Sobeys parent Empire misses earnings expectations despite sales boost
Profit at Sobeys parent Empire Co. Ltd. dipped slightly in its first quarter, despite a boost in sales fuelled by the worst food inflation in decades. Sales at Empire — a network of roughly 1,600 stores, including Farm Boy, IGA, Safeway and Foodland — rose to $7.9 billion in its first quarter, ended Aug. 6, up 4.1% compared to the same period last year. The jump came from higher fuel sales and food inflation, as well as its expansion of FreshCo in Western Canada, the company said in a financial update.
Discount stores like FreshCo have been siphoning sales away from more conventional grocers this year, because more shoppers are seeking bargains as household food bills climb higher and higher. In its latest Consumer Price Index last month, Statistics Canada found grocery prices were up 9.9% year-over-year in July.
But Empire’s profit dropped to $187.5 million, down $1 million or 0.5% compared to 2021. Earnings per share was 71 cents in the quarter, below forecasts of 74 cents, but one cent higher than the previous year.
Empire took a slightly slimmer margin in the quarter, which it partly blamed on higher supply chain costs. Empire’s gross margin — a measure of the profit the chain has left over after accounting for the cost of buying goods and running the stores — dropped to 24.9% from 25.1% last year. The company said its gross margin would be 63 basis points higher than last year, if not for the impact of fuel sales. “We’re off to a strong start in fiscal 2023 and are confident in the momentum and continued underlying strength across our businesses,” said Michael Medline, President & CEO, Empire.
Sobeys boss says he’s fed up with ‘reckless and incendiary’ criticisms about grocery profits amid inflation
The head of Canada’s second-largest grocery chain called suggestions the country’s big grocers are exploiting their market power to profit from inflation “reckless” and “incendiary.” Michael Medline, chief executive of Empire Co. Ltd., which runs 1,600 stores under the Sobeys, Safeway, FreshCo, IGA and Farm Boy banners, made the unusually impassioned remarks at his company’s annual general meeting. Earlier, Stellarton, N.S.-based Empire reported net income of $187.5 million in its most recent quarter, little changed from a year earlier.
“Quite frankly, I am tired of these armchair quarterbacks who make little effort to understand even the basics of our business but are comfortable sitting on the sidelines pontificating about how Canadian companies are reaping unreasonable profits on the backs of inflation,” Medline told shareholders. “This is absolutely not true,” he continued. “These reckless and incendiary attacks are meant to divide us, and sit in stark contrast to the collaboration and problem solving that we experienced in the darkest moments of the pandemic.”
Medline’s remarks represent the most aggressive attempt yet by anyone in the grocery business to push back against a summer of bad press that stoked resentment among customers and threatens to attract the attention of politicians who have demonstrated a newfound interest in competition policy.
Canada’s big grocers have faced blowback in recent months for posting profit gains as shoppers faced the highest grocery inflation since the 1980s. Empire and its main rivals in the industry — Loblaw Companies Ltd. and Metro Inc. — have all dismissed the criticisms as unfounded and misguided. That didn’t stop the swirling accusations of corporate greed from turning into a public relations headache for the industry, which was only just shaking off the Hero Pay scandal of 2020 — not to mention an ongoing federal investigation into an alleged scheme to fix the price of bread and a protracted government campaign to stop grocers from bullying their suppliers.
David Macdonald, an economist at the Canadian Centre for Policy Alternatives, has written that excess corporate profits and fatter margins in the food business were driving up inflation. A Toronto Star investigation published in July came to a similar conclusion. And in August, the Financial Post worked with accounting and auditing experts to analyze financial statements from the top three grocers, and found a more complicated picture than the one drawn by Macdonald and the Star.
The scrutiny was being stoked by “a handful of politicians, media sources and think-tanks — not because we are struggling, but for being too successful in this difficult environment of high inflation,” Medline told shareholders. “I guess it makes for easy headlines and ignores what is truly driving our success,” he added. “I refuse to apologize for our success.”
Empire has previously said its margin and earnings are getting better, in part, because of its three-year Project Horizon strategy to expand its FreshCo and Farm Boy brands, while using e-commerce and analytics to drive profit growth.
In an earnings update before the annual meeting, Empire reported that profits actually dipped slightly in its first quarter, despite a boost in sales. Sales in the quarter ended Aug. 6 increased 4.1% compared with the same period last year. The jump came from higher food and fuel sales, which were influenced by this year’s surge in commodity prices, as well as its expansion of FreshCo in Western Canada, the company said.
