Sobeys rings up Q1 food retail sales gains

Sobeys Inc. parent Empire Company Ltd. tallied net sales and same-store sales gains for its fiscal 2023 first quarter but fell short of analysts’ earnings-per-share estimate, despite an improvement from a year ago.

For the quarter ended Aug. 6, food retail sales totaled $7.94 billion (Canadian), up 4.1% from $7.63 billion a year earlier, Stellarton, Nova Scotia-based Empire reported yesterday. The uptick mainly stems from higher fuel sales and food prices inflation plus benefits from the Project Horizon strategic plan, including the expansion of FreshCo in Western Canada, partially offset by COVID-19 restrictions being in place for part of the fiscal 2022 first quarter, the company said.

Comparable-store sales advanced 3.3% year over year for Q1 2023 yet were up 0.4% excluding fuel, according to Empire.

The results compared with an increase of 3.7% in food retail sales and a decrease of 0.5% (-2.2% excluding gasoline) in same-store sales for the fiscal 2022 first quarter. The 2023 Q1 comp-store sales also represented an improvement from a dip of 0.1% (-2.5% excluding fuel) in the fiscal 2022 fourth quarter.

Empire CEO Michael Medline cited the launch of the retailer's Scene loyalty program as a key growth driver going forward.

“We’re off to a strong start in fiscal 2023 and are confident in the momentum and continued underlying strength across our businesses,” Empire President and CEO Michael Medline said in a statement. “We are very pleased with the recent launch of our Scene loyalty program in Atlantic Canada, a great start for a foundational element in our company’s success going forward.”

Related:Sobeys launches Scene+ loyalty rewards in Atlantic Canada

Continued expansion of Sobeys’ retail footprint also remains a priority. The retailer opened the first of three FreshCo discount grocery stores in Alberta during the first quarter and expects to have 44 FreshCo stores overall in Western Canada by the end of fiscal 2023. Similarly, Sobeys aims to open four Farm Boy fresh market stores this fiscal year. When it acquired Farm Boy in 2018, the company added 26 locations to its Ontario store base and said it plans to double the banner’s store count — currently at 44 — in five years, mainly in the greater Toronto area.

Empire reported that, in Q1 fiscal 2023, its e-commerce platforms — led by the Voilà online grocery delivery service — experienced a combined sales decrease of 21%, namely from cycling elevated sales levels driven by the pandemic in the prior-year period. However, the company said that performance stands to change as it continues to build out the Voilà fulfillment network under its partnership with U.K.-based e-grocer specialist Ocado Group.

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Plans call for four Ocado-powered customer fulfillment centers (CFCs) across Canada. The first CFC in Toronto began deliveries in June 2020 and has been operating successfully operating for over two years, Empire noted. The second CFC in Montreal kicked off deliveries this past March under a phased transition of customers to Voilà par IGA from IGA.net. Construction of third CFC in Calgary, Alberta, has been completed and now will be turned over to Ocado to build the internal grid. That facility, expected to serve most of Alberta, is slated to start deliveries in the first quarter of fiscal 2024. Empire announced in February that the fourth CFC will be situated in Vancouver, British Columbia, and initiate deliveries in the province in calendar 2025.

For its Voilà delivery service, the Canadian grocer has two more Ocado-automated e-commerce fulfillment centers under construction, in Calgary and Vancouver.

Ocado-driven curbside pickup service also is offered at 98 stores. In tandem with the four CFCs and supporting Ocado “spoke” facilities, Empire expects its online grocery delivery and pickup services to serve about 75% of Canadian households, or roughly 90% of Canadians’ estimated e-commerce spend.

At the bottom line, Empire recorded fiscal 2023 first-quarter net income of $187.5 million, or 71 cents per diluted share, compared with $188.5 million, or 70 cents per diluted share, a year ago. Prior to the company’s Q1 report, analysts on average had projected adjusted earnings per share of 74 cents, with estimates ranging from 72 cents to 78 cents, according to Refinitiv.

Empire’s food retail network, operated via its Sobeys Inc. arm, spans over 1,900 food, drug and convenience stores in all 10 provinces under such banners as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Farm Boy and Lawtons Drugs. The retailer also operates more than 350 retail fuel stations and runs grocery e-commerce operations under the Voilà, Grocery Gateway, IGA.net and ThriftyFoods.com brands.