(Stellarton) Empire Company posted a net profit of 125.7 million for its most recent quarter on Thursday, as its supermarket chain Sobeys recovered from a cyberattack it suffered in November.
The grocery store operator behind the IGA and Rachelle Béry chains in Quebec explained that its third quarter result compares with a net profit of 203.4 million for the same period last year.
Empire’s earnings per share were 49 cents for the quarter ended February 4, down from 77 cents in the third quarter last year, which was marked by product listings “particularly large” real estate from the termination of leases and by an increase in real estate sales from Crombie Real Estate Investment Trust.
Its adjusted net profit totaled $164.8 million, down from $203.4 million a year ago.
Sales, which were driven by FreshCo’s expansion in Western Canada, higher food inflation and higher fuel sales, reached $7.49 billion, compared to $7.38 billion in previous quarter.
Empire’s quarterly earnings release came as the Stellarton, N.S.-based company recovered from a cyberattack that forced the closure of its pharmacy services, halted operation of self-checkout machines and prevented customers redeem gift cards and loyalty points.
The cybersecurity incident resulted in a $39.1 million downward adjustment to third-quarter net profit, net of insurance recoveries, Empire said Thursday. In addition, the attack required the shutdown of some operating systems for several weeks, further impacting third quarter net income by at least $15 million, a reduction of 6 cents from its earnings per share.
The incident left Sobeys customers unable to fill their prescriptions for four days and many of the grocer’s systems had to be shut down for several weeks.
The incident also temporarily reduced sales and undermined the efficiency of business operations, including the loss of advanced planning and promotional maximization tools.
The company estimates that the ultimate impact of the cyberattack on its net income in fiscal years 2023 and 2024 will be approximately $32 million, net of estimated insurance recoveries.
Last quarter, Empire said the cybersecurity incident was expected to cost $25 million after insurance recoveries, but declined to share the total cost of the incident.
The company is still working with its insurers to make its claims.
However, she warned that there would be a lag between the disbursement of costs and the recognition of insurance proceeds due to the “complexity” of cybersecurity insurance coverage.
During the quarter, Empire also came under fire for the cost of the groceries it sells, the prices of which rose as annual inflation for groceries hit 11.4% in January, compared to inflation overall 5.9%.
The chief executives of Empire, Loblaw Companies and Metro were called to appear earlier in March before a parliamentary committee studying grocer prices.
The three major grocers reported profits in the first half of 2022 above their average performance for the past five years, according to a recent report from Dalhousie University’s Agri-Food Analytical Sciences Laboratory.
At the hearing, grocery store executives argued that food price inflation was not driven by the pursuit of profit and that their food-related profit margins remained low.
“No matter how many times you say it, write it, or tweet it, it just isn’t true,” Empire President and CEO Michael Medline said.
“The truth is that we are at the end of a very long food supply chain that has economic inputs at every step. »
“While this stubbornly high inflationary backdrop persists, and despite the difficulties encountered following the cybersecurity incident, we have delivered strong results, which shows how much stronger we have become over the past six months. years,” Mr. Medline said in the earnings release.
“We expect inflation to come down, which will benefit Empire and all Canadians. »
Separately, the grocer said Longo’s e-commerce business, Grocery Gateway, will be integrated into its Voilà e-commerce offering. Grocery Gateway customers will switch to Voilà over a six-week period, starting in July 2023.
As for its Scene loyalty program, which it manages in collaboration with Scotiabank and Cineplex, it will be launched in its Quebec stores and at Thrifty Foods on March 23.
