Sobeys parent ‘slowly’ on the comeback trail
Empire touts recently acquired Farm Boy as it’s new ‘weapon’
The Nova Scotia company behind multiple grocery chains in Canada is gaining market share from competitors after a period of losing ground following its troubled acquisition of Safeway in 2013.
Empire Co. Ltd., owner of Sobeys, touted its new “weapon” Farm Boy, an Ottawa-based chain it recently acquired, and forthcoming roboticized online-delivery fulfilment centre as the perfect combination to allow it to triumph in the Greater Toronto Area and surrounding markets.
“Our belief is that we’re gaining market share now, slowly,” said Michael Me- dline, Empire’s CEO, during a conference call with analysts Wednesday after the company released its third-quarter financial results.
“We’ve gone from losing a lot of market share to stabilizing to beginning to gain some market share back, which is a big turn in a short period of time,” he said. “So, it gives us a lot of confidence.”
The gain is coming from a lot of different players in the industry, he said, declining to name specific competitors.
Empire’s tonnage, the industry term for the number of units sold, grew1.5 per cent for the 13 week period ending Feb. 2. It’s the company’s third consecutive quarter of tonnage growth and the strongest growth it’s reported in 34 quarters.
Same-store sales, a key retail metric, increased 3.9 per cent, excluding pharmacy and fuel sales. The figure includes eight weeks of sales at Farm Boy stores, which Empire acquired late last year. The transaction closed Dec. 10, 2018.
Farm Boy’s sales had minimal effect on the metric, said Medline, adding the majority of improvement is attributed to sharper execution.
Customer count and basket size grew in all regions across all the company’s banners for the quarter, he said.
The company expects Farm Boy will help it accelerate growth in Ontario. The company plans to double the chain’s size over the next five years with most of the growth planned for Toronto, where they expect it to be a “home run.”
It already added two new stores in the GTA since the acquisition.
“It’s like they’re at Disney World, they’re so happy,” said Medline of observing customers at one of the new locations on a weekend.
It is “already one of our best performing stores,” he said. Empire’s GTA presence should also get a lift from its Ocado partnership, Medline said. Empire previously announced a partnership with British firm Ocado in early 2018 to build an automated warehouse in the GTA to fulfil online grocery orders.
The build is expected to take two years, but Medline has been adamant his patient approach will be worth the wait.
His optimism came as Empire reported higher net income, but lower adjusted earnings for its most recent quarter.
Net income was $65.8 million or 24 cents per share, up from $58.1 million or 21 cents per share in last year’s fiscal third quarter.
Sales rose to $6.45 billion, up $218.1million from $6.03 billion in the same quarter last year.
However, adjusted net earnings fell to $72.9 million or 27 cents per share from $89.9 million or 33 cents per share a year earlier.
Earnings per share included a cost of 12 cents per share for a labour buyout and store closing costs in British Columbia, the company said.