December 9, 2010 / 5:23 PM / in 7 years

UPDATE 2-North West Co Q3 falls, sees weak Q4 as discounts hurt

* Q3 EPS C$0.45 vs C$0.51 last yr

* Sees weak discount, global sales in Q4

* Sees sales improving in first half 2011

* To pay qtrly div in 2011 after converting to corp

* Units fall 4 pct (Recasts, adds details, updates share movement)

BANGALORE, Dec 9 (Reuters) - Food retailer North West Company Fund NWF_u.TO expects the weakness in its discount stores and international operations that hurt the third quarter to run through this quarter as competition and pricing pressures persist, sending its units down 4 percent.

North West said the pressure to give discounts on food items would hurt the Giant Tiger chain of stores, while the Cost-U-Less chain would continue to remain the “most challenged part” of the company.

Same store sales at these two discount banners were down almost two percent in the third quarter.

International sales -- which account for about a third of total sales -- fell 6 percent in the quarter, while sales at its key Canadian markets rose 6 percent.

However, the retailer expects sales to improve in the first half of 2011 as the weakness in the Cost-U-Less chain and its international operations was starting to level off.

The Winnipeg, Manitoba-based retailer expects net capital expenditures for the year to be about C$44 million, mainly to buy new stores and maintain existing stores.

Third quarter same store sales in northern Canada and Alaska markets rose 5.7 percent.

WEAK Q3

For August-October, earnings fell about 11 percent to C$22.1 million, or 45 Canadian cents a unit.

Total sales at the company, which also runs stores in the South Pacific and the Caribbean, rose 2 percent to C$367.3 million.

Analysts were expecting earnings of 51 Canadian cents a unit on revenue of C$378.2 million, according to Thomson Reuters I/B/E/S.

The retailer said it expects to pay a quarterly dividend of 24 Canadian cents a share in 2011, when it converts to a corporation.

Units of the retailer touched a low of C$20.50, before paring some losses to trade down 3 percent at C$20.61 on Thursday afternoon on the Toronto Stock Exchange. They have shed about 2 percent of their value since it posted second-quarter results that missed estimates. (Reporting by Gowri Jayakumar in Bangalore; Editing by Don Sebastian)

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