With a COVID winter approaching, Medline says Empire is ready

Ten months in and the COVID-19 pandemic and shifts in consumer beahviour continue to impact operations at Empire Company Limited, including pricing, safety and sanitation practices and increased e-grocery penetration.

During a call with analysts Thursday afternoon, Empire president and CEO Michael Medline said the company is "excited" by news of a COVID-19 vaccine in Canada, but added there's still a long road ahead.

Medline made his comments hours after Empire posted its second-quarter results. The Stellarton, N.S.-based grocery company reported a profit of $161.4 million for the quarter ended Oct. 31. Sales totalled nearly $6.98 billion, up from nearly $6.44 billion in the same quarter last year. Same-store sales were up 7.3%. Excluding fuel, same-store sales were up 8.7%.

As winter approaches and the prospect of outdoor lineups increasingly likely, Empire is putting up outdoor structures with heaters at a small number of stores to keep shoppers protected from the elements.

In other areas, Empire is introducing what Medline called "queuing technology" so customers can wait in the warmth of their car until it's time to enter the store. "With the Canadian winter upon us, it's important that customers can visit our stores safely," he said.

COVID-19 has accelerated Canadian usage of online grocery shopping, which prompted Empire to launch its e-commerce service Voilà by Sobeys ahead of schedule--a move that has paid off handsomely. Empire's e-commerce business grew 241% in the second quarter. And, with winter and an increasing number of areas in government-mandated lockdown, Medline said e-commerce sales are ramping up in the beginning of Q3.

Since its launch in June, Voilà has beat internal targets. "Our weekly on time delivery score is 98.6%, beating our aggressive target of 95% and our fulfillment--the percent of products ordered that are delivered--is 99.6% exceeding even our 98% target," said Medline, calling the results "best in the world metrics."

"We are giving Canadians an e-commerce solution they can trust, will show up when expected and we'll deliver the products they ordered," said Medline. "This type of service was not available in the Greater Toronto Area before Voilà and as we predicted customers are thrilled."

In Ontario, Voilà now serves The Greater Toronto Area, Hamilton, Barrie and Guelph, with more than 100 delivery vans and approximately 17,000 products and more added every day, said Medline. Voilà will launch in Alberta with curbside pickup next year before starting home delivery service in 2023 from a new customer fulfilment centre to be built in Calgary.

In-store, consumers continued to favour conventional over discount--a trend Medline believes will remain post pandemic--and prices increased on "a select number of items" such as lettuce and poultry.

"Farmers and suppliers are incurring increased costs associated with poor weather, increased demand and supply chain challenges due to COVID. These are real significant commodity increases, which are being felt at the store," said Medline.

Extenuating circumstances aside, Medline said Empire was "pushing back on price increases and continuing to provide excellent value to customers."