First Quarter Summary
· Same-store sales excluding fuel increased 1.3% (1.8% excluding pharmacy)
· Highest tonnage increase in 6 years
· Earnings per share of $0.35 compared to $0.20 last year
· Adjusted earnings per share of $0.37 compared to $0.32 last year
· Project Sunrise transformation on track
· First two western FreshCo stores to open in Winnipeg in the spring of 2019
For the first quarter of the 2019 fiscal year, Empire Company Ltd. posted a revenue increase of 3.0 per cent. Net earnings were $100.2 million, compared to $87.5 million in the same period last year.
Same store sales excluding fuel rose 1.3 per cent – 1.8 per cent excluding pharmacy, and tonnage showed the greatest increase in six years.
The sales increase of 3.0 per cent was driven by successful promotional and marketing activity across the business, increases in traffic and basket size, along with increased fuel sales attributable to higher fuel prices. Same store sales were higher in most areas of the country and tonnage was positive for the quarter. Partially offsetting these positive effects were the deflationary impact of drug reform and the wind down and closure of ten stores in Western Canada during the quarter.
Those closures also helped to drive gross profit down 1.2 per cent. Other factors included increased transportation and other costs, and lower margins in the company’s pharmacy business due to healthcare reform and the Alberta Air Miles inducement ban.
Gross margin decreased to 23.4 per cent, driven by an increase in lower margin fuel sales, increased transportation and other costs, and changes in product mix in Quebec. Although results in Quebec were strong, average margin rates were affected by changes in the ratio of corporate to affiliate stores and higher sales of lower margin product. Conventional margins outside of Quebec were stable and broadly consistent with last year.
The discount channel continues to be a growth area in food retailing. In fiscal 2018, Sobeys announced plans to expand its discount banner to Western Canada and will convert up to 25 per cent of its 255 Safeway and Sobeys full service format stores in Western Canada to its FreshCo banner over the next five years, with the first two stores expected to open in Winnipeg, Manitoba in the spring of 2019.
The three year Project Sunrise corporate transformation is on track, Empire says. It expects 30 per cent of the project target to be realized in fiscal 2019. Total savings are expected to be $500 million.
The company announcement is available here.