AGM...Sobeys introducing larger-format Sobeys Extra
TAYLOR: Empire results buoy annual meeting in New Glasgow 3 days ago ROGER TAYLOR Business Columnist Empire Co. Ltd., parent company of Sobeys, reported a big increase in first-quarter net profit and 35.4% increase in sales. Something happened at the Empire Co. Ltd. annual meeting of shareholders in New Glasgow on Thursday that hasn’t happened in a very long time — a shareholder asked a question. Someone queried Empire president and CEO Marc Poulin about whether the company, through its wholly owned subsidiary Sobeys Inc., ever considered getting into the discount warehouse business to compete with the likes of Costco Wholesale Canada Ltd., which appears to be doing very well. Poulin indicated the Nova Scotia company had no plans to get into the warehouse business and was choosing to concentrate on its strengths as the No. 1 full-service food retailer in Canada. Another shareholder later explained to me why he thought more people don’t ask questions at Empire meetings. “That’s because they don’t get a vote,” he stated bluntly. Empire operates with both a non-voting Class A share, which is publicly traded, and a Class B common stock with voting privileges that is controlled by the Sobey family. Nevertheless, shareholders were buoyed by the first-quarter performance of the company. It came in better than expected when the financials were released Wednesday evening. SEE ALSO: Empire's growth pushes Stellarton HQ workforce past 1,200 The company, headquartered in Stellarton, recorded adjusted net earnings, net of non-controlling interest, of $131.7 million ($1.43 per share, fully diluted). In the same quarter last year, Empire reported net earnings of $89.7 million ($1.32 per diluted share). Primarily due to the company’s $5.8-billion acquisition of Canada Safeway Ltd. last year, Empire reported sales of $6.22 billion in the first quarter, which ended Aug. 2, representing an increase of $1.63 billion, or 35.4 per cent over the same period last year. Sobeys’ same-store sales increased 1.3 per cent. Empire also has a 41.5 per cent interest in Crombie REIT and a 40 per cent interest in Genstar Community Co., a housing developer in Western Canada. Empire recorded earnings before interest, taxes, depreciation and amortization — often used as a benchmark for measuring profit — of $342.7 million in the first quarter this year, compared to EBITDA of $222.2 million last year, an increase of 54.2 per cent. The company generated free cash flow of $391.3 million in the quarter, compared to free cash flow of $68.2 million last year. Poulin indicates that the company’s ratio of debt to total capital had improved to 35.5 per cent, compared with 38 per cent in the first quarter last year. While Empire isn’t getting into the discount warehouse business, it is introducing larger-format Sobeys Extra stores across the country. There are only three outlets in operation, all in Ontario, but there are plans to bring one to the Maritimes this year, although neither Poulin nor chief financial officer Francois Vimard would reveal where that store would be located. The Empire CEO says the company hasn’t decided whether it will keep the Safeway brand in Western Canada. It only recently introduced the Air Miles loyalty program in Sobeys stores and liquor outlets in the west, and Poulin says he wants to see how that may influence shoppers. Safeway offered the Air Miles program before its acquisition by Empire. Competition among food retailers in Canada is fierce, according to Poulin, and he expressed the hope that it would ease up a bit in the rest of the fiscal year. Asked about whether Sobeys has an online strategy like the ones some of its competitors have been touting, Poulin says it is a little-known fact that Sobeys has “the second-oldest online shop in the world.” Its operations in Quebec have been offering an online store for 19 years, and the company’s Thrifty Foods outlets in British Columbia have had an online shop for 14 years. Poulin says the company headquarters in Stellarton is growing in response to the grocery chain expanding across the country. There are 1,208 people working there. The head office in Nova Scotia is where the company’s information technology and corporate accounting is based, and it is also the regional headquarters for Atlantic Canada. Poulin says the company has no specific target in terms of the number of employees it will have at its headquarters.