* Loblaw Q3 EPS C$0.76 vs C$0.69 a year earlier
* Loblaw same-store sales down 0.4 pct
* Metro Q4 EPS C$0.88 vs C$0.77 a year earlier
* Deflation and consumer sentiment pressures weigh
* Loblaw shares edge higher; Metro shares slip
(Adds details, conference call, analysts comments)
By Solarina Ho and Bhaswati Mukhopadhyay
TORONTO, Nov 17 Two of Canada's largest
grocers, Loblaw Cos (L.TO) and Metro Inc MRUa.TO, posted
higher quarterly profits on Wednesday but an inability to raise
prices in a highly competitive market held back their results.
Both companies reported lower same-store sales. Loblaw
said sales at stores open for at least a year fell 0.4 percent,
while Metro reported 0.5 percent drop in same-store sales.
The results in part reflected a drop in wholesale food
prices this year, which has forced grocers to hold the line on
retail prices. In addition, consumers remain in a cautious
mood, analysts and grocers say.
"The consumer seems to be looking for value and they
continue to struggle a bit there," Edward Jones analyst Brian
Yarbrough said on Loblaw, Canada's biggest grocery chain.
Metro, Canada's No. 3 grocer, saw retail food price
deflation of about 1 percent and did not experience the rise in
food costs that was reported in recent economic data, Chief
Executive Eric La Fleche told analysts during a conference
He attributed the lower retail prices to aggressive
promotional activity that was expected to continue into the
coming first quarter.
"Consumers are very cautious and they are chasing
promotions and there is a lot of offers out there, no
question," La Fleche said.
Analysts said deflation was easing and food prices were
beginning to return to the market. They expected grocers to
pass any price increases to customers, but said the entire
industry would have to follow suit.
Loblaw "cannot raise prices and then everyone else not
raise prices, because then people will then go elsewhere," said
Looking ahead Loblaw, controlled by food processor and
distributor George Weston Ltd (WN.TO), said costs related to
systems and infrastructure upgrades will pressure profit
It raised its 2010 capital expenditures to C$1.3 billion
from C$1 billion to pay for an increase in store renovations.
The company reported a 13 percent rise in third-quarter
profit but results included a number of unusual items,
including costs related to a labor settlement and a gain from a
lower tax rate.
Net earnings rose to C$213 million, or 76 Canadian cents a
share, from C$189 million, or 69 Canadian cents a share, a year
"Economic condition is our headwind ... and we still hover
on the darker side of the moon," said Loblaw Executive Chairman
Galen Weston during a call with analysts.
Sales at Loblaw, which operates more than 1,000 stores
under banners such as Loblaws and No Frills, rose 1 percent to
C$9.59 billion. Its 2009 acquisition of specialty Asian food
chain T&T Supermarket continued to bolster sales, the company
Metro reported a fourth-quarter profit that beat market
consensus. Earnings climbed to C$93.4 million, or 88 Canadian
cents a share, for the quarter ended Sept. 25, from C$84.4
million, or 77 Canadian cents, a year earlier.
Analysts had expected a profit of 84 Canadian cents a
share, according to Thomson Reuters I/B/E/S.
Metro, which operates more than 600 supermarkets in Ontario
and Quebec, said sales rose 1 percent to C$2.56 billion.
"Now that we are cycling through a period of inflation,
that generally tends to be a positive for stock prices of food
retailers," said Robert Cavallo of Mackie Research Capital.
Loblaw shares, which dropped more than 2.6 percent earlier,
finished up 11 Canadian cents at C$42.26, while Metro stock
slipped 23 Canadian cents to C$46.00 on the Toronto Stock
Exchange on Wednesday.
(Additional reporting by Isheeta Sanghi in Bangalore; Editing
by Frank McGurty)