Supply chain ‘No. 1 challenge’ for Canadian retailers: CEO of Sobeys | national company

Empire Co.Ltd. saw higher profits and sales in its latest quarter despite a challenging retail environment punctuated by higher costs and bottlenecks in supply chains.

The parent company of grocery chains Sobeys, Safeway, FreshCo and others beat expectations with third-quarter profit of $203.4 million, up from $176.3 million a year earlier.

The company also reported sales of $7.38 billion, down from $7.02 billion.

“When you look at these results against the backdrop of an extremely volatile economic and retail environment, the strength of our team shines through,” said Michael Medline, president and chief executive officer of Empire and Sobeys Inc., in a statement.

In a call with analysts on Thursday, he said supply chain grunts continue to plague the industry.

“The #1 challenge in all retail businesses right now is supply chain,” Medline said. “He just didn’t get back into shape for a lot of reasons including high demand and disruption.”

Sometimes the grocer had to find alternatives to stock its shelves when suppliers couldn’t keep up, he said.

“It drives us to go out and buy more from the market and sometimes scramble to make sure we’re meeting our customers’ needs,” Medline said.

These efforts are reflected in the strong “shelf availability” of products in the company’s stores, he said.

Still, same-store sales excluding fuel fell 1.7% from high sales last year when restrictions diverted food dollars from restaurants to grocery stores.

In its outlook, Empire said it expects same-store sales to continue to be negative for the remainder of its fiscal 2022 as industry volumes decline from unusually high sales levels related to COVID-19 a year ago.

Still, the company said it doesn’t expect grocery consumer behavior to fully return to pre-pandemic levels in the foreseeable future given the unpredictability of COVID-19.

Meanwhile, inflation is having a noticeable impact on shopping habits as consumers seek to save money.

Customers are buying more of the retailer’s house brands and opting for larger sizes that offer better value, Sobeys chief operating officer Pierre St-Laurent told analysts.

“Our own brand is on fire right now,” he said, referring to Sobeys’ Compliments house brand. “We are growing much faster than national brands.”

The grocer also saw good traction on economy packaging, St-Laurent said.

“The large assortment we have in our store provides many options for customers to mitigate inflation at this time,” he said. “We’re seeing changes in customer behavior, they’re looking for more value in everything they’re trying to buy.”

Empire’s e-commerce platforms reported combined sales growth of 17%, primarily due to the acquisition of Grocery Gateway.

Its Voilà online grocery platform also grew in the quarter, with plans to open new fulfillment centers.

In addition to its location in Vaughan, Ont., the retailer said it entered the testing phase of its second fulfillment center in Montreal earlier this month. A third location in Calgary is expected to come online in 2024 and a facility in the Vancouver area is expected to open in 2025.

This report from The Canadian Press was first published on March 10, 2022.

Companies in this story: (TSX:EMP.A)

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