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Sobeys Reports Substantial 4Q and Full Year Earnings Increases

STELLARTON, N.S. -- Sobeys, Inc., based here, yesterday posted quarterly net earnings of $48.1 million (U.S. $39.0 million), or 74 cents per share, for its fourth quarter ended May 7, a rise of 27.6 percent compared with the 58 cents per share, or $38.3 million (U.S. $31.0 million), reported in the year-ago period.

Sobeys additionally posted annual net earnings of $186.7 million (U.S. $151.2 million), or $2.85 per share, for the fiscal year, an increase of 12.6 percent vs. the $166.5 million (U.S. $134.9 million), or $2.53 per share, reported during fiscal 2004.

Net earnings for the fourth quarter and full-year fiscal 2005 were positively affected by about $3.5 million (U.S. $2.8 million), or five cents per share, as a result of the inclusion of a 14th week of operating results in the fourth quarter this year.

Sales for the fourth quarter were $3.29 billion (U.S. $2.67 billion), as opposed to $2.80 billion (U.S. $2.27 billion) the previous year's quarter, a 17.5 percent jump. Sales for the full year were $12.19 billion, a 10.3 percent rise from $11.05 billion. Fiscal 2005 included 53 weeks of operations compared with 52 weeks in fiscal 2004, and this extra week accounted for $241 million (U.S. $195 million), or 2.2 percentage points of the 10.3 percent fiscal 2005 sales increase. Fiscal 2005 also included $137 million (U.S. $111 million) of sales that resulted from the consolidation of variable interest entities in the fourth quarter.

"We are pleased with the solid results achieved in our fourth quarter and for the full 2005 fiscal year," noted Sobeys president and c.e.o. Bill McEwan in a statement. "Our sales and earnings performance reflect the net impact of improved merchandising and productivity improvements across the company in the near term, and investments and expenditures in our retail network and infrastructure for the long term."

All regions saw sales and market share growth in the fourth quarter, and for the fiscal year. Same-store sales went up 4.5 percent in the fourth quarter, and 3.7 percent for the year.

Sobeys said sales growth was spurred by the continued implementation of sales and merchandising initiatives across the company, increased retail selling square footage from the development and acquisition of new stores, and the enlargement and renovation of existing store assets.

During the year, the company opened 41 new corporate and franchise stores, and expanded 19 stores. Thirteen of those locations were opened and seven were expanded in the fourth quarter. As of May 7, Sobeys had 25.0 million square feet of retail space, a 2.5 percent increase over the prior year.

The company said that it would keep investing in infrastructure and productivity improvements. Specifically, in fiscal 2006 the grocer will upgrade capabilities and improve efficiencies in Ontario, through a system and processes already in use in its Atlantic region. The "Ontario initiative," as Sobeys refers to it, will simplify, standardize, and streamline the "back shop," in support of the company's food-focused strategy. The anticipated cost of the initiative is expected to be 20 cents to 25 cents per share in fiscal 2006.

Sobeys owns or franchises more than 1,300 stores in all 10 Canadian provinces, under such retail banners as Sobeys, IGA extra, IGA, and Price Chopper.
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