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Empire sees earnings rise 8.5% as shoppers continue seeking deals

Sales reached about $7.49 billion
3/14/2024
sobeys exterior toronto jan 2024
Higher sales in the quarter were the result of growth in Empire's discount and full-service businesses.

The parent company of the Sobeys, Safeway and FreshCo grocery chains saw net earnings in its latest quarter rise 8.5% to $134.2 million.

That compares with net earnings of $125.7 million a year earlier, said Empire Co. Ltd. 

"Our team delivered solid results, in line with our expectations, given a cautious consumer navigating the impacts of higher interest rates," said president and CEO Michael Medline in the release. 

The Stellarton, N.S.-based grocer said third-quarter earnings amounted to 54 cents per diluted share compared with 49 cents per diluted share a year prior. Adjusted net earnings for the period ended Feb. 3 totalled $153.1 million compared with $164.8 million a year before.

Sales reached about $7.49 billion compared with roughly $7.48 billion a year ago. They were driven by growth in both its discount and full-service businesses, but offset by lower fuel sales, largely because of the sale of all of its retail fuel sites in Western Canada in the first quarter of its fiscal 2024.

The grocer's results were on the softer side relative to expectations, said RBC Dominion Securities Inc. analyst Irene Nattel in a note, "as consumer value-seeking behaviour continues to be a headwind relative to its largely full-service network." 

Empire continues to try and maximize revenues in its full-service stores, which are losing traffic to discount banners but it's also growing its discount presence, said Nattel. 

As of March 13, there are 47 FreshCo stores in Western Canada, Empire said in its release. It's been expanding the discount banner since announcing in fiscal 2018 that it planned to convert up to a quarter of its Safeway and Sobeys stores in Western Canada to discount. 

The major grocers in Canada have been under pressure from the government to stabilize food prices in their stores. Empire said that during the quarter, it "continued to comply with the federal government's request to identify ways to help further stabilize prices for consumers." 

As shoppers are more sensitive to prices, Empire said it's focusing on negotiations with its suppliers to ensure competitive pricing. 

It also said it recently launched an 11-week program that lowered or locked prices on around 1,000 items across many of its banners. 

Empire's two transformation strategies, Project Sunrise and Project Horizon, were successfully completed over the past six years, the company said. Now, the company said it aims to grow its earnings over the long-term through net earnings growth and share repurchases.

The grocer plans to invest in its store network, renovating between 20% and 25% of its stores over the next three years. These renovations will include upgrades to improve sustainability. 

Empire also said it's focusing on digital and data initiatives, through continued expansion of e-commerce, its loyalty program, personalization, promotional optimization and improving the productivity of its stores by changing layouts and tailoring product assortments. 

Labour expenses, driven by wage rate increases, increased in the third quarter, Empire said. However, after ratifying new agreements with the United Food and Commercial Workers, the company offered voluntary buyouts to senior employees at B.C. Safeway locations, which it said will help better manage labour and operational costs. 

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