(Reuters) - Loblaw Cos Ltd (L.TO), Canada’s largest food retailer, reported a 40 percent increase in first-quarter profit and said it plans to compete the initial public offering of its real estate investment trust (REIT) in early to mid-July.
The company, majority-owned by George Weston Ltd (WN.TO), also raised its quarterly dividend by 9 percent to 24 Canadian cents per share. This was the second time in six months that the company raised its dividend.
Loblaw, which also sells clothing, footwear and drugs, reiterated its outlook for 2013 despite increasing competition.
U.S. discount retailer Target Corp (TGT.N) opened its first three Canadian stores in March and plans to have more than 100 by the end of this year.
Supermarket operators such as Loblaw, Metro Inc (MRU.TO) and Empire Co Ltd’s EMPa.TO Sobeys have come under pressure over the last two years as Wal-Mart Stores Inc (WMT.N) expands its grocery business in Canada.
Loblaw’s profit rose to C$171 million ($170 million), or 61 Canadian cents per basic share, in the quarter, from C$122 million, or 43 Canadian cents per basic share, a year earlier.
The latest results included a gain of 13 Canadian cents per share related to defined benefit plan amendments.
Metro, Canada’s No. 3 grocer, last week reported a quarterly profit that more than tripled, but it warned of a challenging competitive environment.
Loblaw said total sales rose about 3 percent to C$7.04 billion, while sales at established locations, a key measure for retailers, rose 2.8 percent.
“Greater assortment and an improved in-store experience are resonating with customers, translating into same-store sales growth and positive trends in tonnage and market share,” Executive Chairman Galen Weston said in a statement on Wednesday.
Loblaw’s first-quarter operating margin rose to 4.3 percent from 3.4 percent, a year earlier.
The company said in December it planned to contribute about 35 million square feet of property worth about C$7 billion to its proposed REIT, which will allow Loblaw to reinvest in its core business and boost shareholder value.
The company expects to file a preliminary prospectus for the REIT in late May.
On Monday, Loblaw offered to compensate families of victims of a collapsed garment factory in Bangladesh that produced some of its Joe Fresh clothing line. The incident last week killed nearly 400 people.
The Joe Fresh clothing line, launched in 2006, represents a key part of Loblaw’s growth strategy.
The Retail Council of Canada said on Tuesday it would develop a new set of trade guidelines in response to the deadly collapse of the Bangladesh garment factory complex.
The move followed a private emergency meeting of retailers on Monday including Loblaw, Sears Canada Inc SCC.TO and Wal-Mart Canada (WMT.N) to discuss how it would deal with the tragedy.
Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Saumyadeb Chakrabarty