Empire Co. Ltd. Reports Q4 Profit Down from Year Ago, Raises Quarterly Dividend

Empire Co. Ltd, the parent company of Sobeys, is slowing down its e-commerce expansion and ending its exclusive partnership with technology provider Ocado Group PLC as it seeks to make its Voilà online service profitable. The company is delaying the opening of its fourth distribution center in Vancouver, designed to serve Voilà customers in that region. Empire will focus on improving the performance of its other three distribution centres, in Ontario, Quebec, and Alberta.

Empire president and chief executive Michael Medline noted that “this is actually masking the strength of our bricks and mortar business,” on the company’s fourth-quarter earnings call on June 20th.

Voilà continues to report increasing revenues, including its highest-ever sales growth of 23.5% in the fourth quarter, which ended May 4. However, the business is not yet profitable, and Empire is working on cutting the costs of its operations.

The Voilà online service first launched in 2020, with the opening of a distribution centre north of Toronto, using robotic technology provided by British-based Ocado in an exclusive deal for the Canadian market. Since the launch during the pandemic-fueled boom in e-commerce grocery sales, the overall size and rate of growth of the market for online groceries in Canada has been smaller than Empire expected.

Ending the exclusive agreement with Ocado earlier than planned will allow Empire to pursue complementary growth opportunities in the market, which could involve serving customers in ways besides delivery orders from the distribution centres. Third-party delivery services such as DoorDash and Uber Eats have been working with more grocery retailers looking to offer quicker delivery options from stores, often for smaller orders.

Empire will incur a one-time charge of $11.9-million in its first quarter related to the end of the deal. The company remains “very optimistic” about the long-term prospect for Voilà and is in talks with potential partners, but did not specify whom.

In Western Canada, the company’s Thrifty Foods banner already has an e-commerce service and 28 of Empire’s stores offer store pickup. Construction of the Voilà distribution centre in Vancouver is mostly finished, but has not yet completed the installation of robotics.

On Thursday, the Stellarton, N.S.-based grocer announced a 9.6% annualized increase in its quarterly dividend, to 20 cents a share, as it reported a decline in fourth-quarter profits. Empire’s net earnings fell to $148.9-million or 61 cents a share in the fourth quarter, compared with $182.9-million or 72 cents in the same period last year.

Empire’s profit margins have grown as the company has improved operations at chains such as Sobeys and Safeway, cut its supply chain costs through more efficient product distribution, and expanded businesses such as Voilà, its discount grocery banner FreshCo, and the higher-end Farm Boy chain. Gross margin increased to 27.1% in the quarter, compared with 26.4% in the same period last year.

Source: The Star
Source: Globe and Mail
Source: Financial Post

Dollarama Sees Profit Jump 20% in First Quarter, Boosts Stake in Latin America’s Dollarcity

Dollarama Inc.’s profit jumped by 20% in its first quarter, as Canadians turned to discount stores for relief from rising prices.

Despite a decrease in sales growth in Canada compared to last year, Dollarama’s stores continue to see more frequent visits from shoppers. The growth is mainly due to higher demand for consumables, such as food, household cleaning products, and personal care items like soap and toothpaste. These items generally come with lower profit margins but can draw shoppers to stores more frequently. Demand for seasonal products and general merchandise has been stable.

Comparable sales rose by 5.6%, compared to 17.1% in the same period last year. The company expects comparable sales to continue normalizing following an unusual surge in demand over the past two years and has forecast growth for this full fiscal year to be in the 3.5-percent to 4.5-percent range. 

The Montreal-based retailer reported net earnings of $215.8-million or 77 cents a share in the quarter ended April 28, compared with $179.9-million or 63 cents in the same period the prior year. Total sales increased by 8.6%, to $1.4-billion in the quarter, resulting from comparable sales growth and an increase in the number of stores.

Dollarama also increased its stake in Latin American retailer Dollarcity by issuing shares valued at roughly $731-million. The Canadian retailer has increased its stake to 60.1% in exchange for 6,060,478 Dollarama common shares. Dollarama has an option to purchase an additional 9.89% in Dollarcity equity in the future, expiring on Dec. 31, 2027.

Dollarcity operates stores in Colombia, Guatemala, El Salvador, and Peru, and plans to nearly double its store count to 1,050 locations by 2031, primarily focused on Peru and Colombia. The company also plans to expand into Mexico, indirectly holding an 80.5% equity interest, while Dollarcity’s founding stockholders hold a 19.5% interest. 

Source: The Star
Source: Globe and Mail
Source: Financial Post
Source: Dollarama