STELLARTON, N.S. — Empire Company Ltd. recorded a surge in sales in its most recent quarter as the pandemic continued to impact how Canadians shop for food, the grocery chain that owns Sobeys said Wednesday.
Canadians shopped less frequently and purchased more when they did in the company's third quarter, pushing profit to $176.3 million from $120.5 million a year earlier, the retailer headquartered in Stellarton, N.S., said.
Customers gravitated towards one-stop-shop grocery stores that met all their household needs and are increasingly buying food online, Empire said.
Those trends helped the grocery chain bolster its "underlying strength" including improvements in market share and gross margin, Empire president and CEO Michael Medline said.
The company also made progress in its operational and merchandising execution, which he said is "leaps and bounds" ahead of where it was four years ago.
"I attribute our success to our focus and discipline to execute against our strategy, while living our values," Medline said in a statement.
Meanwhile, Empire said the jump in sales in the quarter was also driven by the expansion of its FreshCo banner in Western Canada and Farm Boy banner in Ontario.
The gains were partially offset by lower fuel sales and temporary store closures in Western Canada pending conversion to FreshCo.
Empire's e-commerce businesses reported sales growth of 315 per cent in the third quarter compared with the prior year amid ongoing COVID-19 lockdowns or restrictions across the country for the quarter ended Jan. 30.
The retailer's largely conventional store base benefited from "weekly main shop" consumer behaviour that has become the norm since early March 2020, RBC Dominion Securities Inc. analyst Irene Nattel said in a note to clients.
This was particularly the case during pandemic lockdowns like those in place post-Christmas, she said.
Meanwhile, the company introduced a temporary lockdown bonus for front-line employees in stores and distribution centres in the third quarter as some provinces renewed stay-at-home orders.
The cost of the bonus and maintaining sanitization and safety measures increased selling and administrative expenses by about $19 million, including $9 million for the bonus, Empire said.
Looking ahead, sales have remained robust in the fourth quarter so far, with the company reporting same-store sales growth, excluding fuel, of nine per cent in the first five weeks compared with last year.
But that increase is unlikely to be sustained through the quarter as a result of the "significant COVID-19 driven sales last year," Empire said.
"The company has begun to lap the period when significant stock up activity was experienced in stores," the grocer said, noting that in the fourth quarter last year the company reported same-store sales growth of 18 per cent.
"Consumer buying behaviours have evolved throughout COVID-19," the company said. "As such, sales in the fourth quarter compared to last year will be less meaningful as they will not provide a full indication of underlying performance."
The company's profit amounted to 66 cents per diluted share, up from 45 cents per diluted share in the same quarter a year earlier.
The increase came as sales totalled nearly $7.02 billion, up from nearly $6.40 billion. Same-store sales excluding fuel increased by 10.7 per cent.
This report by The Canadian Press was first published March 10, 2021.
Companies in this story: (TSX:EMP.A)
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