The Canadian grocery giant behind Sobeys, Safeway and FreshCo on Thursday is raising its dividend for shareholders after profits spiked during the coronavirus pandemic.
Empire Co. Ltd. said its adjusted net earnings ballooned by 43 per cent to $181 million in its fourth quarter, compared to last year. In a statement Thursday, Empire chief executive Michael Medline called the 13-week period, which ended on May 2, “one of our proudest quarters in Empire’s 113 year history.”
The earnings update comes less than a week after Empire ended its $2-per-hour pay premiums for frontline staff, a program it had called “Hero Pay.” The report showed that the premiums, as well as pandemic-related safety measures in store, have cost roughly $140 million thus far: $80 million in the fourth quarter and another $60 million in May and the first half of June.
“As provinces execute their reopening plans and customer behaviour shifts, we felt that this was a natural time to end our Hero Pay program,” Medline said in a letter to staff on June 12, a day after Loblaw Cos. Ltd. and Metro Inc. announced they were ending their $2/hour bonuses.
All three companies — the largest supermarket chains in the country — ended the pay premiums on the same day, June 13. Each chain also provided a one-time lump sum bonus at the end of the program in the $100 to $200 range, depending on average hours.
Jerry Dias, president of trade union Unifor — which represents roughly 2,000 Empire employees — said in a tweet on Thursday that the company could afford to keep the wage increases “with profits like this.” Dias and Unifor have publicly criticized the major grocers for ending the hazard pay while the pandemic remains active.
One of our proudest quarters in Empires 113 year history
On Thursday afternoon, the House of Commons standing committee on industry, science and technology was expected to vote on a motion on whether to invite Empire, Loblaw and Metro to appear at the committee and “explain their decisions to cancel, on the same day, the modest increase in wages for front-line grocery store workers during the pandemic, including how those decisions are consistent with competition laws.”
Empire on Thursday also said it was increasing its quarterly dividend by 8.3 per cent to 13 cents a share.
In its report, Empire said that it was starting to see the massive surges in food sales begin to subside as provinces start to reopen for business.
At the outset of the pandemic in early March, Empire’s comparable sales — a key gauge of success in retail — grew by 50 per cent, excluding fuel, as restaurants shut down en masse and “customers began to stock up in preparation for possible stay-at-home requirements.”
A shopper outside a Sobeys grocery store in Toronto in June.Peter J. Thompson/National Post
By late March, comparable sales growth had calmed down, but was still “significantly above prior year levels, Empire said. Overall comparable sales grew 18 per cent during the quarter, not counting a 40 per cent decline in fuel, compared to 3.8 per cent growth a year ago.
Comparable sales growth has averaged 13 per cent in the first six weeks of Empire’s first quarter of 2021, through May into mid-June.
Empire said the growth was driven by a seismic shift in consumption habits from restaurants to supermarkets.
RBC analyst Irene said in a note to clients that Empire’s stable of stores is heavy on the big-box, conventional model, making the chain “extremely well-positioned” for the shift toward one-stop, once-a-week grocery shopping.
Even after the Canadian economy gets back to normal, and restaurants reopen, Empire said it expects to hold on to some of the market share it has wrested from the food service industry.
“Management continues to anticipate a percentage of the consumption that has shifted from restaurants and hospitality businesses to grocery stores will remain in grocery stores,” the company said in its quarterly results.
In Empire’s 2020 fiscal year, which ended May 2, sales increased by 5.8 per cent, which the company attributed to the pandemic, inflation, the addition of the Farm Boy chain in Ontario and the Western Canada expansion of its FreshCo discount chain. Empire’s annual adjusted net earnings were $596.8 million.
Financial Post
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