Empire Co. Ltd. looking at ways to handle minimum-wage hikes
CEO says savings won’t be ‘on the backs of’ employees
Empire Company Ltd. won’t thin out store ranks to make up for increased costs due to higher minimum wages, said president and chief executive officer Michael Medline in an interview on Thursday.
“We’re trying to have our employees be a competitive advantage even more than they are today, so the idea of financing that off of fewer employees to serve our customers is counterproductive and doesn’t really fit the values I like. So therefore, we’ll be finding savings but it won’t be on the backs of our teammates,” Medline said in an interview after the company reported earnings.
The minimum wage in Ontario is set to rise in stages to $15 by 2019 and in Alberta by 2018.
“We’re trying to have our employees be a competitive advantage even more than they are today.” MICHAEL MEDLINE CEO, EMPIRE COMPANY LTD.
Empire reported that the unmitigated financial impact of the proposed minimum wage increases on its operations could be up to $25 million in its 2018 financial year and $70 million in 2019.
In July, Loblaw Companies Ltd. chair and CEO Galen Weston hinted at possible job losses after reporting that the minimum wage increases would hike labour costs by $190 million in 2018, which could lead to more technology being used in stores, including self check-outs at Shoppers Drug Mart stores.
In August, Eric La Flèche, CEO of Metro Inc., Ontario’s third-largest grocery chain, said the company was planning to accelerate its study of automation in an effort to cut costs to offset the wage increases, which was expected to add up to $50 million to Metro’s expenses by 2018.
Empire, which owns the Sobeys chain of grocery stores, said Thursday that it earned $54 million or 20 cents per diluted share on $6.27 billion in sales in the first quarter of its 2018 financial year. That compared with a profit of $65.4 million or 24 cents per diluted share on nearly $6.19 billion in sales a year earlier.
On an adjusted basis, the company said it earned 32 cents per share in the quarter ended Aug. 5, up from 27 cents per share, beating analyst expectations of 22 cents.
Sales for the first quarter increased by 1.4 per cent, as same-store sales were higher in most areas of the country, driven by increases in traffic, basket size and more disciplined pricing strategies, according to the company.
In an interview after earnings were reported, Medline, a former Canadian Tire CEO, said he toured Sobeys and Safeway stores in Alberta last year before interviewing for the top job at Empire, and while the locations seemed good, there was room for improvements to customer service and pricing policies.
Medline took over the top job at Empire in January, after the company’s botched $5.8-billion takeover of Safeway Canada in Western Canada in late 2013 led to CEO Marc Poulin’s departure.
“We had a regional structure that was really hard to run,” said Medline.
“At times it felt like running a holding company and within a few months, we really transformed the structure — we still have some work to do — but transformed that structure, so we are now acting like a national company in the way we do things, so we are consistent across the country in many practices.
“We still have some work to do, but we made a lot of inroads.
“The nice thing about grocery is there is such a great frequency. A lot of people go to the grocery store at least once a week, so you can change peoples’ minds in terms of their experience.”