Farm Boy helps lift sales at Sobeys
Canadian retailer sees strong finish to fiscal year
June 27, 2019
![Sobeys_store_exterior.png Sobeys_store_exterior.png](https://eu-images.contentstack.com/v3/assets/blt58a1f8f560a1ab0e/bltafe6b564cc80d1b0/6699366a1a46659f8da75d1d/Sobeys_store_exterior.png?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Food retail sales climbed at Sobeys Inc. for its 2019 fourth quarter and fiscal year, while parent Empire Company Ltd. topped analysts’ earnings estimates for both periods.
For the quarter ended May 4, Sobeys tallied food retail sales of $6.22 billion (Canadian), up 5.7% from $5.89 billion a year earlier. Stellarton, Nova Scotia-based Empire attributed the gain to a stronger performance across the business and the $800 million acquisition of the Farm Boy chain, which closed in December.
Internal food inflation was positive, and volume rose for the fourth straight quarter, the highest in nearly nine years, the company said Thursday, adding that the increases were partially offset by store closings in western Canada, the deflationary impact of health care reform on pharmacy sales and lower fuel prices.
Same-store sales rose 3.2% for the quarter but were up 3.8% excluding fuel and 4.2% excluding both fuel and pharmacy, Empire said.
Full-year food retail sales totaled $25.14 billion, up 3.8% from $24.12 billion in fiscal 2018. Comparable-store sales advanced 2.8% year over year. The gain was 2.7% excluding fuel and 3.2% excluding fuel and pharmacy, according to Empire.
"The progress being made at Empire Company is clear to see in every financial and customer metric in our fourth quarter and fiscal 2019," Empire and Sobeys President and CEO Michael Medline (left) said in a statement. "The team is stronger, more customer-focused, results-oriented and increasingly innovative. We are especially proud of our annual sales improvement of almost $1 billion and productivity gains that are showing up in significantly higher gross margin.”
At the bottom line, Empire’s fourth-quarter 2019 net income came in at $122.1 million, or 45 cents per diluted share, compared with $71 million, or 26 cents per diluted share, a year ago. Adjusted net earnings were $126.5 million, or 46 cents per diluted share, versus $93 million, or 35 cents per diluted share, in the prior-year period.
Fiscal 2019 net earnings were $387.3 million, or $1.42 per diluted share, compared with $159.5 million, or 59 cents per diluted share, in 2018. On an adjusted basis, full-year net income was $410 million, or $1.50 per diluted share, versus $344.3 million, or $1.27 per diluted share, a year earlier.
On average, analysts had projected Empire’s adjusted EPS at 44 cents for the fourth quarter and $1.48 for fiscal 2019, according to Zacks Investment Research.
Also on Thursday, Empire announced a quarterly dividend of 12 cents per share, an annualized increase of 9%, payable on July 31 and a plan to repurchase up to 3.5 million shares.
Medline noted that Empire also is ahead of schedule with Project Sunrise, its three-year plan launched in the fiscal 2017 fourth quarter to simplify the organizational structure and trim costs.
Empire realized savings of about $100 million in fiscal 2018 and then another $200 million in fiscal 2019, primarily from initial rollouts of category resets and cost reductions in other areas. The company expects at least $250 million in savings for fiscal 2020, wrapping up Sunrise with total savings $550 million or more. Savings for fiscal 2020 are expected to come from the completion of the rollout of the category reset program in the early fall, and further cost cuts and operational improvements.
“Project Sunrise is progressing even better than we had planned, and we expect to exceed our $500 million savings target,” according to Medline. “We now believe that, following our three-year transformation effort, we will be in a strong position to put in place a new three-year strategic and financial roadmap to drive even stronger shareholder returns. Our confidence is manifest in our announcement today that we are raising Empire's dividend 9% and intend to carry out a $100 million share buyback.”
Through its Sobeys Inc. unit, Empire owns, affiliates or franchises more than 1,500 stores in all 10 provinces under retail banners such as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Farm Boy and Lawtons Drugs, as well as more than 350 retail fuel locations.