the long run as lasting relationships between buyers and retailers mean slow changes in retail, Chief Executive Zev Weiss said in a conference call with analysts.

American Greetings, the second-largest U.S. greeting-card maker behind Hallmark, continues to be cautious about the economic conditions in Britain, which could affect its international segment's performance for at least the remainder of this fiscal year.

While we are pleased with the quarter-on-quarter performance in international, the general economic conditions in the UK continue to be challenging, CFO Stephen Smith said in a conference call with analysts.

The company, which divested its retail operation segment in the first quarter, said it now sees a cash flow from operating activities of about $160 million, excluding capital expenditure, for the current fiscal.

We have a high sense of urgency to grow both organically and through acquisitions, Smith said.

The company, which said on Tuesday it would wind down its party goods manufacturing operations, earned $29.7 million, or 75 cents per share for the quarter ended November 27, compared with net loss of $193.3 million, or $4.25 a share, a year ago.

American Greetings recorded termination and asset impairment costs related to the previously announced wind down of its Mexican operations of $5.9 million, which reduced earnings per share by about 14 cents during the quarter.

Also, incremental variable compensation expense trimmed third-quarter earnings per share by about 19 cents.

Revenue fell 3 percent to $440.2 million.

However, excluding foreign exchange impact and divestiture of the retail business, which was partially offset by revenue pickup from acquisitions, revenue fell 1.8 percent in the third quarter, the company said.

Analysts on average expected earnings of 66 cents per share, before items, on revenue of $445.4 million, according to Thomson Reuters I/B/E/S.

Selling, distribution and marketing expenses fell 22 percent to $124.2 million, the company said.

Inventories for the company, whose main brands include American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, fell 28 percent to $176.2 million.

Shares of the Cleveland-based company were up 78 cents to $24.61 in the mid day trade on Tuesday on the New York Stock Exchange. They earlier touched a year high of $25.07.

(Reporting by Shobhana Chadha in Bangalore; Editing by Unnikrishnan Nair, Jarshad Kakkrakandy)

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