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Pedestrians pass in front of a Sobeys Inc. grocery store stands in Toronto, Ontario, Canada, on Wednesday, July 24, 2013.Brent Lewin/Bloomberg

The parent of grocer Sobeys Inc. suffered deepening problems in its Western Canadian business in its fourth quarter, posting a loss of $942.6-million.

And chief executive officer Marc Poulin warned of signs that Sobeys' sluggish sales are spreading to other regions of the country.

As a result of the problems, parent Empire Co. Ltd. took another hit in the quarter – a $1.3-billion impairment charge in addition to the $1.59-billion writedown it took in its previous quarter on the value of its western business, mainly its Safeway chain.

The company reported a fourth-quarter loss of $942.6-million or $3.47 a share compared with a profit of $55.4-million or 20 cents a share a year earlier. Sales rose to $6.3-billion from $5.8-billion.

"The previously reported challenges in Western Canada that have had a negative effect on our results over the past three quarters deepened through the fourth quarter with impacts felt across additional banners in the West," Mr. Poulin said in a release late Tuesday.

And he added: "Management is also seeing early evidence of a softening sales trend in other regions of the country. Although management remains focused on on reversing these negative trends by continuing on our core strategies of cost reduction, network renewal and relevant pricing for our customers, the stabilization of our business will take time."

Sobeys the country's second-largest grocer, has struggled since its 2013 acquisition of Safeway Canada, a chain that operates in Western Canada and is also feeling the pressure of oil-struck markets.

Sobeys has suffered from integration setbacks as well as a perception of having overly high prices at a time when consumers are increasingly cost-conscious.

Sobeys has moved to lower prices but the initiatives have not been enough to turn the tide.

The Stellarton, N.S.-based retailer competes with discount chains of archrival Loblaw Cos. Ltd., the country's largest grocer, as well as the low-cost Wal-Mart Canada Corp. – which has expanded its food offerings – and Costco Canada.

Sobeys doesn't operate a discount chain beyond its FreshCo retailer in Ontario.

Its fourth-quarter results benefited from an extra week in the latest period compared with the previous year, accounting for an estimated $461.2-million in additional sales and $7.4-million to the bottom line.

Sobeys' same-store sales at outlets open a year or more – a key retail measure – fell 1.8 per cent in the fourth quarter ; excluding the negative effect of fuel sales and the Western retailing business, same-store sales would have increased 0.2 per cent, the company said.

Adjusted fourth-quarter profit, net of its non-controlling interest, tumbled 30 per cent to $95.3-million or 35 cents a share from $136.7-million or 49 cents a share a year ago.

The company declared a dividend of $0.1025 a share, up 2.5 per cent.

Follow Marina Strauss on Twitter: @MarinaStraussOpens in a new window

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