Fobi AI Inc V.FOBI

Management Discussion from latest Empire financials.

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Company Strategy

In the first quarter of fiscal 2021, the Company launched Project Horizon, a three-year strategy focused on core business expansion and the acceleration of e-commerce. The Company remains on track to achieve an incremental $500 million in annualized EBITDA and an improvement in EBITDA margin of 100 basis points by fiscal 2023 by growing market share and building on cost and margin discipline. The Company is on track to generate a compound average growth rate in earnings per share of 15% over Project Horizon’s three-year timeframe.

In fiscal 2021, Project Horizon benefits were achieved from the expansion and renovation of the Company’s store network, the addition of new stores, improvement in store operations and merchandising from data analytics along with continued efficiencies gained through strategic sourcing initiatives. Benefits were partially offset by the planned investment in the Company’s e-commerce network.

In the third quarter of fiscal 2022, earnings continued to be positively impacted by strategic initiatives, including the continued expansion and renovation of the store network, strategic sourcing efficiencies, promotional optimization and data analytics. Management expects these initiatives will continue to drive the majority of the benefits through the remainder of fiscal 2022.

While Project Horizon is on track to achieve its targets by the end of fiscal 2023, the benefits will not stop then. Certain initiatives launching in fiscal 2023 that are largely focused on store optimization and customer experience will primarily benefit fiscal 2024 and beyond. These benefits will be incremental to those realized from the ongoing program of store renovations, conversions and new builds.

Growth in Market Share

Growth in market share is expected from supporting and investing further in the store network, improving store productivity, scaling grocery e-commerce, growing the Own Brands portfolio, continuing the Western discount business expansion, increasing the Farm Boy footprint in Ontario and the acquisition of Longo’s which occurred in the first quarter of fiscal 2022.

Invest in the Company’s Store Network

The Company has accelerated investments in renovations and conversions, store processes, communications, training, technology and tools. These continuing investments, coupled with refreshed brand marketing strategies and the expansion of the Farm Boy and FreshCo banners, are reflected in the Company’s capital spending over the Project Horizon timeframe. See the “Capital Expenditures” section of this MD&A for further details.

Improve Store Productivity

The Company began building the foundation of its advanced analytics capabilities a few years ago. Analytics will continue to drive improvements in customer facing elements such as store footprints, customer promotions and availability of product on shelf. These new advanced analytics capabilities enable the Company to further improve the customer experience by optimizing category and product adjacencies to tailor its assortment for each store format.

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Win Canadian Grocery E-Commerce

The first CFC in Vaughan, Ontario has been operating for almost two years. The CFC in Montreal began delivering to customers on March 7, 2022 and the CFC in Calgary is in development. The Company announced that its fourth CFC will be located in the Greater Vancouver Area (“Vancouver”) and will service customers in British Columbia (“B.C.”) starting in 2025. In September 2020, the Company introduced its store pick solution at select Sobeys store locations. It was expanded to Sobeys and Safeway stores nationally in areas where CFCs will not deliver or are not yet operating. The Company now has an e-commerce option available for customers in every province.

Grow the Company’s Own Brands Portfolio

The Company has improved its Own Brands positioning and branding. The Company reviews the specific role of Own Brands in each category and determines which categories and banners to expand based on consumer needs. Working closely with its supplier partners, the Company plans to further grow sales and profitability of its Own Brands portfolio through increased distribution, shelf placement, product innovation and cost of goods sold reduction.

Provide Best-in-Class Customer Personalization

The Company is investing in analytics and technology to better identify customer preferences and support direct, personalized communication – evolving from mass communications to personalized connections with its customers. The goal is to deploy world-class, personalized communications and offers to inspire customers and improve the experience and relevance of promotions.

Building on Cost and Margin Discipline

The Company has significantly improved its efficiency and cost competitiveness through Project Horizon. Further opportunity still remains to remove non value-added costs and optimize margins.

Drive Non-Merchandising Sourcing Efficiencies

The strategic sourcing team continues to build additional efficiencies and cost reductions in indirect spend.

Continue to Build Merchandising Sourcing Efficiencies

The Company continues to invest in advanced data analytics to support its category planning process. Merchants work with both national and private brand suppliers to sustain gains made through category by category reviews, while continuing to partner with suppliers on new opportunities to ensure the Company brings the best value and offers to its customers.

A national sourcing team was created at the end of fiscal 2021 to centralize sourcing responsibilities. This structure allows the Company to efficiently navigate inflationary pressure and supply chain disruptions, while merchants focus on delivering value to the Company’s customers.

Invest in Best-in-Class Analytics to Improve Customer Value Proposition

Advanced analytics tools are helping the Company shift investments to the products customers care most about, with the goal of improving value for customers.

Advanced analytics tools are being leveraged nationally by category merchants across all formats to improve the Company’s net cost of promotions, while improving value for customers. The promotional optimization initiative – a partnership between the advanced analytics team and category merchants – began to show benefits in margins during fiscal 2021. Additional investments in data analytics and technology are driving further improvements in fiscal 2022.