As food prices continue to soar, Sobeys parent Empire Company has reported an increase in profits and hiked its quarterly dividend payout to shareholders and executives. The Canadian grocery giant reported that its profit for the 13-week period ended May 6 increased to $182.9 million, or 72 cents a share, up from a profit of $178.5 million or 68 cents a share a year earlier.

Empire — the parent company to Sobeys, Farm Boy, Safeway and FreshCo — also announced a dividend increase of 10.6%. The company says it will now pay a quarterly dividend of 18.25 cents a share, up from 16.5 cents a share.

The results come after the grocery retailer saw third-quarter profits plunge 38% in March, which it attributed to a cyberattack late last year as well as customers seeking bargains amid high inflation. After initially estimating the cost of the attack — which it referred to as a “cyber event” — at just over $25 million, Empire said the net cost will be $32 million.

Gross profit decreased in the quarter by 2.2% to $1.9 billion, while gross margin increased to 26.4% from 25.6%. The company said its increased gross margins increased was primarily due to store improvements, lower supply-chain costs and the mixed impact of lower fuel sales. For the full year, gross profit increased by 1.7% to more than $7.7 billion while gross margin increased slightly to 25.6% from 25.4%.

Same-store sales grew 1.6% for the last 13 weeks of the fiscal year and increased 2.3 per cent for the full year. The company’s gross margin increased as it launched 100 private-label goods in the quarter to add to its total of 1,000 new products since it started Project Horizon, CEO Michael Medline said. He added that the company is beginning to see food inflation moderate from a peak in the third quarter and that suppliers’ cost-increase requests will continue to moderate over the coming quarter.

RBC Dominion Securities analyst Irene Nattel said the results were slightly ahead of expectations due to a better gross margin and slightly lower expenses in food retail. Jim Stanford, an economist and director of the Centre for Future Work, said that since the pandemic began, Empire has seen its profits explode.

“I wouldn’t focus so much on the quarter-over-quarter results,” Stanford said. “Remember you’re comparing it to a quarter a year ago when food prices had already surged and grocery store profits had already surged.”

Going through records back to 2019, he said, the company posted profits of $727.7 million this year, up from $410 million in 2019. Meanwhile, food prices have soared by 18% over the past two years, piling on to Canadians’ grocery bills, and as of April, food prices were still 8.3% higher than a year ago, according at a recent RBC report.

Stanford said the profit increase can’t be explained simply by inflation. “Profits shot up during the pandemic and they’ve stayed up,” he said, “and the profit margin has gone up by about half.”

The grocer recently completed a multi-year growth plan, which included store renovations, store expansions including the Farm Boy banner, the conversion of some locations to its discount banner FreshCo, the addition of the Scene Plus loyalty program and the improvement of its in-house food brands.

The loyalty program now has 13 million members across Canada. Medline said the company overcame some of its “greatest challenges” in fiscal 2023. “I am extremely proud of this team for continuing to deliver results and scrupulously execute against our strategy in the face of significant external headwinds,” he said. “Six years ago, I’m not sure our business could have withstood shocks of this magnitude, but our annual results in Q4 in particular highlight the underlying strength of our business today.”

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