(Reuters) - Empire Co Ltd (EMPa.TO), 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 a increased loss of inventory between manufacturing and sale of Sobeys’ fresh retail products.
Net earnings fell to C$40,000, or nil Canadian cents per share, in the third quarter, ended Feb 1, from C$74.1 million, or C$1.09 per share, a year earlier.
Empire reported third-quarter adjusted earnings of 84 Canadian cents per share, below analysts’ estimate of C$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 C$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.TO) 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 C$1.62 billion to Empire’s total sales in the third quarter.
Empire’s total sales rose more than 40 percent to C$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.
Empire’s shares closed at C$70.22, down 11 Canadian cents, on Wednesday on the Toronto Stock Exchange.
Reporting By Sneha Banerjee and Kanika Sikka in Bangalore; Editing by Steve Orlofsky