Earnings by Empire Co. Ltd., the parent of the Sobeys, Farm Boy and Safeway grocery chains, jumped by more than a third in the first quarter as improved sales and cost cutting efficiencies took hold while the company expands.
Adjusted net earnings for the three months to Aug. 3 rose by 34 per cent to $133.9 million or 49 cents a share compared with $100.2 million or 37 cents a share during the same period last year, the company said in a statement. Same-store sales excluding fuel increased by 2.4 per cent, it said.
“Our results, in the face of a late start to the seasonal summer weather, underline our confidence in our strengthening business,” Empire president and chief executive officer Michael Medline said in the statement.
“Strong margins, good sales growth and Project Sunrise benefits all underpin a solid quarter,” he said, referring to the cost-cutting program.
The Stellarton, Nova Scotia-based company is targeting $550 million in savings by next year through its Sunrise reorganizational plan with $300 million already achieved over fiscal 2018 and 2019, it said.
The plan has seen organizational design, strategic sourcing cost reductions and improvements in store operations.
Total sales rose 4.4 per cent to $6.74 billion driven by strong performance across the business, the consolidation of results from Farm Boy, an Ontario retailer it bought a year ago, and positive internal food price inflation partially offset by lower fuel prices, it said.
Sobeys continues the expansion of its discount FreshCo format in Western Canada, saying it’s on track to open 65 locations by 2022 as it rebrands about a quarter of its 255 locations. It’s also expanding Farm Boy locations in Ontario and Empire’s online operations around Toronto, Ottawa and Montreal, with plans for first deliveries around Toronto next spring.
The company is apportioning $100 million this year to a share buyback plan, having spent $18.9 million in the first quarter, it said.
During the quarter, Dominion Bond Rating Service upgraded Sobeys’ credit rating from BB (high) with a positive trend to BBB (low) with a stable trend. Standard & Poor’s confirmed Sobeys’ rating at BB+ and upgraded Sobeys’ outlook from stable to positive.
The board increased its quarterly dividend to 12 cents a share payable on Oct. 31 from 11 cents in the year-ago period, it said. The company stock fell 0.64 per cent to $35.64 on the Toronto Stock Exchange.
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