OTTAWA (Reuters) - Profit at Canada’s Empire Co Ltd EMPa.TO rose more than 2.5 percent in its fourth quarter as strong results from its Sobeys supermarket chain more than offset weakness in its real estate operations, the company said on Thursday.
Empire said it earned C$66.5 million ($65.8 million), or C$1.01 a share, in the quarter ended May 3, up from C$64.8 million, or 99 Canadian cents a share, in the same period last year.
Revenue rose 6.2 percent to C$3.56 billion as same-store sales rose by 2.6 percent at Sobeys, Canada’s No. 2 supermarket chain behind Loblaw L.TO.
Food division sales gained 7.3 percent to C$3.48 billion, but real estate revenue fell 49 percent to C$33.8 million. That decline reflects a C$32.2 million drop in residential real estate revenue that Empire said was expected due to slower lot sales, primarily in Western Canada.
Investment revenue increased nearly 7 percent to C$43.4 million in the quarter, the Stellarton, Nova Scotia-based company said.
“Our consolidated earnings benefited from having 100 percent ownership of Sobeys versus 72 percent a year ago, amplified by Sobeys’ continued growth in total and same-store sales, selling margins and ongoing cost reduction initiatives,” said Empire Chief Executive Paul Sobey in a statement.
“The higher earnings contribution from Sobeys more than offset the expected lower earnings from our residential real estate operation.”
At May 3, Empire’s investment portfolio carried a market value of C$431.2 million. It includes a 27.6 percent stake in Wajax Income Fund WJX_u.TO and a 47.8 percent holding in Crombie REIT CRR_u.TO.
Sobeys opened, acquired or moved 15 stores in the quarter, compared with seven stores in the same period last year, and expanded 10 stores, up from three last year.
It closed 17 stores in the quarter, compared with nine last year and ended the period with 27.2 million square feet, a 3 percent increase over last year.
Empire shares rose 1.2 percent, or 49 Canadian cents, to C$42 on the Toronto Stock Exchange after the results were announced.
The stock is down about 2.5 percent year-to-date, compared with a decline of about 8 percent for the TSX consumer staples sector .GSPTTCS, which includes food retailers and producers.
“Canadian food retailers have been going through tough times over the past year as hyper food inflation and intense industry competition have crushed profit margins. However, the worst seems over,” Dundee Securities strategist Martin Roberge said in a recent note.
“Raw food inflation has peaked out at a time when food retailers are attempting price increases to restore margins. Also, the slowing of the Canadian economy is such that supermarket sales should continue to improve as more household spending is directed to essentials.”
Reporting by Susan Taylor; Editing by Peter Galloway