Loblaw Cos, the Canadian food and general retailer, has reported a fall in basic earnings for its second quarter, despite a rise in sales.

In a statement, the company said that for the second quarter of 2007, basic net earnings per common share were C$0.43 (US$0.40) compared to $0.71 in 2006, a decline of 39.4%. 

Sales for the second quarter increased by 3.5% or C$234m to $6.93bn. Total sales increases were realised across all regions of the country and in the food, general merchandise and drugstore areas, the company said. Same-store sales, excluding the impact of a continued decrease in tobacco sales, increased by 4.2%.

The company pointed to an increase in net retail square footage of 0.4 million square feet or 0.9% during the latest four quarters, as part of the reason for the sales increase.

For the first half of the year, sales of $13.3bn were 3.4% ahead of last year.

Looking ahead the Loblaw said in a statement: "The significant changes which were initiated last year are on track, although the period of maximum risk associated with the restructuring is now beginning.

"The company plans to continue its strategy of targeted price reduction and improvements to the structure of its business which are likely to continue to put pressure on margins. It is expected that earnings will remain challenged for the remainder of 2007."