January 27, 2009 / 5:08 PM / in 9 years

UPDATE 2-Metro profit rises on strong sales

*EPS C$0.73 vs C$0.64

*Sales C$2.6 billion vs C$2.51 billion.

*Shares fall 0.2 percent

(Adds details. Adds analyst and company comments)

TORONTO, Jan 27 (Reuters) - Metro Inc MRUa.TO, Canada’s third-largest grocer, said on Tuesday quarterly profit rose, helped by strong sales in Quebec and an improved performance in Ontario, where it united its stores under the Metro banner.

The company said it earned C$81.1 million ($65.9 million), or 73 Canadian cents a share, up from C$73.8 million, or 64 Canadian cents a share for the comparable period.

Excluding some items including an income tax expense, earnings came in at C$84.1 million, or 76 Canadian cents a share, up from C$62.4 million, or 54 Canadian cents a share.

Sales rose to C$2.6 billion from C$2.51 billion.

Analysts on average had expected earnings of 64 Canadian cents a share and revenue of C$2.58 billion, according to Reuters Estimates.

“They have rebounded from a tough quarter a year ago, both from the internal issue and perspective and from a competitive perspective,” said David Hartley, an analyst at BMO Capital Markets.

“The new banner is, maybe, helping them drive traffic or interest in their stores.”

The food retailer moved to consolidate its five Ontario food banners last year under the main Metro name to try to boost efficiency and spark growth.

It also struggled to cope with a computer system overhaul which cut into profits.

Metro started the rebranding work in September to renovate stores, offer a wider and improved range of food products, and launch a new marketing campaign.

By the end of 2008 it had converted some 60 stores including The Barn and Dominion brands to the Metro banner.

The company also plans to spend about C$300 million in capital expenditures in 2009 as it continues the upgrades and opens a dozen new stores. It sees a total net square footage increase of about 1.5 percent next year.

Eric LaFleche, the company’s president and chief executive, said the company’s results were “excellent” given the tough economic times.

“I think in this environment where there are layoffs and bad news all over the place, I think this is a good news story. We are very pleased with our results,” LaFleche said on a conference call with reporters.

The company’s shares were down 0.2 percent at C$38.13 on the Toronto Stock Exchange after rising as high as C$38.77 earlier in the session. ($1=$1.23 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)

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