Empire bounces back with Q4 results
Four years after the bungled integration of Safeway and Sobeys led to $2.9 billion in writedowns, hundreds of millions of dollars in lost sales and a multitude of disappointed customers, it appears the worst could be over for parent company Empire Co.
The Stellarton, N.S.-based grocery retailer posted better than expected earnings and sales in the fourth quarter reported Wednesday and, most critically, Empire saw its first increase in tonnage — the volume of groceries shipped to its stores — in 17 quarters.
“I am bullish on the future,” chief executive Michael Medline, the former Canadian Tire CEO who was brought in to turn around the retailer, told investors on a morning conference call.
Empire announced a threeyear turnaround plan last month aimed at saving $500 million a year by fiscal 2020 that includes slashing $200 million in onetime costs in the first half of this fiscal year, eliminating duplicate jobs and simplifying its complicated processes with vendors.
“It is already a much easier structure to run,” Medline said.
He cautioned that there is much work yet to be done to repair the damage sustained to the Sobeys brand by the Safeway debacle, which had customers complaining about higher prices, empty shelves and the axing of its loyalty program and in-store food brand.
“We are not out of the woods yet …. We have to win back customers who we have gravely let down, particularly in Western Canada.”
On a positive note, even though the critical metric of same-store sales declined 1.6 per cent in the period ended May 6, excluding the impact of fuel, the number was fairly consistent across the country, suggesting the western Canadian stores did not significantly underperform those elsewhere.
Empire’s overall sales declined to $5.79 billion in the period from $6.28 billion last year, which contained an extra week in the earnings period.
“It looks as though the business is heading in a good direction under new leadership,” said Stewart Samuel, Vancouver-based program director at IGD Canada, a food and consumer goods research firm.