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Sobeys parent company reports higher profit, raises dividend

Empire Co. Ltd. raised its dividend as it reported a better-than-expected fourth-quarter profit. The parent company of Sobeys will now pay a quarterly dividend of 11 cents per share, up from 10.5 cents. TIM KROCHAK • THE CHRONICLE HERALD
Empire Co. Ltd. raised its dividend as it reported a better-than-expected fourth-quarter profit. The parent company of Sobeys will now pay a quarterly dividend of 11 cents per share, up from 10.5 cents. TIM KROCHAK • THE CHRONICLE HERALD - The Chronicle Herald

The executive team at Empire Co. Ltd. still has a lot on its plate, but it thinks dessert is on the way.

“I am proud of what we have accomplished over the last year,” Michael Medline, president and CEO, said Thursday during a conference call with retail analysts.

“We are laying the foundation for our future as we shift from a position of defence to one of offence. The best days of Sobeys are yet to come.”

Empire’s key business is the competitive food retailing sector. On Thursday, the company raised its dividend as it reported a better- than-expected fourth-quarter profit. The Stellartonheadquartered parent company of the Sobeys grocery chain will now pay a quarterly dividend of 11 cents per share, up from 10.5 cents. The increased quarterly dividend will result in the annual dividend increasing from 42 to 44 cents per share.

The increase came as Empire said it earned $71 million, or 26 cents per share, for the 13 weeks that ended May 5, compared with a profit of $29.5 million, or 11 cents per share, a year earlier. Sales in the quarter totalled $5.89 billion, up from nearly $5.8 billion in the same quarter last year.

On an adjusted basis, Empire said it earned $93 million, or 35 cents per share, for the quarter, up from an adjusted profit of $50.2 million, or 18 cents per share, a year ago.

Analysts, on average, had expected an adjusted

profit of 29 cents per share for the quarter, according to Thomson Reuters Eikon.

For the 52 weeks that ended May 5, Empire earned $ 159.5 million, or 59 cents a share, compared with $ 158.5 million, or 58 cents a share, a year earlier. On an adjusted basis, Empire said it earned $344.3 million, or $1.27 per share, for the year, up from an adjusted profit of $191.3 million, or 70 cents per share, a year ago.

The company says it has about $24.2 billion in annualized sales and $8.7 billion in assets. Including its subsidiaries, franchisees and affiliates, it employs roughly 120,000 people.

Empire operates and reports on two business segments: food retailing, which consists of wholly-owned subsidiary Sobeys, and investments and other operations, which includes investments in Crombie REIT and interests in Genstar.

In the fourth quarter of fiscal 2017, the company launched Project Sunrise, a three-year transformation initiative intended to simplify the organizational structure and reduce costs. The company claims it is expected to result in at least $500 million in annualized cost savings by the end of fiscal 2020 and that the project is on track after the first year. Medline described the early stages of Project Sunrise as a success.

“On May 4 last year, we set out to rewrite the fundamentals of our company, and what a difference a year makes. We have found ourbearings,” he said.

“We have transformed our structures, sharpened our leadership team, stabilized our margins and taken costs out of the business.”

Medline shrugged off one analyst’s question about any reluctance by merchandisers to travel to Stellarton to do business.

“We are a $24-billion (company), one of the biggest retailers in the country, we are the secondbiggest grocer. We are proud to be in Pictou County, and they will make that trip. And, I’ve got to tell you, it’s a great place to go.”

Among the challenges Empire has to face are an increased promotional intensity among competitors, the influx into consumers’ mailboxes of gift cards from Loblaw Companies that are linked to a price-fixing investigation of bread products, and the impending closure of 10 underperforming stores in British Columbia.

Medline said the right corporate team is in place.

“All of our levels of confidence are higher than they’ve been in some time,“ he said.

“We know how the movie’s going to end. We’re going to do real well.”

Empire shares were up about four per cent Thursday on the Toronto Stock Exchange, closing at $26.67.

-With The Canadian Press

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