Empire's momentum continues
The sun is preparing to set on Project Sunrise. Empire Company Limited's multi-year, $500-million cost-cutting plan wraps up at the end of fiscal 2020.
CEO Michael Medline introduced the turnaround effort not long after joining Empire—the parent company of Sobeys—in a bid to right the ship following the highly-criticized $5.8-billion Safeway takeover.
READ: Sobeys tries to overcome challenges of Safeway integration
Empire has been converting underperforming Safeway and Sobeys locations in the West to its discount banner FreshCo for the past two years. Seven of approximately 65 locations slated for the the West are up and running, with an additional 11 stores scheduled to open throughout the remainder of fiscal 2020.
In a conference call with analysts Thursday afternoon, Medline said Project Sunrise had exceeded expectations and would result in a cumulative savings of at least $550 million. A category reset program, and continued cost reductions and operational improvements have been driving the Sunrise savings since its 2017 launch, and given the company some welcome financial momentum.
In its most recent quarterly report, Empire reported $130.6 million in profit, up from $95.6 million in the same quarter last year. Sales, meanwhile, totalled $6.74 billion, up from $6.46 billion, while same-store sales excluding fuel increased 2.4%.
READ: Empire reports $130.6M Q1 profit, up from $95.6M a year ago
"We are again pleased with our results this quarter. Our momentum continues. Sunrise costs are coming under the business. The team is executing more sharply. Our strategic initiatives are all progressing well," said Medline."
The category resets are nearly complete, said Medline, and customer feedback indicates they have been well received. "Our teammates and our stores have done a great job realigning our stores, tranche by tranche, ensuring our sales are stocked with the items customers want most," he said.
Just as it continues to grow its FreshCo banner, the company has similar plans for Farm Boy--the Ottawa-based chain it acquired a year ago. It plans to make good on its promise of doubling the chain in size in the first five years. Medline said it had "concrete plans to open another three Farm Boy stores in fiscal 2020, and two in the first quarter of fiscal 2021."
READ: Empire completes $800-million Farm Boy purchase
The Farm Boy acquisition has allowed Empire to strengthen its hold in the Ontario market, especially the Greater Toronto Area, where market share has been historically lower than that of its competitors. The company is also betting that its soon-to-launch home delivery service Voilà by Sobeys will help accelerate its growth in the GTA.
Medline was asked about "Sunrise 2.0" and what cost-saving measures would be in place at the end of fiscal 2020. He declined to share specifics. "But I can tell you that we're not just beginning this work," he said. "We're right in the middle of it. And we're going to have very aggressive goals to grow our year-over-year earnings numbers as we go forward."