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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Healthier foods helping Sobeys boost bottom line in recent results

Friday, September 12, 2014 > 09:05:41
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(Calgary Herald)

The chief executive of Empire Co. Ltd. says he's counting on Canadians' desire to buy healthier foods to help keep profits rolling in for the firm's Sobeys Inc. supermarket chain.

Marc Poulin said healthier and easy-to-prepare food products introduced into the supermarket chain over the past year are part of the reason for the recent profit jump at the stores.

Canadians are changing their outlook on food, Poulin said Thursday.

"They truly understand with the obesity problem we have ... they clearly understand there is something broken in the relationship Canadians have with food," he said in an interview after the company's annual shareholders meeting.

"They have decided we are going to be the ones helping them in a transition."

Poulin, who became Empire's CEO as well as chief executive of Sobeys in January, said some examples of new programs in stores include a greater variety of breads, pre-marinated meats, and meals that replace home cooking.

He declined to quantify how much the specific programs are adding to revenues.

However, results released on Wednesday say same-store sales, at locations open at least a year, were up 1.3 per cent despite a market that has become fiercely competitive.

Poulin's comments came the day after the Nova Scotia-based firm, which has one of Canada's largest grocery chains, announced a net profit of $123.1 million or $1.33 for quarter from May 4 to Aug. 2 this year.

Empire's adjusted net earnings, which are more closely watched by analysts, were $131.7 million or $1.43 per share, well ahead of the average of estimate of $1.35 per share.

Revenue in the three months to Aug. 2 rose to $6.22 billion, up from just under $4.6 billion in the prior-year period — in line with estimates — mostly because of additional Safeway Canada stores in a $5.8 billion transaction that closed in November.

The profit for the latest quarter was a turn-around from the fourth-quarter ended May 3, when net income dropped to $800,000, or a penny per diluted share, as the company recognized at $169.8 million accounting charge for administrative and sales costs from its restructuring plan.

Poulin says the closure of 50 less successful supermarkets, announced in June, played only a marginal role in the results. He said only about half of the announced closures have taken place.

He also described the impact of store closures on the bottom line as "immaterial" so far.

The company has said it will continue to focus on integrating the Canada Safeway business and will continue to look for ways to cut costs.

"We expect this program (the closures) to take up to a year," Poulin said.

He declined to indicate what the closures will mean to the bottom line or to provide figures on the total layoffs that will result.

In a later conference call with analysts, Poulin said that the grocery business remains intensely competitive but it's been somewhat more stable than in the 2014 fourth quarter ended May 3.

"Unfortunately, in such an environment, it's a week to week battle and the weeks are unevenly distributed betwee very competitive to somewhat competitive," Poulin said.

He said that Sobeys continued to be price-competitive to ensure it keeps its market share.

Sobeys has been able to pass through some of the increases in wholesale grocery costs to consumers, although with a lag.

"So as the quarter progressed, things got better on that front," Poulin said.

He added that Sobeys has been experimenting with new store formats, including one in the Toronto neighborhood of Leaside that has been doubled in size and given some of the features of its new large-format Sobeys Extra stores, which include in-store chefs, wellbeing counsellors and cheese experts to advise customers.

"We are very pleased with customer reaction to the (Extra) stores and it does show in very positive sales numbers," Poulin said. "We're expanding that format in new locations."


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