Empire Co. sees C$25 million cost from cybersecurity event

Empire Co., the Stellarton, Nova Scotia-based parent of Sobeys and other Canadian food retailing banners, said that a cybersecurity attack last month will have a negative impact of about C$25 million ($18.3 million U.S.).

The cybersecurity breach, which took place Nov. 3, “had a minimal impact” on store operations, the company said, although it knocked some pharmacy operations offline for four days and also briefly impacted some other systems, including self-checkout, loyalty point redemption and gift cards.

“We continue to systematically bring our information and administrative systems back online in a controlled, phased approach,” said Matt Reindel, chief financial officer, in a conference call with analysts on Thursday discussing third-quarter results.

Empire said it had been unable to provide details on the security breach until now at the advice of authorities.

The company has been offering full service to customers in its stores for the past few weeks, said Michael Medline, president and CEO of Empire.

“There were a lot of workarounds and in-the-moment solutions that carried us through,” he said.

When the breach was first detected, Empire immediately began shutting down its systems to protect its operations and data, Medline said.

“This ensured that we were able to run our stores with little disruption,” he said.

Related:Sobeys debuts Scene+ loyalty program in Western Canada

The breach did not have an impact on second-quarter results, but the tentative estimate of C$25 million in net impact to earnings will be reflected in future reports, covering costs such as shrink and labor, as well as IT and legal professional fees.

In other news, the company said it has agreed to sell all 56 of its retail fuel sites in Western Canada to Canadian Mobility Services Ltd., a subsidiary of Shell Canada, for approximately C$100 million in cash.

Medline said the company expects to continue to benefit from the in-store traffic generated by the fuel locations near its stores.

For the second quarter, Empire said both its discount and full-service banners performed well, led by double-digit same-store sales in the discount channel and strong sales in private label.

Net income for the quarter, which ended Nov. 5, was up 8.3%, to C$189.9 million, on a 4.4% increase in sales, to C$7.6 billion, compared with the year-ago quarter. Same-store sales, excluding fuel, were up 3.1%.