Empire Reports Fiscal 2025 First Quarter Results
Earnings per share ("EPS") of $0.86 and adjusted EPS(1) of $0.90
Prior year EPS of $1.03 and adjusted EPS of $0.78
Same-store sales, excluding fuel, increased by 1.0%
Gross margin, excluding fuel, increased by 46 bps
STELLARTON, NS, Sept. 12, 2024 /CNW/ - Empire Company Limited ("Empire" or the "Company") (TSX:EMP) today announced its financial results for the first quarter ended August 3, 2024. For the quarter, the Company recorded net earnings of $207.8 million ($0.86 per share) compared to $261.0 million ($1.03 per share) last year. For the quarter, the Company recorded adjusted net earnings of $218.7 million ($0.90 per share) compared to $196.2 million ($0.78 per share) last year.
"We enter fiscal 2025 with confidence due to strengthening same-store sales growth and strong control of our margins and costs," said Michael Medline, President & CEO, Empire. "We are increasingly optimistic as market conditions are gradually improving, contributing to a more predictable operating environment. Our team remains focused on strong execution and operational discipline, and we are starting to see the benefits as our strategic initiatives gain traction and deliver results."
(1)
Adjusted Metrics include adjusted operating income, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted net earnings, and adjusted EPS. The Company is excluding from its Adjusted Metrics: a one-time charge related to ending the mutual exclusivity agreement with Ocado Group plc ("Ocado"), costs incurred to plan and implement strategies to optimize the organization and improve efficiencies, gains associated with the sale of the retail fuel sites in Western Canada ("Western Canada Fuel Sale") which occurred in the first quarter of fiscal 2024, and insurance recoveries related to the Cybersecurity Event (as defined below under the heading "Adjusted Impacts on Net Earnings"). See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release.
Company Priorities
Since fiscal 2017, the Company has successfully completed two transformation strategies, Project Sunrise and Project Horizon. These strategies have comprehensively reset Empire's foundation, enhanced the Company's data capabilities, deepened the understanding of customers, and prepared the business to effectively capture emerging trends. With these transformation strategies now accomplished and the turnaround complete, the Company aims to grow total adjusted EPS over the long-term through net earnings growth and share repurchases. The Company intends to continue improving sales, gross margin (excluding fuel) and adjusted EBITDA margin by focusing on priorities such as:
Continued Focus on Stores:
Over recent years, the Company has accelerated investments in renovations, conversions, and new stores along with store processes, communications, training, technology and tools. Investing in the store network will remain a priority, demonstrated by a sustained emphasis on renovations and continued store expansion in discount. The Own Brands program enhancement will remain a priority through increased distribution, shelf placement and product innovation.
The Company intends to invest capital in its store network and is on track with its plan to renovate approximately 20% to 25% of the network between fiscal 2024 and fiscal 2026. This capital investment includes important sustainability initiatives such as refrigeration system upgrades and other energy efficiency initiatives.
Enhanced Focus on Digital and Data:
The focus on digital and data will include continued e-commerce expansion with Voilà, personalization, loyalty, through Scene+ (see "Business Updates, Voilà" and "Business Updates, Scene+" for more information), improved space productivity and the continued improvement of promotional optimization. Space productivity will further enhance the customer experience by improving store layouts, optimizing category and product adjacencies and tailoring product assortment for each store. The advanced analytics tools built for promotional optimization will continue to be refined through the partnership between the advanced analytics team and category merchants. Enhancing digital and data capabilities will allow the Company to deliver the best personalized experiences to elevate its in-store and e-commerce experience for its customers.
Efficiency and Cost Control:
The Company has significantly improved its efficiency and cost effectiveness through sourcing efficiencies, optimizing supply chain productivity and improving systems and processes. The Company will continue to focus on driving efficiency and cost effectiveness through initiatives related to sourcing of goods not for resale, supply chain productivity and the organizational structure. In addition, the Company is pursuing cost savings in the Voilà business by pausing the opening of its fourth Customer Fulfilment Centre ("CFC") and has ended its mutual exclusivity with Ocado, amongst other initiatives.
SUMMARY RESULTS, FIRST QUARTER
13 Weeks Ended
$
($ in millions, except per share amounts)
August 3, 2024
August 5, 2023
Change
Sales
$
8,136.9
$
8,075.5
$
61.4
Gross profit(1)
2,126.3
2,074.5
51.8
Operating income
369.1
456.5
(87.4)
Adjusted operating income(2)
383.2
374.9
8.3
EBITDA(1)
645.0
723.0
(78.0)
Adjusted EBITDA(2)
659.1
641.4
17.7
Net earnings(3)
207.8
261.0
(53.2)
Adjusted net earnings(1)(2)(3)(4)
218.7
196.2
22.5
Diluted earnings per share
EPS(3)
$
0.86
$
1.03
$
(0.17)
Adjusted EPS(2)(3)(4)
$
0.90
$
0.78
$
0.12
Diluted weighted average number of shares outstanding (in millions)
242.3
252.2
(9.9)
Dividend per share
$
0.2000
$
0.1825
13 Weeks Ended
August 3, 2024
August 5, 2023
Gross margin(1)
26.1 %
25.7 %
EBITDA margin(1)
7.9 %
9.0 %
Adjusted EBITDA margin(2)
8.1 %
7.9 %
Same-store sales(1) growth
0.5 %
3.0 %
Same-store sales growth, excluding fuel
1.0 %
4.1 %
Effective income tax rate
22.9 %
27.5 %
(1)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release.
