‘Not going to sit here and lose market share:’ Empire CEO talks expansion plans

Sobeys parent company Empire Co. Ltd. is leaning into its strengths as a primarily full-service grocer as its competitors bet on discount. 

But the food retailer isn’t counting out its low-cost FreshCo banner.

“We like our discount banner... It's been a home run for us,” Michael Medline, president and chief executive officer of Empire and Sobeys, said. “I think you're going to see more confidence in our discount banner, and maybe a little bit of innovation there as well in terms of fitting into different markets.”

“But having said that, we are increasingly confident that full service is about to come into it big… We're looking at ensuring that we're going to be taking market share in the next few years.”

Canada’s major grocers have been doubling down on discount in recent years as inflation and high interest rates leave Canadians cash-strapped.

Loblaw Cos. Ltd., in particular, has been expanding its discount offering in recent quarters. This month, the grocer opened the first of three pilot No Name stores—its new ultra-discount banner.

“Our competitors follow a certain strategy, we're gonna follow our own strategy,” Medline said. “It will involve full-serve, it'll involve discount as well… We're not just going to sit here and lose any market share—we're going to get market share.”

Empire reported net earnings of $207.8 million for the first quarter of the company’s fiscal 2025, down from $261 million last year

Sales totalled $8.14 billion, up 0.8%. The increase was slightly offset by lower fuel sales due to the sale of 56 gas stations in Western Canada last year.

Same-store sales, excluding fuel, increased by 1%.

On the company’s earnings call Thursday (Sept. 12), executive vice president and chief financial officer Matt Reindel said Empire is gradually shifting focus to opening new stores.

“New stores has not been a major pillar for us in the past, but they will start to be more of one moving forward,” Reindel told analysts. 

Empire said it’s on track with its plan to renovate approximately 20% to 25% of its store network between fiscal 2024 and fiscal 2026.

“We believe that the gap between full-service and discount same-store sales will continue to close as the economy improves, which will be advantageous to us as we continue to lean into our strengths as a full-service grocer,” Medline said.

The executive said moderating inflation and lower interest rates has led to a “positive inflection point” for full-service over the past six months.

“We are seeing small, gradual improvements in the consumers that we service across every single one of our businesses,” Medline said. “We need to continue to see interest rates fall, because we need Canadians to feel better about the economy and not be as affected by certain things like shelter costs.”

The Bank of Canada delivered its third consecutive interest rate cut earlier this month amid easing inflation.