04/22/2015 07:31 EDT | Updated 06/22/2015 05:59 EDT

Metro's Rising Sales A Sign Things Are Looking Up For Food Retailers

A Store is Born - Dominion's becomes "metro". The day the sign changed.

MONTREAL - Grocery company Metro Inc. 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.

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