Shoppers enter a west-end Toronto Sobeys grocery store, Sunday, June 26, 2023. Empire Co. Ltd. says it earned $207.8 million in its latest quarter, down from $261.0 million a year ago as its sales edged higher. The Canadian Press
Empire Co. Ltd., the parent company of Sobeys, is optimistic about an economic recovery as it sees the sales gap between its discount and full-service stores starting to close. President and CEO Michael Medline described the growth of the FreshCo discount chain as a "home run" during the company’s latest earnings call on Thursday. However, Medline expressed confidence that full-service stores are also poised for a comeback, saying, "We want to be there for our customers as the economy improves, and we aim to gain market share in the coming years."
Medline pointed to early signs of consumer recovery, such as less comparison shopping and fewer declines in average grocery basket sizes. But he cautioned that these indicators are still in their early stages. "It will take time for customers to fully return to their usual shopping habits," Medline said, noting that Empire is beginning to see positive sales momentum.
In recent quarters, Canada’s major grocery chains have seen strong sales growth from their discount stores as consumers face inflation and high interest rates. Loblaw and other companies have opened more discount stores, even converting full-service locations. Empire has also expanded its FreshCo brand but continues to invest in its full-service stores, such as its Farm Boy chain.
Medline believes that an improving economy will benefit Empire as it capitalizes on its strengths as a full-service grocer. While inflation has cooled, high interest rates still weigh on consumers. The Bank of Canada has begun to lower rates, but they remain above pre-pandemic levels.
Empire reported a profit of $207.8 million for its latest quarter, down from $261 million last year, despite a slight increase in sales. The company also announced a pause in plans for a new fulfillment center for its Voilà delivery service to cut costs. Empire ended its exclusivity agreement with technology provider Ocado to increase flexibility, expecting these changes to boost Voilà’s profitability by 2025.
Shares of Empire rose 5.6% to $40.62 on the Toronto Stock Exchange. The company’s adjusted profit for the quarter was 90 cents per share, up from 78 cents a year ago. Same-store sales grew by 0.5%, and excluding fuel, they rose by 1%. The Scene+ loyalty program now boasts over 15 million members, contributing to a significant increase in sales.