(2)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs and recoveries included.
(3)
Attributable to owners of the Company.
(4)
See "Adjusted Impacts on Net Earnings" Section of this News Release.
Sales
Sales for the quarter ended August 3, 2024 increased by 0.8% primarily driven by strong performance across the business, particularly in FreshCo and Full-Service. This increase is slightly offset by lower fuel sales due to the Western Canada Fuel Sale in the first quarter of the prior year.
Gross Profit
Gross profit for the quarter ended August 3, 2024 increased by 2.5% primarily driven by higher sales, business expansion (Farm Boy, FreshCo and Voilà) and strong performance and operational discipline in Full-Service banners.
Gross margin for the quarter increased to 26.1% from 25.7% in the prior year, primarily as a result of strong execution in Full-Service banners from several targeted initiatives aimed at closely managing shrink and inventory and improving promotional mix. Gross margin, excluding the mix impact of fuel, increased by 46 basis points.
Operating Income
13 Weeks Ended
$
($ in millions)
August 3, 2024
August 5, 2023
Change
Food retailing
$
357.9
$
449.1
$
(91.2)
Investments and other operations:
Crombie REIT(1)
12.8
8.9
3.9
Real estate partnerships
3.5
1.1
2.4
Other operations, net of corporate expenses
(5.1)
(2.6)
(2.5)
11.2
7.4
3.8
Operating income
$
369.1
$
456.5
$
(87.4)
Adjustments:
E-commerce Exclusivity(2)
$
11.9
$
-
$
11.9
Restructuring(2)
2.2
9.7
(7.5)
Cybersecurity Event(2)
-
(0.5)
0.5
Western Canada Fuel Sale(2)
-
(90.8)
90.8
14.1
(81.6)
95.7
Adjusted operating income(3)
$
383.2
$
374.9
$
8.3
(1)
Crombie Real Estate Investment Trust ("Crombie REIT").
(2)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs and recoveries included.
(3)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release.
For the quarter ended August 3, 2024, operating income from the Food retailing segment decreased due to higher selling and administrative expenses and a decrease in other income (driven by the gain from the Western Canada Fuel Sale in the prior year), partially offset by higher sales, gross profit and a gain on sale of a property in the current quarter. Selling and administrative expenses increased mainly due to increased investments in the store network, tools, technology and projects to support the Company's strategic initiatives, increase in compensation expense including retail labour costs, and a non-cash charge related to ending the exclusivity with Ocado, partially offset by lower utility costs and other cost saving initiatives.
For the quarter ended August 3, 2024, operating income from the Investments and other operations segment increased primarily as a result of higher equity earnings from Crombie REIT driven by increased property sales.
EBITDA
13 Weeks Ended
$
($ in millions)
August 3, 2024
August 5, 2023
Change
EBITDA (1)
$
645.0
$
723.0
$
(78.0)
Adjustments:
E-commerce Exclusivity(2)
11.9
-
11.9
Restructuring(2)
2.2
9.7
(7.5)
Cybersecurity Event(2)
-
(0.5)
0.5
Western Canada Fuel Sale(2)
-
(90.8)
90.8
14.1
(81.6)
95.7
Adjusted EBITDA(1)(2)
$
659.1
$
641.4
$
17.7
(1)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release.
(2)
See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs and recoveries included.
For the quarter ended August 3, 2024, EBITDA decreased to $645.0 million from $723.0 million in the prior year mainly as a result of the same factors affecting operating income. Adjusted EBITDA margin increased to 8.1% from 7.9% in the prior year.
Income Taxes
The effective income tax rate for the quarter ended August 3, 2024 was 22.9% compared to 27.5% in the same quarter in the prior year. The effective tax rate was lower than the statutory rate primarily due to non-taxable capital items, the revaluation of tax estimates, not all of which are recurring, and consolidated structured entities which are taxed at lower rates. The effective tax rate in the same quarter last year was higher than the statutory rate primarily due to the revaluation of tax estimates, not all of which are recurring, partially offset by non-taxable capital items.
Net Earnings
13 Weeks Ended
$
($ in millions, except per share amounts)
August 3, 2024
August 5, 2023
Change
Net earnings(1)
$
207.8
$
261.0
$
(53.2)
EPS (fully diluted)
$
0.86
$
1.03
(0.17)
Adjustments(2) (net of income taxes)
