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Sobeys battles to capture cautious Canadian consumers
Retailer says new pricing effort showing signs of traction in first month
Mark Hamstra
March 14, 2024
2 Min Read
Sobeys / Empire
Sobeys is focusing sharply on product pricing, but Canadian consumers have remained stubbornly cautious, the company’s parent company said in its third-quarter earnings call with analysts on Thursday.
“It will take some time for consumer spending to normalize,” said Matt Reindel, chief financial officer, Empire Co., who cited ongoing inflationary price pressures on other consumer expenses, such as household items.
The Stellarton, Nova Scotia-based company also said that although many of its suppliers have slowly shifted back toward a normal cadence of occasional, minimal price increases, some suppliers of commodities, such as sugar and cocoa, have continued to raise prices more aggressively.
Empire said it has seen some positive signs in its recent efforts to fight inflation. A new, 11-week pricing initiative, in which it has lowered or locked prices on about 1,000 items across several of its banners, is showing some positive results in its first month, said Michael Medline, president and CEO, Empire Co.
“We are pleased with the traction it is having with customers,” he said.
The effort follows pressure from the Canadian government on retailers to lower grocery prices.
Empire said net income in its food retailing segment for the third quarter, which ended Feb. 3, was up about 11.5%, to C$123 million (about $90.9 million U.S.), on a sales gain of less than 0.01%, to about C$7.5 billion (about $5.5 billion U.S.), compared with year-ago results. Same-store sales, excluding fuel, were up 1.9% in the period.
For the 39-week, year-to-date period, net income was up 25.1%, to C$568.4 million (about $420.1 million U.S.), on a 1.1% increase in sales, to C$23.3 billion (about $17.2 billion U.S.).
The company noted that its results for the quarter and year were impacted by a cybersecurity breach that occurred beginning in November 2022 as well as by restructuring charges and the impact of a warehouse strike last year.
In addition to the Sobeys banner, Empire also operates stores under several other banners, including IGA, Safeway, Thrifty Foods, FreshCo, and Needs.
Among other news from the call:
The company’s Scene loyalty program, which it co-owns with Scotiabank and Cineplex, now has more than 15 million members and is available nationwide. Going forward, Empire will focus on increased personalization through the use of machine learning and artificial intelligence
Through the use of a new central kitchen program, the company is planning to introduce ready-to-cook, ready-to-heat, and ready-to-eat meals that it expects to roll out gradually across its markets. The first new commissary is slated to open in Calgary in the first fiscal quarter of 2025
The company’s ecommerce platform, Voilà, recorded a sales increase of 16% in the third quarter, compared to the year-ago period, and the service also gained market share. The service continues to see increased orders and strong customer retention, Medline said, noting that basket sizes on Voilà are more than three times the size of in-store baskets
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