Lower meat, produce prices coming to Western Canada Sobeys stores

Troubled Safeway acquisition by Sobeys hits Empire with $1.36 billion loss

Shoppers in Western Canada can expect to pay a little less for groceries as a sluggish economy has forced the company behind Sobeys and Safeway to rethink prices in the western provinces.

Empire Company's Safeway banner and its western business unit have seen sales erode in a difficult economic environment, mainly in Alberta and Saskatchewan, president and CEO Marc Poulin said during a conference call Thursday after the company reported third-quarter earnings.

"We're not dealing with the same customer psyche that we were dealing with, you know, even a year ago. The behaviour of the customer has changed in Western Canada and we have to acknowledge that,'' Poulin said.

READ: How will Sobeys cut produce prices?

The company plans to bring down prices long term on fruits, vegetables and meat after initiating a pricing and promotion campaign in January.

In February, Sobeys told Canadian Grocer it had streamlined its buying practices in the West and combined its Sobeys and Safeway flyers.

Last May, Sobeys West, Thrifty Foods and Safeway businesses were combined into a new Calgary-based group called the "Western Business Unit," headed by Jason Potter. Sobeys has said the unit's back-office team will have finished its transition to new roles by April.

READ: Sobeys reorganizes its western business unit

Empire wrote down the value of its western business, primarily the Safeway chain, resulting in a loss of $1.36 billion in its latest quarter. The loss was largely due to a recognition that the long-term value of the Safeway business is lower than previously estimated, the company said.

Sobeys paid $5.8 billion to acquire the Canadian assets of Safeway in 2013.

Excluding the Safeway writedown and certain other items, Empire would have had $82.5 million of adjusted earnings in its fiscal third quarter–down 36.1 per cent from $118.6 million in the comparable year-earlier period.

The net loss amounted to $5.03 per share, which included a $1.59-billion writedown of goodwill associated with the Safeway purchase.

Correction: An earlier version of this story incorrectly reported that Sobeys and Safeway would have a new management team for Western Canada in place by April. In fact, the back-office team will have finished its transition to new roles by then. 

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