PROVIGO'S ONTARIO OPERATIONS TO WIDEN DOMAIN

BRIAN DUNN

MONTREAL (FNS) -- Provigo here plans to expand its Ontario operations by opening stores in new trade areas.

At the same time, the grocery retailer and distributor is slated to open two more stores in the Quebec City area, where it faces increased competition from Sobeys, the Stellarton, Nova Scotia-based chain owned by Empire Co. Ltd.

Pierre L. Mignault, president and chief executive officer, told shareholders at the annual meeting here that the company is holding its own despite Empire's push in the Quebec City area. He noted that Provigo's year-to-date sales are up 2.8% in the area.

This year, Provigo will build 15 new stores in Quebec and Ontario, including five Loeb units in Ontario, according to Mignault. In addition, the company will renovate more than 40 of its existing Provigo, Maxi and Loeb stores during the year. Provigo and Loeb stores are conventional supermarkets, whereas Maxi is a warehouse-style discount format.

The expansion will continue next year, when the company will build another 25 to 30 stores in both provinces for about $125 million ($91 million U.S.), Mignault said.

Provigo eventually plans to expand to western and eastern Canada, he explained, but the company will wait to expand eastward until the end of a price war between Sobeys and Toronto-based Loblaw Cos. that's brewing in the Maritime provinces.

This summer, he added, Provigo is slated to introduce its Maxi & Co. brand, modeled after Price Club's expanded line of hard goods.

During the annual meeting, Provigo also announced results for the 12-week first quarter ended April 20. Net profit increased 11.9% to $15 million (Canadian), or 15 cents per share, from $13.4 million, or 13 cents per share, in the prior-year quarter. First-quarter sales rose 3.8% to $1.31 billion from $1.26 billion a year ago.

In the supermarket and discount store group, sales climbed 6% to $1.01 billion. The rise stems from the opening of five stores since the beginning of the previous year, plus an increase in comparable-store sales and the transfer of franchised and affiliated stores to corporate status, Provigo reported.

In the company's wholesale and convenience store group, sales dipped 3% to $298.2 million, compared with $307.5 million the year before. After allowing for the disposal of the Top Valu gas station business and the termination of a supply agreement with a client the previous year, sales in the group increased by 3.6%, the company noted.

During the first quarter, Provigo opened a Maxi in Quebec and a Loeb in Ontario. It also renovated nine stores. Excluding store opening costs, first-quarter operating income was $35.5 million, compared with $33.9 million a year earlier, according to the company.

In March, Provigo issued 8.8 million common shares and 4.4 million common share purchase warrants for a cash consideration of $68.8 million. In May, the company made an issue of debentures totaling $125 million, bearing interest at 8.7% and maturing in 2006. "The company now enjoys the required flexibility to carry out its store construction and modernization program," Mignault stated.