January 26, 2010 / 4:56 PM / 8 years ago

UPDATE 2-Grocer Metro earnings jump 21 pct, boosts dividend

* EPS C$0.91 vs C$0.73

* Raises quarterly dividend 24 pct

* Shares up 1.6 pct at C$39.77 (Adds background, analyst comments)

TORONTO, Jan 26 (Reuters) - Metro Inc MRUa.TO, Canada’s No. 3 grocery chain, raised its quarterly dividend 24 percent as it reported a sharp jump in quarterly earnings on Tuesday that topped expectations.

The Montreal-based supermarket chain, which recently consolidated all of its Ontario stores, including Dominion, under the Metro banner, said it earned C$98.1 million ($92.5 million), or 91 Canadian cents a share, in its first quarter.

That was up 21 percent from C$81.1 million, or 73 Canadian cents a share, in the same period a year earlier when it benefited from rising food prices.

Adjusted earnings, which exclude nonrecurring costs from the rebranding and tax gains, were C$88.7 million, or 82 Canadian cents a share, up from C$84.1 million, or 76 Canadian cents a share.

Sales rose 1.7 percent to C$2.65 billion, while EBITDA jumped 7 percent.

Analysts had expected, on average, earnings of 76 Canadian cents a share before items and revenue of C$2.64 billion, according to Thomson Reuters I/B/E/S.

The company boosted its quarterly dividend by 23.6 percent to 17 Canadian cents.

Metro’s shares were up 1.6 percent at C$39.77 on the Toronto Stock Exchange.

“Their ability to get slightly higher margins with virtually no inflation was a very positive development,” said Bill Chisholm, a retail analyst at MacDougall, MacDougall and MacTier.

The earnings rise came despite a drop in overall prices for goods. Food prices had 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 lessened in recent months as the commodity prices slipped, dragging retail prices and margins down with them.

Industry watchers expect a further slowdown in price increases and that will mean less spectacular earnings growth for Canada’s big supermarket chains.

$1=$1.06 Canadian Reporting by Scott Anderson; editing by Rob Wilson

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