Profit of Sobeys owner Empire slump n Q3; revenue soars on Safeway acquisition

STELLARTON, N.S. – Empire Company Ltd. (TSX: EMP.A), parent of supermarket chain Sobeys Inc., say net profits fell sharply in the third quarter compared with a year ago even as revenue soared as a result of its acquisition of Canada Safeway stores in Western Canada.

Empire, based in Stellarton, N.S., reported after markets closed Wednesday that net earnings in its fiscal third-quarter ended Feb. 1 slumped to $400,000 or nil per diluted share compared with $74.1 million or $1.09 per share in the year-earlier period.

The company said the decrease of $73.7 million was due to a $65-million decline in net earnings from continuing operations, net of non-controlling interest, accompanied by an $8.7-million decline in net earnings from discontinued operations.

In November, Empire Theatres announced it had completed the sale of 46 theatres with 397 screens in separate transactions with Cineplex Inc. (TSX:CGZ) and Landmark Cinemas.

Sales revenue was $6.02 billion, up 1.73 billion or 40.4 per cent, including sales from Canadian Safeway stores, which it acquired for $5.8 billion in a deal announced last summer.

Excluding sales of $1.62 billion related to the acquisition of Canada Safeway, the sales contribution from the food retailing segment to Empire increased by $115.4 million or 2.7 per cent.

Sobeys’ same-store sales decreased 0.2 per cent from the prior year, reflecting the impact of low food inflation, increased competitive square footage in the market, ongoing competitive intensity and a severe ice storm in Ontario in its fiscal third quarter.

“Our third quarter results include the first full quarter of operations from the recently acquired Canada Safeway,” president and CEO Marc Poulin said in remarks accompanying the earnings release.

“We are working diligently to successfully integrate the Canada Safeway business, and are focused on securing operational efficiencies and reducing costs across the network. We remain confident in our ability to secure $200 million in annual run-rate cost synergies over a three-year period.”

On the Toronto Stock Exchange, Empire shares closed down 11 cents at $70.22 on Wednesday.