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Metro posts higher profit, boosts dividend

Shoppers leave a Metro store in Toronto.

Fred Lum/Fred Lum/The Globe and Mail

Grocer Metro Inc. boosted its dividend nearly 12 per cent after reporting higher profits and revenues in its latest quarter, fuelled by acquisitions and investments.

The Montreal food retailer reported Tuesday it raised its payment to shareholders 11.7 per cent to 21.5 cents a share.

The payment increase came as Metro boosted its first fiscal quarter profits 8.6 per cent to $103.7-million, or $1.01 a share, beating analyst expectations.

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That compared with year-earlier earnings of $95.5-million.

Sales for the quarter ended Dec. 17 rose 3.4 per cent to $2.7-billion from about $2.6-billion.

The company benefited from the acquisition of Adonis ethnic food stores last year and its investment in Alimentation Couche-Tard, Canada's largest convenience store operator.

"We are pleased with our first quarter results as we continue to grow in a highly competitive market," president and CEO Eric La Fleche said after the company's annual meeting, where shareholders approved a reorganization of the company's share capital.

"Our customer-focused strategies and programs supported by a strong execution, together with our new Adonis partnership, fuelled our results and we are confident they will allow us to continue our growth.

"Finally, we are happy that our shareholders approved today by an overwhelming majority the changes to our share capital structure, whereby there will now be only one class of voting and participating shares."

Metro's earnings were expected to increase by 10 per cent to 97 cents per share on $2.73-billion of revenues in the first quarter, according to analysts polled by Thomson Reuters.

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That compared to 88 cents per share on $2.63-billion of revenues a year earlier.

Analysts expect the retail food industry will face big challenges in 2012 with intensifying competition from Wal-Mart ahead of the arrival in 2013 of Target.

Metro is a preferred food retailer for many industry observers. But the company's ownership stake in convenience store operator Alimentation Couche-Tard is expected to face limited earnings growth because of weak consumer spending and high gas prices.

Canadians are expected to get a break at the supermarket cash register this year as the rise in food prices slows.

A University of Guelph study forecast that general food prices will increase about 2 per cent from Dec. 1 through the end of November 2012.

In December, retail grocery price increases lagged Statistics Canada's food inflation with Metro reporting 2.5-per-cent increase.

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The Canadian grocer recently moved to strengthen its appeal to ethnic shoppers by buying a majority stake in Marche Adonis, a Mediterranean-style retailer that's planning to enter the crowded Ontario market.

Metro is Quebec's leading grocery chain with nearly 34-per-cent market share. It has more than 65,000 employees in Quebec and Ontario.

The Montreal-based company operates a network of close to 600 food stores under several banners including Metro, Metro Plus, GP, Super C and Food Basics, as well as over 250 drugstores under the Brunet, Brunet Plus, Clini Plus, The Pharmacy and Drug Basics banners.

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