NEWS
04/22/2015 09:30 EDT | Updated 06/22/2015 01:12 EDT

Analyst says Metro's Q2 results suggest conditions improving for food retailers

MONTREAL - Grocery company Metro Inc. (TSX:MRU) says that the rising cost of food contributed to higher revenue and store sales in the company's second quarter.The Montreal-based retailer said that its "aggregate food basket" experienced inflation of 4.0 per cent during the quarter ended March 14.Same-store sales at locations open at least a year were up 4.5 per cent and total revenue was up six per cent to $2.707 billion, including a contribution from the Première Moisson bakery business acquired last year.RBC Capital Markets analyst Irene Nattel says that Metro's results suggest that conditions are improving for Canadian food retailers.She added in a brief research note that Metro's ability to pass through higher food costs to consumers "should extend to Loblaw as well, suggesting upward bias to expectations."For Metro shareholders, there was a $111.6 million net profit in the second quarter, a 15.2 per cent increase over the same time last year.Besides its own operations, Metro benefited from its investment in Alimentation Couche-Tard (TSX:ATD.B).Metro's share of the multinational convenience store operator's earnings rose to $16.3 million from $11 million a year earlier.The company's quarterly dividend remains 11.7 cents per share — unchanged from the first quarter but up 16.7 per cent from a year ago.Metro's profit amounted to 43 cents per share on a diluted basis, up from 36 cents in the second quarter of 2014 and one cent better than analyst estimates.Analysts had estimated 42 cents of net income and $2.67 billion of revenue, according to estimates from Thomson Reuters.