(Reuters) - Metro Inc, Canada's No. 3 grocer, more than tripled quarterly earnings after selling part of a convenience store operator, but it warned of a "challenging" competitive environment.
Metro and other Canadian supermarket chains face stern competition from Target Corp, the U.S. discount retailer, which opened its first three Canadian stores last month and plans to have more than 100 by the end of this year.
Metro and rivals such as Loblaw Cos Ltd, Canada's largest grocer, are already under pressure from the expansion of Wal-Mart Stores Inc's grocery business in Canada.
"The competitive environment will remain challenging in the coming quarters," Chief Executive Eric La Fleche said in a statement.
Loblaw, in its fourth-quarter earnings in February, had said sales growth in 2013 would be moderated by the entry of a new competitor, among other things.
Metro's net earnings rose to C$366.8 million ($357.5 million), or C$3.77 per share, in the second quarter, from C$96.1 million, or 94 Canadian cents per share, a year earlier.
The earnings were helped by an after-tax, one-time gain of C$266.4 million related to the sale of nearly half of its stake in Alimentation Couche-Tard Inc.
On an adjusted basis, the company earned C$1.02 per share from continuing operations.
Sales fell 3 percent to C$2.51 billion. The fall was primarily due to the inclusion of the week preceding Christmas in the first quarter, compared with the second quarter a year earlier.
Sales at established stores, an important indicator for retailers, were flat for the quarter.
Metro, which operates more than 600 food stores and more than 250 drugstores in Canada, said it planned to repurchase for cancellation up to 1 million of its common shares.
The repurchase would form part of the renewed buyback program, which company announced in September.
Shares of Montreal, Quebec-based Metro closed at C$66.09 on the Toronto Stock Exchange on Tuesday.
Reporting by Shounak Dasgupta in Bangalore; Editing by Sriraj Kalluvila