Canadian grocer Sobeys has seen its second-quarter earnings fall on the back of costs from closing stores in Ontario and severance costs linked to plans to close its Brantford distribution centre.

For the quarter ended 31 October, net earnings fell C$50.6m (US$50.1m) from C$66m in the same quarter of the previous year.

However, sales rose 1.2% during the quarter to C$3.85bn, which Sobeys attributed to an increase in selling space from new stores and enlargements, as well as the “continued implementation of sales and merchandising initiatives, improved store level execution and product and services innovations”.

Same-store sales were flat during the second quarter, although Sobeys added that deflation and competition partially offset the growth associated with its growth initiatives.

Operating income was hit by costs associated with the store and distribution centre closures in Ontario, including C$16.1m in pre-tax store closure costs and $5.4m pre-tax severance costs related to the imminent closure of the Brantford distribution centre.

Adjusting for these costs and the impact of depreciation and amortization related to the privatisation of Sobeys, operating income for the second quarter was down C$17.2m to C$90.4m.

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“We are pleased with our second quarter and fiscal year-to-date financial results, particularly give the challenges Sobeys faces with continued retail price deflation driven by intense competitive activity,” said president and CEO Paul Sobey.

Click here for the full earnings statement.