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Sobeys Posts Higher Q1 Earnings

STELLARTON, N.S. -- Sobeys, Inc. here yesterday reported net earnings $48.2 million (US $40.5 million), for its first quarter ended Aug. 6, 4.2 percent better then earnings of $46.6 million (US $39.2 million) posted for the year-ago period.

Per share revenue for the latest quarter was 74 cents, compared to 71 cents. Included in the latest quarterly earnings is $3.8 million (US $3.2 million) in costs connected with the company's initiative in Ontario to "simplify, standardize, and streamline the back shop in support of our food-focused strategy, as well as leverage technology investments, improve efficiency, and lower costs over the long term," said Sobeys president and c.e.o. Bill McEwan during a conference call yesterday. Excluding these expenses, earnings per share would be 78 cents, a 9.9 percent rise from last year.

First-quarter sales came to $3.30 billion (US $2.78 million), compared with $3.01 billion (US $2.61 million) for the same quarter last year, a rise of $289.4 million (US $243.5 million), or 9.6 percent. Sales growth in the first quarter of fiscal 2006 was affected by the consolidation of variable interest entities, which accounted for about $162 million (US $136 million), or 5.4 percentage points of the increase, over fiscal 2005. Same-store sales went up 4.1 percent during the quarter.

According to the company, sales increases were due to the ongoing introduction of merchandising initiatives across Sobeys, in addition to its continuing investment in its retail store network. During the first quarter, Sobeys opened three new corporate and franchise stores, expanded a further three stores, and rebannered two. The company closed 13 stores, as opposed to 11 during last year's first quarter. At the end of the quarter, the company had 24.9 million square feet of retail space, a 2.1 percent increase over the year-ago period.

"We are pleased that our continuing efforts to improve our in-store offering and execution combined with our ongoing productivity initiatives produced strong sales and solid earnings growth in the first quarter," said McEwan in a statement.

During the conference call, although McEwan said that he was pleased by the progress made on improving overall cost structure and reducing complexities in the business, he was not content for Sobeys to rest on its laurels, noting, "We fully realize that significant opportunity for improvement still exists and will remain a priority." McEwan was particularly proud of a revamped produce program introduced in the company's Western region, and how store conversions, combined with "an aggressive pricing program," had boosted business in Saskatchewan.

Among Sobeys' initiatives in the near future discussed during the conference call were the rollout of the second phase of the company's Smart Retailing program, which would consist of a comprehensive store performance management process, and the expansion of its private label offerings, including 235 additional value-tier products in stores by Oct. 14 and unique "sensational-tier" items, which offer "affordable indulgence" and will be available by mid-September.

Additionally, McEwan spoke of opening more 3,900-sq.-ft. Sobeys Express stores, which he described as adhering to a "fresh fill-in format," although he wouldn't reveal where or when those opening would occur, only that Quebec and the Atlantic Canada region were being considered in addition to Ontario, where the first two Sobeys Express stores are located. He added that the company would open eight to 10 convenience stores under the Needs banner and revamp a number of others, as well as improving "the intensity of merchandising in that offering."

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