Discount stores such as FreshCo have been siphoning sales away from more conventional grocers this year, because more shoppers are seeking bargains as household food bills climb higher and higher. In its latest consumer price index Statistics Canada found grocery prices were up 9.9% year-over-year in July.
Source: Financial Post
Dollarama posts higher sales, profit as shoppers seek cheaper prices amid inflation
Dollarama Inc. has raised its full-year same-store sales forecast after topping quarterly revenue estimates, helped by strong demand for its groceries and household essentials as more consumers turn to discount stores amid surging inflation.
Dollarama is winning over new customers as Canadian shoppers “trade down” from more expensive stores and gravitate toward the dollar store’s cheaper prices amid inflation. Dollarama said it’s attracting consumers from “all walks of life” — including higher income households — as the climbing cost of living takes a toll on budgets. “I do believe that there’s probably some trading down because of the inflationary environment and the pressures on everybody’s wallet,” Dollarama president and CEO Neil Rossy said during a call with analysts.
Montreal-based Dollarama, which typically sells everything from kitchen essentials to party supplies under $4, has also rolled out additional price points up to $5, which Wall Street analysts have said would cushion margins amid higher costs.
Total sales for the three-month period totalled $1.22 billion, up from $1.03 billion a year earlier, while comparable store sales, a key metric for retailers, gained 13.2% as the number of transactions rose 20.2%, but the average transaction size fell 5.8%. Net income for the quarter ended July 31 rose to $193.5 million, or 66 cents per share, from $146.2 million, or 48 cents per share a year earlier. Net income for the quarter ended July 31 rose to $193.5 million, or 66 cents per share, from $146.2 million, or 48 cents per share a year earlier.
Walmart Canada to build its first-ever fulfillment centre in Quebec as part of $1 billion major infrastructure investments this year
Walmart Canada is investing $1 billion in infrastructure this year as part of the retailer’s efforts to speed up and transform the business for its customers. A cornerstone of the investment includes more than $100 million to build a new high-tech sortable fulfillment centre near Montreal in Vaudreuil-Dorion, Quebec – the first of its kind for Walmart in the province. The new facility, currently slated to open in 2024, will offer better product availability and quicker service for customers choosing to shop in-store or online.
This year’s $1 billion investment also includes plans to update and remodel a record number of stores in a year. Store changes include modernizing and upgrading physical spaces with a focus on improving the customer experience both in-store and online. These projects are all part of Walmart Canada’s multi-year $3.5 billion investment to make the online and in-store shopping experience simpler, faster and more convenient for customers as the retailer invests for continued growth to help more Canadians save money and live better.
Quebec fulfillment centre
- The Quebec fulfillment centre, to be located in Vaudreuil-Dorion, will be approximately 457,000 square feet in size, serving as a delivery hub for millions of customer orders in Quebec and Atlantic Canada.
- The facility will be powered by cutting-edge logistics technology to achieve productivity with less physical effort by using innovative technology.
- This platform will speed up order fulfillment through an advanced operating system that will help associates store, pick and sort items by using smart and flexible storage abilities to manage a large and wide variety of inventory.
- Capable of shipping 20 million items annually from the facility to local customers.
- Capable of storing 500,000 items to fulfil direct to home and in-store pickup orders.
- Designed to optimize packaging, minimize waste and reduce transportation costs.
- Creating approximately 225 new jobs in Quebec, plus construction and engineering jobs.
Investing in stores, supply chain across Canada
This year’s infrastructure investments include plans to spend approximately $330 million to revamp and refresh more than 80 stores from Port Alberni, B.C., to Carbonear, N.L., providing more than 2,500 trade and construction jobs. Some of the enhancements include:
- Expanding product assortment and offering an upgraded look and feel.
- Integrating more dedicated omnichannel spaces for more online orders.
- Refreshing interiors and exteriors, including fresh paint and new signage.
- Adding LED lighting to key departments to enhance the interior experience.
- Updating associate lounge areas, including new couches and other upgrades.
- Renovating washroom areas, including new tiling and sustainability features.
- Replacing and upgrading legacy systems with new technology and applications.
“We know these are challenging times for our customers. That’s why we are proud to be making significant investments in Canada to deliver the very best shopping experience,” said JP Suarez, executive vice president, chief administration office and regional CEO for Walmart International, who is also leading Walmart Canada on an interim basis. “We are building a better Walmart Canada to help more Canadians save money and live better. As the cost of living rises, Canadians can trust Walmart to be that convenient, one-stop shop for everyday low prices.”