Empire Company Limited makes an announcement at the Sobey's office in Mississauga, Ont., Monday, Oct. 7, 2019. Empire Company Ltd. raised its dividend as it reported its profit in its latest quarter fell compared with a year ago when shoppers stocked up at the start of the pandemic. THE CANADIAN PRESS/ Tijana Martin

‘We’re bullish but we’re realists too:’ Empire prepares for more stable grocery sales

Canada’s second largest grocer reported softer sales in its latest quarter as results slipped compared with the grocery shopping bonanza that marked the start of the pandemic a year ago.

Empire Company Ltd., which operates numerous grocery chains including Sobeys, Safeway and FreshCo, said Wednesday consumer behaviour has started to stabilize sending overall sales down 1.3 per cent in its fourth quarter.

Same-store sales — a key metric for retailers that excludes fluctuations from store openings and closings — dropped 4.5 per cent in the fourth quarter. Excluding fuel, same-store sales fell 6.1 per cent.

Yet while stockpiling and panic buying has subsided, Empire’s sales continued to trend higher than pre-pandemic levels.

Compared with two years ago, the company’s same-store sales were 10.4 per cent higher as Canadians shopped less frequently but bought more when they did go to the store.

Yet the grocer is also preparing for some normalization of shopping habits as vaccination rates increase and COVID-19 restrictions ease, Empire president and CEO Michael Medline said.

“We’re bullish but we’re realists too,” he said during a conference call with analysts to discuss the company’s results.

“We gained market share during the pandemic … and we believe we’ll retain a good portion of those new customers.”

Still, Empire expects Canadians to start shifting some food spending back to restaurants and shop around a bit more for groceries, resulting in more frequent trips but smaller overall purchases, Medline said.

That shift might see some grocery spending move from full-service stores, which saw a boom in shoppers amid the pandemic’s one-stop-shopping trend, to discount stores, he said.

Overall, Empire sales totalled $6.92 billion, down from $7.01 billion in the company’s fourth quarter a year earlier.

Meanwhile, Empire continued to pay front-line workers a premium during COVID-19 lockdowns in the 13-week period ended May 1. The company paid $9 million in lockdown bonuses in its fourth quarter, more than double its original estimate of $4 million.

Empire said it earned a profit attributable to its owners of $171.9 million or 64 cents per diluted share, compared with a profit of $177.8 million or 66 cents per diluted share in the same quarter last year.

During the quarter, Empire announced it was buying a majority stake in Longo’s, a long-standing family-built network of specialty grocery stores in the Toronto area. The $357-million deal, which included Longo’s Grocery Gateway e-commerce business, closed on May 10.

Empire also ramped up its expansion of Farm Boy. It acquired the grocer’s 26-store network in December 2018 and announced plans to double the store count in five years. The company said it has now reached the halfway mark in its expansion goal, with 39 Farm Boy stores now open.

Empire is continuing to expand its FreshCo discount format in Western Canada, with 15 new stores opening in its fiscal year.

The company is also ramping up its e-commerce platform Voilà by Sobeys. The online ordering service fills orders through the grocer’s automated customer fulfilment centre in Vaughan, Ont., which delivers to a wide swath of southern Ontario.

The company said a second fulfilment centre in Montreal will begin operating in early 2022, which will support the launch of Voilà par IGA.

Empire said it plans to have four fulfilment centres across the country serving about 75 per cent of Canadian households.

The company also launched the Voilà Curbside Pickup service at 30 store locations in Nova Scotia, New Brunswick, Newfoundland and Labrador, P.E.I. and Alberta, and expects to add up to 90 new store locations in the coming year.