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Metro to buy back one million shares; sales slip

Metro grocery store chain is buying back one million shares.

Peter Power/The Globe and Mail

Metro Inc. saw its second-quarter sales slip in a tough retail climate while profit more than tripled thanks to a big after-tax gain on the sale of nearly half its stake in Alimentation Couche-Tard Inc.

Canada's third largest grocer also said on Wednesday it plans to buy back and cancel up to one million of its common shares in private deals.

Second-quarter sales were $2.5-billion, down from $2.6-billion in the year earlier period. Metro cited the exclusion of the important pre-Christmas week in second quarter results, the closing of some underperforming Ontario stores and the loss of sales in the pharmaceutical unit due to problems with a new warehouse management system.

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Adjusting for the Christmas week shift, same-store sales were flat compared with the year-earlier period, the company said.

"While we're not happy with that, there has been an unprecedented level of new store openings in the last six months, especially in Ontario," president and chief executive officer Eric La Flèche said on a conference call for analysts.

He added that shoppers are cautious.

"Consumers remain very value conscious, fickle. They shop around, that's for sure," he said. A tough retail climate with intense competition means pressure continues to maintain promotional activities, he said.

Rivals in the grocery space include Loblaw Cos. Ltd., Wal-Mart Canada and new entrant Target Corp., which opened three stores last month and plans to build up to about 100 by the end of the year.

Mr. La Flèche also reiterated statements that there's no rush to make an acquisition with the pile of cash Metro is sitting on after the one-time after-tax gain of $266.4-million from the sale of the Couche-Tard shares to three financial institutions for $479-million.

"It's nice to have the cash," he said, adding that all options besides an acquisition will be examined, including productivity-boosting measures, organic growth and implementing chain efficiencies and returning cash to investors.

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"We're very shareholder focused and we'll do the right thing in due course."

Speculation has swirled that Metro is interested in buying Safeway Inc.'s Canadian assets; also mentioned as possible targets are drugstore chains Familiprix and Jean Coutu Group (PJC) Inc., and B.C. grocery chain Overwaitea.

Metro's second-quarter profit reached $366.8-million or $3.77 per share, compared with $96.1-million or 94 cents in the year-earlier period, largely on the Couche-Tard sale.

Adjusted net earnings from continuing operations in the quarter came in at $100.5-million or $1.02 per share, up from 94 cents and within range of analysts' estimates.

Metro's chief operating officer Robert Sawyer left earlier this month to take over as CEO of hardware giant Rona Inc.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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