Dec. 11 (Bloomberg) -- Empire Co., the owner of Canada’s second-biggest supermarket chain, said second-quarter profit rose 13 percent because its Sobeys grocery division increased sales and benefited from a lull in food-price competition among rivals.

Net income climbed to C$65.7 million ($53.6 million), or C$1 a share, the Stellarton, Nova Scotia-based retailer said today in a statement. Revenue for the three months through Nov. 1 advanced 7 percent to C$3.73 billion, helped by grocery purchases that offset declines from its real-estate businesses.

Empire’s food unit increased sales 5.4 percent at stores open at least a year. New technology that improved inventory and finance tracking has helped bolster Sobeys earnings.

“Same-store sales growth at Sobeys of 5.4 percent is a very impressive result,” David Hartley, an analyst with BMO Capital Markets in Toronto, said in a telephone interview. “They’ve been doing a lot of things to drive sales. They’ve got new systems in place, so they have got a good idea of what’s on the shelves and what’s selling.”

Growth in comparable sales beat Hartley’s 3 percent estimate and was more than double the 2.3 percent advance a year earlier.

Empire was unchanged at C$47 by 4:10 p.m. in Toronto Stock Exchange trading. The shares climbed 9.8 percent this year, compared with Loblaw Cos.’s stock being little changed and a 32 percent advance at Metro Inc., the first- and third-largest grocery chains in the country.

‘Disappointing’ Margins

Increased discounts by Sobeys may have led to “disappointing” margins on earnings before interest, taxes, depreciation and amortization, Hartley said. The margin fell almost two-tenths of a percentage point to 4.6 percent, lower than Hartley’s estimate of about 5 percent.

Profit was hurt by the introduction of a new customer- loyalty program, which cost C$3 million, and the rapid decline of the Canadian dollar against the U.S. currency that trimmed about C$2.5 million off earnings, Sobeys Chief Executive Officer Bill McEwan said on a conference call with analysts.

Produce bought in the U.S. declined in value when sold in Canada as the dollar fell 20 percent in October, he said.

“With product on the road from California, it was impossible to recover,” said McEwan, 52. “That was a significant event that we’d never seen before.”

Loblaw reported same-store sales growth of 3 percent in the quarter ended Oct. 4, while Metro said they increased 1.5 percent in the three months through Sept. 27. Investors consider same- store sales a key performance measure because they exclude results from new or closed locations.

The Sobeys division, which runs Price Chopper, IGA, Foodland and Thrifty Foods food stores, represents about 98 percent of Empire’s revenue and 84 percent of its operating profit.

A year earlier, Empire’s net income was C$58.4 million, or 89 cents a share.

To contact the reporter on this story: Kevin Bell in Toronto at kbell2@bloomberg.net

Last Updated: December 11, 2008 16:12 EST