Empire Company Ltd. said Thursday its full-service grocery stores rebounded in its latest quarter as it added more private-label food items, the pace of inflation slowed and the company's multi-year overhaul paid off with customers.
The grocery retailer, which owns Sobeys, Safeway and FreshCo stores among others, said the completion of its second long-term growth plan has seen the company build out its house brands, introduce a new loyalty program, improve its store network through renovations and expansions, launch an e-commerce business and invest in data analytics.
"After six-and-a-half years, we are very pleased to announce that our turnaround is now complete," Michael Medline, president and CEO of Empire and Sobeys, said during a call with analysts referring to two three-year business plans called Project Sunrise and Project Horizon.
"We now have the tools, capabilities, team and assets needed to compete and win."
Empire raised its quarterly dividend as it reported its fourth-quarter profit rose compared with a year ago.
The Stellarton, N.S.-based company said it will now pay a quarterly dividend of 18.25 cents per share, up from 16.5 cents per share.
The increased payment to shareholders came as Empire reported its profit for the 13-week period ended May 6 amounted to $182.9 million or 72 cents per share. The result was up from a profit of $178.5 million or 68 cents per share a year earlier.
During the quarter, the company launched 100 new private-label food products, bringing the total number of new items introduced under Project Horizon to more than a thousand, Medline said.
"We continue to drive product innovation and value-focused offerings through this assortment," he said of the company's house labels, which include Compliments, Panache, Best Buy, Eight Treasures, and Chalo!.
Empire reported its fourth-quarter sales totalled $7.41 billon, down from $7.84 billion in its fourth quarter last year, which included an additional week.
Same-store sales were up 1.6 per cent while same-store sales, excluding fuel sales, were up 2.6 per cent.
Although food inflation remained high in the quarter, Medline said it started to moderate.
"Although we continue to navigate through supply cost increases that are higher than pre-pandemic levels, it appears we reached the peak in our (third quarter) as supplier requests moderated this quarter in both magnitude and volume," he said.
"We expect supplier cost increase requests will continue to moderate over the coming quarters. This is supported by most ingredient commodities coming off their highs such as wheat, flour and various cooking oils."
Empire will be well positioned to capture market share as inflation abates, a trend already reflected in the grocer's latest quarterly sales, Medline said.
"As we exit this inflationary period, our full service banners will be stronger," he said.
Store traffic improved in the quarter, with a higher transaction count compared with the same period last year, though basket sizes were lower, Medline said.
Customers also continued to "stretch their dollars" by seeking out promotions and deals, he said.
Meanwhile, the grocer has seen wage costs rise.
"We saw minimum wages increase almost in every province over the last year," Empire chief operating officer Pierre St-Laurent said during the conference call.
"We are working on different initiatives to generate efficiencies at the store level without compromising the service to our customers," he said. "We have a roadmap in place to mitigate those increases as best we can and we're not seeing a major impact on our results based on those increases."
The company said its gross margins increased in the quarter to 26.4 per cent from 25.6 per cent the year before, primarily due to store improvements, lower supply chain costs and the mixed impact of lower fuel sales.
RBC Dominion Securities analyst Irene Nattel said the results were slightly ahead of expectations due to a better gross margin and slightly lower selling, general and administrative expenses in food retail.
This report by The Canadian Press was first published June 22, 2023.
Companies in this story: (TSX:EMP.A)
Brett Bundale, The Canadian Press
