December 10, 2009 / 9:11 PM / 8 years ago

WRAPUP 1-Thrifty Canadians boost Dollarama, Empire sales

* Empire same-store sales up 2.7 percent

* Dollarama same store sales up 7.3 percent

* Dollarama shares up 7.5 pct; Empire up 0.4 pct

(Adds additional analyst comments. Updates share price)

By Scott Anderson

TORONTO, Dec 10 (Reuters) - Two Canadian retailers showed sales growth on Thursday despite the lingering recession as consumers spent on necessities.

Empire Co Ltd (EMPa.TO), which owns Sobeys supermarket unit, Canada’s No. 2 grocery chain, and Dollarama Inc (DOL.TO), the country’s largest operator of dollar stores, both reported higher sales in stores opened at least a year and revenues that topped analysts’ estimates.

The improved sales came as recession-weary consumers continued to spend money on much-needed items such as food, toiletries and other household items.

“Although consumer confidence is picking up a bit, there is still a high level of unemployment...and so people don’t really feel like spending money yet. Certainly there is that uncertainty that is overhanging things,” said Bill Chisholm, a retail analyst at MacDougall, MacDougall and McTier. “There is still this trading down to discount levels.”

This was evident with discounter Dollarama as Canadians looked for bargains as they flocked to its stores for household items and other necessities.

Dollarama, which went public in October, said same-store sales rose 7.3 percent during the quarter as the number of transactions and average size of transactions grew.

Dollarama, which recently raised C$300 through the IPO, said sales grew 14.8 percent to C$312.8 million. Analysts on average had expected the company to report revenue of C$309.5 million, according to Thomson Reuters I/B/E/S.

It shares were up 7.5 percent at C$22.68.

For the quarter ended Nov. 1, the company earned C$1.1 million ($1 million), or 2 Canadian cents a share, compared with a loss of C$22.2 million, or 52 Canadian cents a share, a year earlier.

Excluding items, such as charges related to the company’s initial public offering, Dollarama earned C$23 million, or 46 Canadian cents a share.

CANADIANS SPENDING ON FOOD

Empire, the retail holding company whose grocery interests include Sobeys, IGA, IGA extra, Foodland, and discounters Price Chopper and Thrifty Foods, said its performance was helped by a 2.7 percent rise in same-store sales at the Sobeys chain.

Empire’s overall revenue rose 3.9 percent to C$3.87 billion, with Sobey’s contribution checking in at C$3.81 billion.

Analysts, on average, were expecting Empire to report revenue of C$3.85 billion, according to Thomson Reuters I/B/E/S.

The improved profit came despite an easing of food price inflation, which had boosted the results of grocers earlier this year.

Food prices climbed in recent quarters as grocers passed on rising costs for wheat, rice, vegetables, fruit and other goods to the consumer, benefiting from wider profit margins. But this benefit has lessened in recent months as the commodity prices slipped, dragging retail prices and margins down with them.

“This to me is a solid quarter, especially with the food inflation coming out of the system,” said Ken Chernin, an analyst at Jennings Capital in Halifax, Nova Scotia.

Empire’s shares, which have fallen 6.5 percent so far this year, were up 0.4 percent at C$44.43 on the Toronto Stock Exchange on Thursday afternoon.

For the quarter Empire said it earned C$70.4 million, or C$1.03 a share, in its second quarter, up from C$65.6 million, or C$1.00, in the same period last year.

Excluding items, the company earned C$72.1 million, or C$1.06 a share, compared with C$63.1 million, or 96 Canadian cents, a year earlier.

With additional reporting by Ashutosh Joshi in Bangalore $1=$1.05 Canadian Reporting by Scott Anderson

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