(Stellarton) The Empire chain plans to crack down on what it considers to be unjustifiable demands for cost increases from some of its largest suppliers.
“We are now seeing more than a few of our large supplier partners sending out cost increase requests for February and some of them are distressing,” said Michael Medline, president and CEO, during a call with analysts.
“Periods of inflation are no excuse to pass every cost increase onto grocers and, more importantly, Canadians. This was not the way business was done before this inflationary period,” Medline said, adding that the company plans to be “even tougher” with the latest round of demands.
“If that means a few holes on our shelves, we think Canadians will understand. »
Empire posted second-quarter net income of $181.1 million on Thursday, compared to $189.9 million at the same time last year.
The owner of IGA, Sobeys, Safeway and FreshCo, among others, said that this corresponds to a net profit of 72 cents per share, compared to 73 cents per share a year ago.
Quarterly sales increased from 7.64 billion last year to 7.75 billion this year.
Same-store sales advanced 2.2%, but 2% excluding fuel sales.
The increase in revenue is primarily attributed to growth across the business, but particularly in the discount area, the company explained. This echoes comments from rivals Metro and Loblaw in their recent earnings reports, which indicated that customers are increasingly looking for better prices in their discount banners due to the rising cost of living.
Six years ago, Empire announced plans to convert up to a quarter of its 255 Safeway and Sobeys stores in Western Canada to its FreshCo discount store banner. As of mid-December, the company said it has 46 FreshCo stores in Western Canada and plans to open another in fiscal 2024.
On an adjusted basis, Empire revealed it earned 71 cents per diluted share in its most recent quarter, down from adjusted earnings of 73 cents per diluted share a year ago.
During the quarter, margins contracted a little more than expected due to greater promotional penetration of flyer items, he said. Customers bought more of Empire’s own brands and opted for cheaper products.
Empire has accelerated its investments in renovations, conversions and new stores in recent years, the company said in its statement. Investment in its store network will remain a priority, particularly regarding renovations and expansion of its discount store network.
However, despite the challenging macro environment, Medline said he was seeing “great momentum” in the business. Sales momentum increased in the first five weeks of the third quarter, he said, more than the second quarter, but not as much as the first.
“We are optimistic that this trend will continue as consumers begin to regain confidence,” Medline said.
The company has accelerated its investments in renovations, conversions and new stores in recent years, the company said in its statement. Investment in its store network will remain a priority, particularly regarding renovations and expansion of its discount store network.
Grocery store results were in line with expectations, RBC analyst Irene Nattel said in a note.
Empire is continuing its strategy to maximize revenues at its full-service stores, which are losing traffic to discount brands, while expanding its own network of discount stores, she added.
