Canadian grocer Sobeys has booked a decline in profit for the first nine-months of the year, impacted by “competitive intensity”, costs associated with the acquisition of Safeway’s stores and a weaker Canadian dollar.
In the nine months to 1 February, net earnings fell to C$139.4m (US$125.9m), down from $246.8m in the comparable period of last year. Operating profit dropped to $587.6m, down from $641.1m in the first nine months of 2012. The company said that the bottom line was hit by higher operating costs “combined with transaction and finance costs related to the Canada Safeway acquisition”.
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Michael Van Aelst, TD Securities analyst, cautioned that the margin impact was worse than expected. “The drop in EBITDA at both Canada Safeway (CSL) and Sobeys was greater than feared. We were among the most conservative on the street in terms of earnings forecasts, target and recommendation and had even suggested that Canada Safeway’s deteriorating profit trends in recent quarters gave us concern that our EPS for F2015 and F2016 were too high. But the extent of the shortfall was still a surprise.”
Sales, however, were boosted by the contribution from Safeway Canada, which more than offset a 0.2% drop in like-for-like revenue in the third quarter. Sales increased to $15.05bn, compared to $13.13bn in the prior year period.
Click here to view the full release from Sobeys’ owner Empire Group.
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