Solid Comps Lift Sobeys' Q4, FY 06 Earnings

STELLARTON, N.S. – Multi-format retailer Sobeys, Inc. here yesterday posted earnings for the fourth quarter and fiscal year ended May 6, 2006 that were up from the year ago periods, thanks in part to same-store sales increases.

The chain reported quarterly earnings of 77 cents per share, or CAN $49.7 million (US $44.3 million), for its fourth quarter an increase of 4.1 percent vs. the 74 cents per share, or CAN $48.1 million (US $42.8 million, reported last year. Included in earnings for Sobeys' fourth quarter was CAN $5.3 million (US $4.7 million) of costs in connection with the ongoing rollout of the company's Ontario business process and system initiative.

Sobeys also posted annual earnings of $2.93 per share, or CAN $189.4 million (US $168.6 million), a rise of 1.7 percent compared with $2.88 per share, or CAN $186.7 million (US $166.2 million), in fiscal 2005. Included in the earnings per share for fiscal 2006 was 19 cents of costs related to the Ontario initiative.

Fourth-quarter sales came to CAN $3.16 billion (US $2.81 billion), as opposed to CAN $3.29 billion (US $2.93 billion) last year, representing a 4.0 percent decrease; but adjusting for the extra week of sales in fiscal 2005, sales grew 3.6 percent over the fourth quarter last year.

Sales for the full year amounted to CAN $12.85 billion (US $11.44 billion), a 5.4 percent rise from CAN $12.19 billion (US $10.85 billion) in fiscal 2005.

All regions saw total and same-store sales growth during the fourth quarter and for the full fiscal year. Same-store sales increased 3.9 percent in the fourth quarter and 4.0 percent for the full fiscal year.

In a conference call yesterday e.v.p. and c.f.o. Bruce Terry said the quarter's sales growth was "driven by the continued implementation of selling and merchandising initiatives across the country, coupled with increased retail selling square footage from the development of new stores and the enlargement and renovation of existing store assets."

He added that the completed disposition of Sobeys' cash-and-carry businesses in Ontario and Quebec would allow for concentration on the company's core food-retailing business.

"Our continued strong sales and earnings growth in the fourth quarter and full fiscal year 2006 are right in line with our expectations," said Sobeys president and c.e.o. Bill McEwan in a statement. "From improved programs to more consistent execution, including our significant supply chain and systems initiatives, our people have innovated, stayed focused on our plan, and delivered results."

During the year, Sobeys opened, replaced, expanded, renovated, acquired and/or converted the banners in 83 stores, including the opening of two fresh-format stores in downtown core Toronto. The company also introduced two sub-brands of Compliments, its private label brand: Compliments Organics and Compliments Balance-Equilibre, an organic and healthy line of products, respectively. At the end of fiscal 2006, Sobeys had rolled out about 3,700 Compliments products.

For fiscal 2007 the retailer said it planned to boost its capital expenditure expenses by $200 million, funded by its higher cash flow.

"We expect to open, expand, and renovate approximately 90 stores in 2007, increasing square footage by about four percent," noted McEwan. Sobeys will continue to focus on its retail network, as well as spend more on such items as logistics infrastructure.

The company also said it implemented a transformation plan in the Western region in the fourth quarter of fiscal 2006 similar a plan already under way in the Ontario market. The anticipated costs for both these initiatives in fiscal 2007 will be 27 cents to 32 cents per share.

Additionally, the grocer's board of directors declared a quarterly dividend of 14 cents per share on Sobeys common shares, which will be payable on July 31, 2006, to shareholders of record on July 14, 2006.

Sobeys owns or franchises about 1,300 stores in all 10 Canadian provinces under retail banners including Sobeys, IGA extra, IGA, and Price Chopper.
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