Empire Reports Profit Decline That Trails Estimate
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Empire Reports Profit Decline That Trails Estimates (Update1)
By Kevin Bell
Sept. 11 (Bloomberg) -- Empire Co., the owner of Canada'ssecond-biggest supermarket chain, reported a first-quarterprofit decline that trailed analysts' estimates.
Net income dropped 47 percent to C$75.1 million ($70million), or C$1.14 a share, because of a year-earlier gain fromthe sale of investments, the Stellarton, Nova Scotia-basedcompany said today. Earnings fell at its real-estate unit,offsetting an increase at its Sobeys grocery division.
Empire gained C$81.9 million from selling investments ayear earlier to help finance its purchase of the 28 percent ofSobeys it didn't already own. While sales and profit at thegrocery division exceeded analyst David Hartley's estimate,real-estate earnings trailed his prediction.
``The weak real-estate profitability was a result of lowerresidential lot sales activity in western Canada,'' Hartley, ananalyst at BMO Capital Markets in Toronto, said in a note toclients. He recommends investors hold the shares.
Empire declined 66 cents, or 1.4 percent, to C$47.20 at4:10 p.m. in Toronto Stock Exchange trading. The shares advanced10 percent this year, compared with a gain of 9.3 percent atMetro Inc., the third-largest grocery chain. Loblaw Cos., thecountry's biggest supermarket chain, lost 7.8 percent in thesame period.
Excluding capital gains, Empire said it earned C$1.07,which trailed the average $1.10 estimate of four analystssurveyed by Bloomberg. A year earlier, Empire said it earnedC$142.3 million, or C$2.16.
Real Estate
Operating income from its residential real-estate unit fell14 percent in the three months ended Aug. 2, while earnings fromthe Sobeys division increased 11 percent.
Canada's existing home sales in July declined 1.2 percentin July, according to the Canadian Real Estate Association. Thewestern provinces of Alberta and British Columbia had thebiggest drops in volume and also posted decreases in unit salesand average prices from a year earlier.
Revenue, including the Sobeys grocery unit consisting ofmore than 1,300 stores, rose 7.4 percent C$3.78 billion, Empiresaid in a statement.
The Sobeys division improved distribution and financeoperations with new technology and took market share as itreduced prices to compete with Loblaw and Wal-Mart Stores Inc.supercenters, which sell fresh produce, meat and dairy products.
Thrifty Purchase
Grocery-store sales climbed 7.9 percent to C$3.71 billion,beating Hartley's estimate by C$29 million and representing 98percent of Empire's revenue. The company said it benefited frompromotions and more retail space through new stores, expansionand its purchase of 20 Thrifty Foods stores in September 2007.
Sales at Sobeys, IGA, Foodland and Price Chopper grocerystores open at least a year advanced 3 percent, more than the 2percent gain predicted by Hartley. A year earlier, thosepurchases increased 3.5 percent.
Loblaw said that so-called same-store sales rose 0.7percent in the quarter ended June 14, while Metro reported thosesales increased 0.5 percent in the period ended July 5 as theretailers cut prices.
Canadian grocers have lowered prices amid speculation thatWal-Mart may double its share of sales in the country in aslittle as five years. The world's largest retailer has about 32supercenters presently, mostly in Ontario and western Canada.
To contact the reporter on this story:Kevin Bell in Toronto at kbell2@bloomberg.net