Customers push a cart outside a west-end Toronto Sobeys grocery store, on June 26, 2023.Graeme Roy/The Canadian Press
Sobeys parent company Empire Co. Ltd. EMP-A-T reported a modest increase in sales in its first quarter, while profits were impacted by the sale of gas stations and a recent decision to slow the pace of its e-commerce expansion.
The Stellarton, N.S.-based grocer reported on Thursday that net earnings fell to $207.8-million or 86 cents per share in the quarter ended Aug. 3, compared to $261-million or $1.03 per share in the same period the prior year.
Profits were impacted by a decline in fuel sales, related to last year’s sale of the company’s Western Canadian gas station locations to Shell Canada subsidiary Canadian Mobility Services Ltd. The $100-million deal closed in July, 2023.
Empire also reported a non-cash charge in the quarter, related to its decision in June to end its exclusive partnership with e-commerce technology provider Ocado Group PLC. Empire has been slowing the pace of its e-commerce expansion, and ended the Ocado partnership early as it seeks to make its Voilà online service more profitable.
In addition, Empire made changes to its leadership team during the summer and cut some jobs through employee buyouts.
Not including those factors and other adjustments, Empire reported its adjusted net earnings grew to $218.7-million or 90 cents per share in the quarter, compared to $196.2-million of 78 cents per share in the prior year.
Sales grew by 0.8 per cent compared to the prior year, to $8.14-billion While shoppers continue to visit Empire’s discount FreshCo stores in search of deals, the company reported its full-service banners such as Sobeys, Safeway and IGA are also performing well. Same-store sales – an important metric tracking sales growth not attributable to new store openings – grew by 1 per cent in the quarter compared to the prior year. Voilà's online sales increased by 26.2 per cent.
Empire’s gross profit margins improved, to 26.1 per cent of sales in the quarter compared to 25.7 per cent in the prior year. The company has been working to improve its mix of promotions in stores, manage inventory levels and reduce “shrink” – an industry term for items that are not sold because of damage, spoilage or theft.
But operating income fell in Empire’s grocery operations because of the sale of the western fuel business, and rising expenses. Empire, like many retailers, has seen labour costs rise. The company has also been spending on store renovations, improving its technology and other projects.