Stellarton, Nova Scotia-based Sobeys Inc, Canada's second largest retail grocer and distributor, has reported record quarterly net earnings (after goodwill charges) of C$36.1m, 55 cents/share, for its Q3 ended 2 February 2002, which includes C$1.5m, 2 cents/share, from discontinued SERCA Foodservice operations.

Year on year, the company achieved a 59% increase in earnings for the nine months ended 2 February 2002. Earnings totaled C$104.5m, C$1.59/share, compared to C$65.8m, C$1.11/share prior to a restructuring charge last year.

"Our sales continue to be strong, our operating fundamentals continue to improve and our merchandising programs have strengthened," said Bill McEwan, Sobeys president and CEO. "Our speed and discipline in executing our capital investment program has never been better. We're pleased with our earnings growth and momentum."

Q3 earnings last year included an after tax restructuring charge of C$49.2m, 76 cents/share. Prior to this charge, earnings in the third quarter last year equaled C$14.9m, 23 cents/share.

Financial Results

Sobeys retail food distribution business, exclusive of SERCA foodservice operations because of the 5 December 2001 definitive agreement to sell substantially all of the net assets of SERCA, reported sales of C$2.44bn for the Q3, 6.6% up on last year with all retail food distribution regions contributing to the positive increase. Sales growth for the first nine months of the fiscal year equaled 6.4%.

Same store sales, excluding stores that expanded in the year, rose 3.6% in the Q3. Including expanded stores, same-store sales for the quarter increased by 5.4%.

For the Q3, EBITDA totaled C$105.9m, an increase of C$41.1m, 63%, over the C$64.8m recorded in the Q3 last year. The improvement is attributed to continued sales growth and steady progress on all of the Company's margin development and efficiency initiatives. EBITDA margin improved to 4.35% from 3.96% in the Q2 and 2.84% in the Q3 last year.

EBITDA for the first nine months of the fiscal year was C$293.8m, an increase of 24% compared with C$236.8m for the similar period in the previous year.

Investment in property, stores and equipment totaled a record C$100.2m in the Q3, an increase of C$32.2m over the C$68m reported in the Q3 last year. During the Q3, 17 new corporate and franchised stores were opened and another 11 stores were expanded. For the first three quarters of fiscal 2002, a total of 40 new corporate and franchised stores were opened and another 27 stores were expanded. An additional 44 stores were renovated or rebannered in the quarter, 15 of these stores in Quebec were rebannered to the new IGA extra format.

"We have made impressive gains in Atlantic Canada and Ontario stores and operations, and we will continue to focus substantial attention on further improvements," McEwan said. "Our performance continues to be strong in Quebec and Western Canada, as well. Company-wide, we're right on track."

Sobeys' financial position continues to strengthen. Total debt to total capital at the end of the Q3 of 35.4% compares to 42.1% for the same period last year and 38.5% at 5 May 2001 year end.

Operating cash flow before net change in other current items for the quarter improved to C$76.8m from C$54.7m, primarily as a result of higher earnings.

The board of directors declared a quarterly dividend of 6 cents per share on Sobeys Inc. common shares, which will be payable on 30 April 2002 to shareholders of record on 15 April 2002.