Empire Co. Ltd. owner of the Sobeys supermarket chain, is reporting a big increase in profit in its latest quarter, despite heavy competition in the retail food industry.
The Stellarton, N.S.,-based company that also has interests in real estate and other business, reported net income for the second quarter of $132.8-million, or $1.94 per share.
That was up sharply from net income of $70.4-million, or $1.03 per share, in the same quarter a year ago.
Earnings before capital gains and other items were $73.9-million, or $1.08 per share, compared with $72.1-million, or $1.06 per share, in the year-earlier period. That was just short of the $1.10 analysts had expected.
Consolidated revenue totalled just over $3.9-billion, up from $3.87-billion in the prior-year period.
"We are pleased with our second-quarter and fiscal year to date financial results particularly given the challenges Sobeys faces with continued retail price deflation driven by intense competitive activity," president and chief executive officer Paul Sobey said in a statement.
"Our financial condition continues to improve and our liquidity and focus has been strengthened with the sale of our position in Wajax Income Fund during the second quarter."
"Moving forward, the focus on our core businesses is unwavering as we continue to work together to build long-term sustainable value," Mr. Sobey said.
Sobeys' revenue in the three months ended Oct. 30 was $3.85-billion against $3.81-billion in the second quarter last year, an increase of $46.4-million, or 1.2 per cent.
"The growth in Sobeys' sales continued to be a direct result of the increased retail selling square footage from new stores and enlargements, coupled with the continued implementation of sales and merchandising initiatives, improved store-level execution and product and services innovation," the company said.
However, Sobeys' second-quarter same-store sales, an important gauge of retail performance, were flat compared with a year earlier.
Sobeys, Empire's food retailing division, conducts business through more than 1,300 retail grocery stores across Canada, both corporate owned and franchised, which operate under banners that include Sobeys, IGA extra, Thrifty Foods, IGA, Foodland, and FreshCo, as well as Lawtons Drug Stores.
Retail analyst Robert Cavallo said the slightly improved Sobeys results were similar to those reported by rivals Metro Inc. and Loblaw Cos. Ltd. in November.
He said much of the decline in prices reported by all three big Canadian grocers is due to a hyper-competitive low-cost market in Ontario, sparked as a response to Sobeys' recently opened FreshCo banner stores.
"The launch of the FreshCo banner has triggered some minor price clashes in the discount sector in Ontario, which we believe were a bit of a headwind for sales comps which were reported as flat," Mr. Cavallo said.
Investments and other operations recorded revenue of $50.1-million in the second quarter compared with $52.3-million in the second quarter of last year, a decrease of $2.2-million.
In early October, Empire sold its 27.5 per cent ownership interest in Wajax for net proceeds of $121.3-million and a resulting net capital gain of $80.1-million. The net proceeds were used to reduce Empire's direct bank indebtedness and to purchase for cancellation under the company's normal course issuer bid a total of 513,579 non-voting Class A shares.
Empire also applied $6-million of the net proceeds from the Wajax sale for charitable donations in the quarter.