Loblaw profit falls as rival Metro posts increase

Wed Nov 14, 2012 9:40am EST
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(Reuters) - Loblaw Cos Ltd, Canada's biggest grocer, raised its dividend even as it reported lower quarterly profit on Wednesday, while rival Metro Inc said its profit rose, helped by an extra week in the quarter and a recent acquisition.

Loblaw's (L.TO: Quote) sales at established stores fell 0.2 percent in the third quarter. Still, it raised its dividend by 1 cent to 22 Canadian cents a share.

Loblaw's operating margin slipped to 4.1 percent from 4.3 percent as labor and other operating costs rose.

Loblaw, majority-owned by George Weston Ltd (WN.TO: Quote), said net earnings fell to C$222 million, or 77 Canadian cents a share, from C$236 million, or 83 Canadian cents, a year earlier. Revenue rose 1.0 percent to C$9.83 billion.

Analysts looked for earnings of 78 Canadian cents a share on revenue of C$9.84 billion.

Loblaw has been spending to secure the loyalty of its customers as competition heats up, paying to improve its product assortment and customer service and holding back on price increases even as input costs rise.

For the full year, Loblaw expects to make incremental investments of C$50 million ($50 million) in what it calls its "customer proposition," up from C$40 million previously.

Much of the competition is coming from Wal-Mart Stores Inc (WMT.N: Quote). Its Canadian unit said in February it would remodel or open 73 stores by the end of 2012, its most ambitious expansion ever. It was slated to open 28 new stores in October, and has been converting many existing locations to "supercenters" that feature a wider array of grocery items.