Empire preparing for e-commerce fight
Michael Medline, president and CEO of Empire Co. Ltd., corporate parent of the Sobeys grocery chain, says Empire is getting ready to win the next phase of what he calls “the e-commerce battle” in Canada.
On June 22, Empire management said it introduced grocery home delivery to the greater Toronto area through the Voilà by Sobeys e-commerce platform. Voilà is powered by U.k.-based Ocado Group PLC'S technology and fills orders through its automated CFC in Vaughan, Ont.. Robots assemble orders efficiently and safely, resulting in minimal product handling, while Voilà teammates safely deliver orders directly to the customer's home.
The Vaughan CFC has recently extended its service area to include Barrie and Guelph, already servicing the GTA and Hamilton area. Customers currently choose from a selection of about 16,500 products and the company continues to add products daily.
Empire announced on Thursday that it plans to build a third customer-fulfilment center in Calgary in 2023. The company will partner with New Glasgow-based Crombie REIT to develop the third CFC in Calgary and it intends to lease the location from Crombie.
“We are now ready and well positioned to take the next meaningful step forward in our plans to win the ecommerce battle in Canada,” Medline said. “It's time for our world-class Voilà team and service to go west. Our CFC in Calgary will serve the majority of the Alberta population beginning in 2023.
“In 2021, we will launch Voilà's curbside pickup service in Alberta to begin providing an omni-channel experience to customers in that province, before going live with our home delivery service from the CFC in 2023,” he said in the news release that accompanied the Empire's second quarter financial results.
Construction of Voilà's second CFC in Montreal was delayed due to a temporary shutdown of non-essential construction in Quebec due to COVID-19, the company stated. Construction has resumed, according to Empire management, and the CFC is expected to be ready to deliver to customers in early 2022. This second CFC will support the launch of Voilà par IGA, which will serve major cities in Quebec and across the Ontario border in Ottawa.
Empire doesn't have a plan to build an automated fulfillment centre in the Atlantic region. The company said it is accelerating plans for the remaining two Voilà ecommerce CFCS, for a total of four across Canada. With only four CFCS, the company will be able to serve about 75 per cent of Canadian households, which represents about “90 per cent of Canadians' spend.”
Medline announced the next step in the e-commerce plan on Thursday when the company reported its fiscal 2020-21 second quarter results.
Stellarton-based Empire reported second quarter net earnings of $161.4 million (60 cents per fully diluted share) on sales of $6.98 billion for the 13-week period that ended on Oct. 31.
In the same quarter last year, Empire recorded net earnings of $154.6 million (57 cents per share) on sales of $6.44 billion for the 13 weeks that ended on Nov. 2, 2019.
Same-store sales in the second quarter, excluding fuel, increased by 8.7 per cent, according to the company and food retailing net earnings increased 27.3 per cent, while e-commerce sales growth topped 240 per cent.
Medline indicated that company management is confident it will achieve the Project Horizon, which is the follow-up to his Project Sunrise restructuring plan he introduced to the company shortly after taking over as CEO in 2017. In the first quarter Empire started a new three-year, Project Horizon, strategy, which is a growth plan focused on expansion of its core business and accelerated growth of e-commerce.
“The market share gains our teams are delivering, quarter after quarter, give us tremendous confidence in our ability to achieve our Project Horizon goals. Strong execution continued throughout the company, with robust sales and margin growth, and very strong year-on-year increases in food retailing operations,” he said in the release.
Management stated in its report to shareholders that it expects market share to grow by supporting and investing further in its store network, improving store productivity, scaling up grocery e-commerce, building the private-label portfolio, continuing the western Freshco discount business expansion, and increasing the Farm Boy footprint in Ontario.
For the quarter ended Oct. 31, Empire reported that earnings before interest, taxes, depreciation, and amortization increased to $513.4 million compared to EBITDA of $477.7 million in the same quarter last fiscal year. Empire now has an incremental target of $500 million in annualized EBITDA and an improvement in EBITDA margin of 100 basis points by fiscal 2023 by expanding its market share and “building on cost and margin discipline.”