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Empire, owner of Sobeys, hit by profit plunge

Tags: Empire Co, Sobeys

Empire Co Ltd (EMP.A-T), the operator of Canadian grocery chain Sobeys, reported a steep fall in quarterly profit, hurt by higher inventory losses and higher costs due to a weaker Canadian dollar.

The company posted an increased loss of inventory between manufacturing and sale of Sobeys' fresh retail products.

Net earnings fell to $40,000, or nil cents per share, in the third quarter, ended Feb 1, from $74.1 million, or $1.09 per share, a year earlier.

Empire reported third-quarter adjusted earnings of 84 cents per share, below analysts' estimate of $1.23 per share, according to Thomson Reuters I/B/E/S.

Expenses related to Empire's acquisition of Safeway's Canadian assets also weighed on the company's profit.

Empire bought the assets for $5.7 billion last year to double its reach in the country's western provinces.

Empire, which faces competition from bigger rival Loblaw Companies Ltd (L-T) and U.S. retailers such as Wal-Mart Stores Inc and Target Corp, said its earnings were negatively affected by a highly promotional environment.

The company cemented its position as Canada's No. 2 grocer with the acquisition of Safeway Canada, which contributed $1.62 billion to Empire's total sales in the third quarter.

Empire's total sales rose more than 40 percent to $6.02 billion, helped by higher sales from its food retailing business.

Sales at established Sobeys stores, an important measure for retailers, fell 0.2 percent from the year-earlier quarter.

Loblaw, which reported a better-than-expected quarterly profit on February 20, warned of an extremely competitive first half. CTV Two CTV News CTV News Channel BNN - Business News Network CP24