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Grocer Empire Co. reports $154.6M Q2 profit, up from $103.8M a year ago

STELLARTON, N.S. — One of Canada's largest grocers has experienced "a slight softening in sales" over the past few months, prompting the company to closer watch the Canadian economy for signs consumer spending patterns will change.

Sobeys and Safeway parent company Empire Co. Ltd. saw sales begin a modest decline at the end of its second quarter and that trend has persisted into the beginning of the third quarter, CEO Michael Medline said Thursday during a conference call with analysts following the company's quarterly earnings release.

Parts of the country also saw an onslaught of poor weather, he said. While cold weather benefits some retailers, like outerwear sellers, it does not have the same effect for grocers.

The drop in sales momentum came as the company reported positive same-store sales, a key retail metric, for its third quarter and higher sales compared with the same period in the previous year.

Shares of the company fell $3.25 or 9.3 per cent Thursday to end the day at $31.60.

Over the quarter, the company saw some changes in the consumer backdrop, Medline said, especially in Alberta — but stressed he didn't want to over emphasize these shifts.

Medline said the company is watching closely key indicators, like employment figures, and listening to the recent communications for Canada's major banks.  

Empire continues to watch for economic changes with interest, as well as listen to what the banks say about consumer sentiment.

"And, I think, like everyone else out there, we are watching it and concerned," said Medline. "There's nothing to panic about right now. But we're concerned."

The company needs to watch consumer behaviour for a longer period of time to deduce what changes are taking place, such as whether they're shopping more frequently at discount labels, executives said on the call. It has not yet noticed consumers shifting from full-service to discount.

Empire saw sales for its most recent quarter total $6.44 billion, up from $6.21 billion last year. Same-store sales excluding fuel increased 2.0 per cent.

The company earned $154.6 million or 57 cents per diluted share for the 13 weeks ended Nov. 2, compared with a profit of $103.8 million or 38 cents per diluted share a year ago.

On an adjusted basis, Empire earned 58 cents per diluted share in its latest quarter, up from an adjusted profit of 40 cents per share a year ago.

Analysts on average had expected a profit of 57 cents per share and $6.47 billion in revenue according to financial markets data firm Refinitiv.

This report by The Canadian Press was first published Dec. 12, 2019.

Companies in this story: (TSX:EMP.A)

The Canadian Press