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Deborah Baic/Deborah Baic/The Globe and Mail

Empire Co. Ltd. reported a higher quarterly profit Thursday, underpinned by gains at its core Sobeys supermarket unit, Canada's No. 2 grocery chain.

The improved profit came despite an easing of food price inflation, which had boosted the results of grocers earlier this year.

Food prices climbed in recent quarters as grocers passed on rising costs for wheat, rice, vegetables, fruit and other goods to the consumer, benefiting from wider profit margins. But this benefit has lessened in recent months as the commodity prices slipped, dragging retail prices and margins down with them.

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Industry watchers expect a further slowdown in price increases and that will mean less spectacular earnings growth for Canada's big supermarket chains.

"This to me is a solid quarter, especially with the food inflation coming out of the system," said Ken Chernin, an analyst at Jennings Capital in Halifax.

The retail holding company, which also has interests in real estate, said its performance was boosted by a 2.7 per cent rise in same-store sales at its Sobeys grocery store chain. Sobeys' revenue for the quarter was $3.81-billion.

Empire said it earned $70.4-million, or $1.03 a share, in its second quarter, up from $65.6-million, or $1, in the same period last year.

Excluding items, the company earned $72.1-million, or $1.06 a share, compared with $63.1-million, or 96 cents a share, a year earlier.

Revenue rose 3.9 per cent to $3.87-billion.

Analysts, on average, had expected earnings of 97 cents a share and revenue of $3.85-billion, according to Thomson Reuters I/B/E/S.

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