Sobeys Announces Cuts to Produce Prices as It Releases Its Q3 2016 Results

Fri. March 11th, 2016 - by Melissa De Leon Chavez

STELLARTON, CANADA - Sobeys’ parent company Empire has released the results for its third quarter of fiscal  2016, reflecting continuing struggles for the chain after purchasing Safeway assets in Canada.

Marc Poulin, President and CEO, Empire Company Limited“As anticipated, our second quarter results continued to trail performance versus the same period last year as the integration of Safeway continues to present challenges,” Marc Poulin, President and CEO of Empire Company Limited, stated in the financial report.

Upon the announcement of the results, Sobeys also disclosed a plan to cut fresh food prices, according to The Globe and Mail.

“We’re not dealing with the same customer psyche that we were dealing with even a year ago,” Poulin told analysts. “The behaviour of the customer has changed in Western Canada, and we have to acknowledge that.”

The report yielded a $1.36 billion loss, with a 12.6% decrease in adjusted net earnings, net of non-controlling interest, of $110.7 million ($0.40 per diluted share) compared to $126.6 million ($0.46 per diluted share) from the same time last year.

Photo Credit: Kevin Brine,

“While we made progress in the adoption of new processes following the implementation of new technology systems, the challenges persisted. In the second quarter, same store sales were below expectations as a result of customer reaction to our operational challenges and a difficult economy in the west.”

Despite the struggle, Sobeys is reportedly considering launching FreshCo in the western provinces. “We are happy with the FreshCo banner’s performance in Ontario and would be foolish not to explore how the franchise FreshCo model could be a solution to some of our structural challenges in Western Canada,” Andrew Walker, a spokesman for the retailer, said, according to the report.

Second quarter highlights noted in the financial report included:  

  • Sales of $6,059.2 million, up $64.1 million or 1.1% from the same quarter last year.  
  • Sobeys’ same-store sales (excluding fuel sales) increased 0.9%, while same store sales increased 0.1% with fuel sales included.
  • EBITDA of $256.3 million compared to $323.8 million last year, down $67.5 million or 20.8%.
  • Adjusted EBITDA of $303.7 million compared to $331.0 million last year, down $27.3 million or 8.2%.
  • Net earnings, net of non-controlling interest, of $68.5 million compared to $116.9 million last year, a decrease of $48.4 million or 41.4%.
  • Adjusted net earnings, net of non-controlling interest, of $110.7 million compared to $126.6 million last year, a $15.9 million or 12.6% decrease.
  • Looking forward, Poulin looks to be keeping positive as the company looks to get settled.

“Now that our merchandising team is in place, their focus will be to implement strategies that will improve our overall offering and performance,” Poulin said. “This marks a critical milestone in the second phase of our Safeway integration strategy, which entails consolidating the majority of our Western Canada back office functions and processes in Calgary. This will yield meaningful cost savings and improve long-term profitability. We remain confident in our ability to realize, if not exceed, our three-year run rate Safeway integration synergy target of $200 million.”

AndNowUKnow will continue to report on the financial performance of influential retailers for fiscal 2016 and beyond.