Sobeys beats analysts’ Q3 earnings forecast

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Empire Company Ltd., parent company of Canadian food and drug retailer Sobeys Inc., beat analysts’ lofty profit estimates on the back of growth in food retail sales from a year earlier during of its third quarter of fiscal 2022.

For the quarter ended Jan. 29, Stellarton net income was $203.4 million (Canadian), or 77 cents per diluted share, up 15.4% from $176.3 million. dollars, or 66 cents per diluted share, a year earlier, Nova Scotia-based Empire said yesterday. Analysts, on average, had forecast earnings per share of 67 cents, with estimates ranging from a low of 62 cents to a high of 72 cents, according to Refinitiv.

Net income for the 39-week-to-date year also increased, rising 7.1% to $567.3 million, or $2.13 per diluted share, from $529.6 million, or 1 $.96 per diluted share, a year ago.

“Our team delivered another outstanding quarter. EPS of 77 cents is our highest EPS in memory, and we achieved it while navigating some of the choppiest waters we’ve seen in a long time, BC floods [British Columbia] and other global and local events that have disrupted communities and the supply chain,” Empire President and CEO Michael Medline told analysts on a conference call Thursday. “The rise of Omicron has presented new labor challenges, and the inflationary environment has continued to impact our industry. Through it all, our team delivered a historic performance.

At the top of the list, food retail sales in the third quarter of 2022 rose 5.1% to $7.38 billion, from $7.02 billion a year earlier, as Empire recorded a 9.7% increase. The company attributed the increase primarily to its acquisition of Longo’shigher fuel sales, increased food inflation and the benefits of its Project Horizon strategic growth plan, including the expansion of FreshCo in Western Canada and Farm boy in Ontario. The gain was partially offset by changes in consumer shopping behavior amid various COVID-19 measures, the retailer said.

Comparable store sales for the third quarter increased 0.2% but fell 1.7% excluding fuel, compared to growth of 8.9% overall and 10.7% excluding fuel during the quarter of fiscal year 2021.

“Comparable store sales were negative 1.7% as we offset severe lockdowns across much of the country last year. But we’re up a steep 8.3% over the past two years,” Medline said.

Empire/Sobeys

To fuel its growing Voilà delivery service, Empire opened its second Ocado fulfillment center in Montreal earlier this week and has two more on the way to Western Canada.

Empire was also able to capitalize on the 315% growth in online sales in the third quarter of 2021. And to support the expansion of its Voilà home delivery service, the company opened its second Customer Fulfillment Center (CFC ) automated by Ocado on March 7 and has another in development in Calgary, Alberta, slated to open in the first half of calendar year 2023. Last month, Empire also announced plans for a CFC in Vancouver, British Columbia, which is expected to become operational in 2025.

Currently, Voilà delivery is available in Ontario, including the Greater Toronto and Hamilton areas, and in Quebec, Greater Montreal and Quebec City.

“E-commerce sales increased 17% over last year with the addition of [Longo’s] Grocery Gateway and the continued growth of [Sobeys home delivery service] That’s it, partially offset by declines in our other e-commerce platforms due to the heavy inventory that occurred during last year’s lockdown,” Medline said.

On the analyst call, Medline also announced the promotion of Pierre St. Laurent to executive vice president and chief operating officer of Sobeys.

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In the new role, St. Laurent (left) will oversee all full-service, discount and online grocery retail operations. He was previously executive vice president and chief operating officer of the full-service grocery store.

St. Laurent joined Sobeys as a director in 1991 and became vice president of store operations in 2005, later serving in senior vice president and executive vice president roles in areas such as business development, operations and merchandising.

Empire pegs fiscal 2022 capital spending at around $765 million, roughly earmarked for new stores and renovations. Plans call for the retailer to open 10 to 15 FreshCo stores in Western Canada and add seven new Farm Boy stores in Ontario. Farm Boy now has 43 stores in Ontario, while FreshCo has 38 locations in British Columbia, Alberta, Manitoba, Saskatchewan and Ontario. Two are expected to open in Alberta in fiscal year 2022, followed by two more in the province in fiscal year 2023.

Voila’s capital expenditures for fiscal 2022 will total approximately $80 million, including its share of CFCs in Montreal, Calgary and Vancouver, up to 70 new in-store pickup sites and more commerce facilities on-shelf electronics supporting CFCs and associated investments in technology .

“We’re renovating, transforming and building the finest grocery stores in Canada that continue to generate our best returns, and we’re finding more personalized ways to connect with our customers,” Medline said.

Empire’s food retail network, operated through its subsidiary Sobeys, includes more than 1,900 food, drug and convenience stores in all 10 provinces under banners such as Sobeys, Safeway , IGA, Foodland, FreshCo, Thrifty Foods, Farm Boy and Lawtons Drugs. The retailer also operates more than 350 gas stations and manages grocery e-commerce operations under the Voilà, Grocery Gateway, IGA.net and ThriftyFoods.com banners.

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