"It ain’t all COVID," says Empire CEO of strong Q3 numbers

Empire is coming off a strong third quarter, and its president and CEO Michael Medline wants to make it clear its results are based on years of hard work and strategic investment-- "It ain't all COVID," he said.

Though customers did stock up as certain provincial governments implemented new lockdown restrictions during the period ended Jan. 30, Medline credited improvements in merchandising, and investments in Farm Boy, FreshCo and Voilà for boosting sales and growing market share in the quarter.

"I don't need to say much about our third-quarter results, they stand for themselves," he said during a conference call with analysts Wednesday afternoon. "However, I do think many people are sorely underestimating how much stronger our business is now, regardless of any COVID benefits."

The Stellarton, N.S.-based company reported $176.3 million in profit for the quarter, while sales totalled nearly $7.02 billion. Same-store sales excluding fuel increased by 10.7%.

Gross profit margins improved 134 basis points year over year, which Medline said was due in large part to Project Horizon-- the company's latest multi-million dollar cost-savings initiative--and a favourable sales mix. The latter of which proves companies don't need to unilaterally impose fee increases on suppliers, he said.

"We try to treat our supplier partners with respect and transparency. We believe this values-driven approach garners better results for both sides," said Medline. "It doesn't mean we're not tough, we are, but we negotiate the right way. I am extremely proud of our merchants who put these values into practice every day."

Sales for Empire’s e-commerce business, Voilà,  increased approximately 100% from Q2. The business has grown considerably since it launched in June 2020 and though specifics weren't shared, Medline said he was happy with retention rates, customer acquisition and basket size. Empire's CFC in Montreal is scheduled to launch early next year.

Empire's momentum has continued into the fourth quarter. Same-store sales are up 9% year over year in the first five weeks of Q4, said Empire’s chief financial officer Michael Vels. However, this increase is “unlikely to be sustained through the fourth quarter, as a result of the significant COVID-driven sales last year,” he said.

At the onset of COVID-19, customers began panic buying and pantry loading, which resulted in an 18% increase in same-store sales during Q4 2020. "Because of this volatility, even a negative same store sales number for the fourth quarter will not automatically indicate weaker sales, just an anomalous outcome because of the highly unusual quarter last year," said Vels.

Empire is also likely to incur additional marketing costs during the fourth quarter to coincide with events relating to its sponsorship of the Canadian Olympic team.

"With the delay at the Summer Olympics, we now have both Summer and Winter Games in the same fiscal year, which we of course did not fully expect," said Vels. "This is a once in a generation opportunity to grow our brands with Canadians during two Olympics in one year, and we intend to take full advantage of this exclusive chance."