December 9, 2010 / 4:18 PM / in 7 years

UPDATE 2-Gain boosts Empire profit, same-store sales flat

* Q2 EPS C$1.94 vs $1.03

* Revenue up 1 percent at C$3.91 bln (Adds analyst comments, conference call details)

By Solarina Ho

TORONTO, Dec 9 (Reuters) - Profit at Empire Co Ltd (EMPa.TO) jumped nearly 90 percent in the second quarter, thanks largely to a big capital gain, the parent of Sobeys, Canada’s second largest grocery chain, said on Thursday.

Empire saw a 1 percent deflation in retail food price this quarter, however, predominantly driven by promotions.

“They were expecting it (deflation) to stabilize much quicker than it has, so the competitive pressures remain,” said Philip Bassil, an analyst with Beacon Securities.

“Now they’re saying Q3 should be flat ... so they expect it to stabilize next quarter. That remains to be seen -- we’ll see,” Bassil said.

“I guess it did intensify as the quarter progressed and I would call it as intense as its been in several years particularly in Central Canada, in Ontario,” said Bill McEwen, Chief Executive of Sobeys Inc.

Net income for the second quarter ended Oct. 30 was C$132.8 million, or C$1.94 a share. That was up 88.6 percent from C$70.4 million, or C$1.03 a share, a year earlier.

The quarterly results included a capital gain of C$58.9 million, net of taxes, the company said.

Excluding capital gains and other items, quarterly earnings were C$73.9 million, or C$1.08 a share, up from C$72.1 million, or C$1.06 a share in 2009.

Analysts had expected, on average, earnings of C$1.11 a share, according to Thomson Reuters I/B/E/S.

Revenue was up 1 percent to C$3.91 billion. Same-store sales at Sobeys were flat compared with the previous year.

Going forward, Empire said there was still significant room for cost improvements. It also said it had no current plans to open any of its new FreshCo discount supermarkets outside of Ontario.

Empire shares finished 1 percent lower at C$56.33 on the Toronto Stock Exchange on Thursday.

$1=$1.01 Canadian Reporting by Solarina Ho; editing by Rob Wilson

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