“I don’t like negative numbers, but I don’t think anyone expected to see a repeat of last year’s numbers,” said Empire CEO and president Michael Medline during a conference call with analysts Wednesday afternoon.
Medline was discussing Empire’s fourth-quarter financial performance, which took a dip when compared to the unprecedented sales the grocery company reported at the onset of the COVID-19 pandemic last year.
In fact, what Medline described as “the most extreme levels of stock-up buying behaviour we’ve ever seen” impacted more than two thirds of Q4 2020.
Excluding fuel, same-store sales declined 6.1% year over year, but sales increased 10.4% when evaluating this year’s performance against pre-pandemic levels.
Medline said looking at its most recent results on a two-year stack demonstrated “more meaningful growth” and as the country starts to return to a sense of normal it would become clear “what a fundamentally strong company we are.”
The strength in its operations and merchandising, plus strategic investments in renovations and acquisitions has put Empire, which operates Safeway, FreshCo and Sobeys, in an “enviable” position, said Medline.
As more and more Canadians become fully vaccinated and the country starts to reopen, Medline predicted consumer habits would shift in three ways:
- Consumers will start spending more money outside of the home as lockdowns ease, workplaces reopen and social gatherings resume.
- Basket size will decline somewhat, but the number of transactions will increase as customers become more comfortable shopping across numerous banners. Customers will also return to buying prepared foods.
- The split between discount and conventional grocery will stabilize, but “not return to pre-pandemic norms.” Medline said the company had revamped many of its conventional stores and customers now more than ever see the value in shopping its full-service offering.
“As COVID subsides and Canada is able to safely reopen, we believe we are very well positioned to meet these changing customer needs with our diverse network and well-aligned offer,” said Medline.
“While we expect the grocery industry will shift towards some pre-pandemic ways, we do not believe it will fully return to the way it was, and we've been pretty accurate in our projections over the last while since the pandemic started," he added.
Wednesday marked one-year since the first-ever delivery was made through the company’s Voilà online ordering and delivery service. “And that customer was me,” joked Medline.
All kidding aside, Empire’s e-commerce strategy is paying off, with sales increasing 15% year over year, even against last year’s surge. Over the last year, he said Voilà’s average customer shopped twice a month and their basket size was “3.8 times greater than the average bricks and mortar basket.”
Medline said the company was on track to open its second fulfillment centre in Montreal early next year, and its store-pick option continues to grow. By the end of fiscal 2022, Empire will have e-commerce options in every province.
“We need to be able to serve customers where, when, and how they want to shop,” said Medline. “We are well-positioned to win grocery e-commerce in Canada.”
During the quarter, Empire also announced it was buying a majority stake in Longo's and its Grocery Gateway e-commerce business for $357-million. The deal closed on May 10.
Additionally, the company ramped up its expansion of Farm Boy, opening seven new stores in fiscal 2021, with plans for another seven net new locations in fiscal 2022.
We continue to be extremely pleased with our acquisition of Farm Boy, which has grown its industry-leading same-store sales growth since we acquired them,” said Medline.