Sobeys parent company posts big loss in latest quarter
Same-store sales fall nearly two per cent as western business woes continue
Canadian Press with files from Canadian Grocer
Sobeys parent, Empire Company Ltd., has reported a massive fourth-quarter net loss of more than $900 million, citing ``challenges'' related to its Canada Safeway acquisition in Western Canada.
Empire said the loss, net of non-controlling interest, was $942.6 million or $3.47 per diluted share, compared with a net profit of $55.4 million or 20 cents per share in last year's fourth quarter.
That contributed to a consolidated net loss for all of fiscal 2016 of $2.13 billion or $7.78 per diluted share, compared with net income of $419 million or $1.51 per diluted share in fiscal 2015.
Empire said in its earnings release (issued Tuesday after markets closed) that integration of the Safeway operations had ``resulted in a number of operational issues that have had an impact on financial results.''
``In addition, increased promotional activity and a difficult economic environment mainly in the Alberta and Saskatchewan markets, resulted in sales, gross margin and earnings erosion in the West business unit," the company stated.
Marc Poulin, president and CEO of Empire, said that Sobeys executives were "also seeing early evidence of a softening sales trend in other regions of the country."
Sobeys, he added, "remains focused on reversing these negative trends by continuing on our core strategies of cost reduction, network renewal and relevant pricing for our customers.
However, Poulin cautioned that "the stabilization of our business will take time."
Sales for the quarter were $6.28 billion, up $512.7 million or 8.9% from $5.77 billion, helped by an extra week in the quarter compared with 2015 that added about $461.2 million. Retail food inflation and the acquisition of Co-op Atlantic's grocery business a year ago also helped boost sales.
Same-store sales decreased 1.8%. Excluding the negative impact of fuel sales and the retail West business, same-store sales would have increased 0.2%.
Adjusted net earnings for the quarter were $95.3 million or 35 cents per diluted share, down from $136.7 million or 49 cents in the year earlier period.
Full-year sales, covering a 53-week period versus 52 weeks in fiscal 2015, were $24.618 billion, up $690 million or 2.9%.
The company also said on Tuesday that it would incur a $1.3 billion impairment charge in its fourth quarter due to the decline in its western business. That's on top of a $1.6 billion charge in the third quarter.
In a research note, BMO analyst Peter Sklar noted that the combined value of the two impairment charges "amounts to about half the purchase price of Canada Safeway."