A Voilà grocery deliver van used for e-commerce food deliveries. Empire took a charge of $746-million on the business in the third quarter.Fred Lum
Sobeys parent, Empire Co. Ltd. EMP-A-T, reported increased sales in the third quarter, but one-time charges related to a major shift in its e-commerce strategy resulted in a net loss for the grocer.
The retailer, which is based in Stellarton, N.S., and owns grocery banners including Sobeys, Safeway, IGA, Farm Boy and discounter FreshCo, had previously disclosed that it would take a writedown this quarter on its Voilà e-commerce business, which amounted to $746-million, because the online business had not met financial expectations.
“While this impacted reported earnings, it resets the cost structure and sharpens our focus on profitable growth,” chief executive officer Pierre St-Laurent said during a conference call on Thursday to discuss the third-quarter results.
Empire announced in January that it would shut down its Voilà facilities in Alberta, and instead expand its online services through partnerships with third-party delivery providers. A new partnership with DoorDash is now live.
In the third quarter, which ended Jan. 31, e-commerce sales grew by 10 per cent, partly driven by those third-party partnerships. The company expects improvements to its e-commerce performance to begin in the fourth quarter, which is under way.
The closing of the facilities in Calgary and Edmonton resulted in severance and decommissioning costs, as well as one-time cash payments related to contract terminations. Construction on another facility in Vancouver was paused in 2024 and remains on hold. On Thursday’s call, Mr. St-Laurent declined to specify when a decision would be made about the future of the Vancouver facility.
Due to the impairment charge, Empire reported a net loss of $385-million or $1.68 a share in the third quarter, compared with net earnings of $146-million or 62 cents a share in the same period last year. Not including the impact of the e-commerce impairment, the company reported its adjusted net earnings grew to $164-million or 72 cents a share.
The retailer expects a roughly $95-million benefit to its annualized operating income next year, as a result of the changes to its e-commerce strategy.
Empire reported $7.9-billion in sales in the third quarter, representing growth of 2.1 per cent compared with the same period last year.
Same-store sales – an important metric that tracks growth not tied to store openings – were up 3 per cent in the company’s grocery stores in the quarter. The stores saw growth in both customer traffic and the average amount that shoppers purchased during each visit.
Empire also reported that it saw improvements in both its discount and full-price stores, a contrast from other major grocers who have noted a trend of customers shopping in discount stores and buying items on promotion.
“All of our formats are performing well and contributing to the top line. This confirms that customers are seeing value across all of our banners,” Mr. St-Laurent said. He added that food inflation in the stores remains relatively stable, and that Empire is continuing to manage cost-increase requests from its suppliers.
Sobeys parent Empire names Pierre St-Laurent as CEO as Medline set to retire
Last month, Empire announced changes to its executive team. Chief marketing officer Sandra Sanderson will retire in July, and Luc L’Archevêque will be responsible for both marketing and merchandising responsibilities as chief customer officer. Julia Knox will take on the role of chief retail officer, with Farm Boy co-founder Jean-Louis Bellemare acting as interim executive adviser to Ms. Knox. General counsel Doug Nathanson is expanding his role to include chief pharmacy and development officer.
The latter appointment was an intentional move to bring pharmacy into the executive team and more focus to that business after a number of years when the company’s leaders concentrated much more on improvements to the core grocery operations, Mr. St-Laurent said.
“We see potential growth” in pharmacy, he said. “We have an interesting baseline, and we can build on it.”
Empire owns the Lawtons drugstore chain in Atlantic Canada, as well as pharmacies across the country in some of its grocery stores.
“We will grow in a profitable way,” Mr. St-Laurent said.