- Earnings per share of $0.49;
adjusted earnings per share of $0.64
- Prior year earnings per share and adjusted earnings per share
of $0.77, which included $0.14 of unusually large real estate income
- Cybersecurity Event(1) adversely impacted the
quarter; operational impacts relating to this event are now
resolved
- Same-store sales, excluding fuel, increased by 0.1%
- Gross margin, excluding fuel, was flat to last year
- Project Horizon on track to deliver $500
million increase in annualized EBITDA
- Scene+ will be launched in Quebec and Thrifty Foods on March 23
- Longo's e-commerce business, Grocery Gateway, will be
integrated into Voilà in July
2023
STELLARTON, NS, March 16,
2023 /CNW/ - Empire Company Limited ("Empire" or the
"Company") (TSX: EMP.A) today announced its financial results for
the third quarter ended February 4,
2023. The Company is excluding the estimated impact of the
recent Cybersecurity Event in its Adjusted
Metrics(2). For the quarter, the Company recorded
adjusted net earnings of $164.8
million ($0.64 per share)
compared to $203.4 million
($0.77 per share) last year.
In addition, management considers that the Cybersecurity Event
temporarily reduced sales, and operational effectiveness, including
impacts such as the temporary loss of advanced planning, promotion
and fresh item management tools. This is estimated to have impacted
third quarter net earnings by at least ($15.0) million (($0.06) per share). Consistent with regulatory
guidance, these estimated impacts are not included in the
adjustments above.
The prior year's EPS of $0.77
included $0.14 related to unusually
large lease termination income and higher property sales from
Crombie Real Estate Investment Trust ("Crombie REIT").
"As this stubbornly high inflationary environment persists, and
despite the challenges we faced due to the Cybersecurity Event, we
delivered solid results, highlighting how much stronger we have
become over the last six years. We look forward to inflation
abating, which benefits Empire and all Canadians," said Michael
Medline, President & Chief Executive Officer, Empire. "This
quarter we continued to advance our strategic initiatives,
including efforts to expand the impact of our best-in-class grocery
home delivery service Voilà and finalize our Scene+ launch across
Canada."
The Company is also announcing today that Longo's e-commerce
business, Grocery Gateway, will be integrated into Voilà. Grocery
Gateway customers will transition to Voilà over a six-week period,
starting in July 2023. The full
assortment of Grocery Gateway products will be available on the
Voilà platform via a Longo's 'shop in shop'. In addition to cost
efficiencies, the Company expects that both Voilà and former
Grocery Gateway customers will benefit from the broader product
assortment that will be available on Voilà.
(1)
|
On November 4, 2022,
Empire experienced IT system issues related to a cybersecurity
event (the "Cybersecurity Event" or
"Event").
|
(2)
|
Adjusted Metrics
include adjusted operating income, adjusted earnings before
interest, taxes, depreciation and amortization ("EBITDA"), adjusted
net earnings, and adjusted earnings per share
("EPS").
|
PROJECT HORIZON
In the first quarter of fiscal 2021, the Company launched
Project Horizon, a three-year strategy focused on core business
expansion and the acceleration of e-commerce. In its third and
final year, the Company has remained disciplined in its Project
Horizon execution focused on growing market share and building on
cost and margin discipline despite significant inflationary
pressures. The Company's assessment of Project Horizon will exclude
the full impacts of the Cybersecurity Event due to its unusual
nature and the expectation that the timing of some insurance
recoveries will occur after the fiscal year end. See "Business
Updates – Cybersecurity Event" for more information on these
adjustments. The Company is on track to achieve its Horizon
target of an incremental $500 million
in annualized EBITDA(1). Over Project Horizon's
three-year timeframe the Company expects to generate a
compound average growth rate in EPS(1) of
approximately 13% and an increase in EBITDA
margin(1) of approximately 50 basis points, both
excluding the full impact of the Cybersecurity Event and the
one-time costs associated with the Grocery Gateway
integration.
In fiscal 2022, benefits were achieved from promotional
optimization and data analytics, the continued expansion and
renovation of the store network, and strategic sourcing
efficiencies. Benefits achieved in fiscal 2022 were partially
offset by the planned investment in the Company's e-commerce
network.
These initiatives continue to deliver benefits in fiscal 2023.
Additional benefits are expected from strategic initiatives
launched more recently as part of Project Horizon, including
Scene+, the Company's new loyalty program. Scene+ was
successfully launched in Atlantic
Canada in August 2022,
followed by Western Canada in
September 2022 and Ontario in November
2022. During the fourth quarter of fiscal 2023,
Scene+ will be launched in Quebec and in the Thrifty Foods banner in
British Columbia ("B.C."). Project
Horizon initiatives focused on loyalty, store optimization and
customer experience will largely provide financial benefits in
fiscal 2024 and beyond.
Empire is hereby also announcing that the next locations for its
Farm Boy banner will be Burlington
and Port Credit, Ontario. As a
result, the Company has now confirmed Farm Boy's first 50 locations
in Ontario.
(1) See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release.
|
Summary Results – Third Quarter
On November 4, 2022, Empire
experienced IT system issues related to a Cybersecurity Event. The
Company has included in its Adjusted Metrics an adjustment for
direct costs such as inventory shrink, hardware and software
restoration costs, legal and professional fees, and labour costs,
net of insurance recoveries to date. The adjustment to net earnings
was ($39.1) million.
In addition, the Cybersecurity Event required certain
operational systems to be shut down for several weeks. The
inability to utilize these systems had a temporary negative impact
on Empire's sales and operational effectiveness, further impacting
third quarter net earnings by at least ($15.0) million (($0.06) per share).
Empire is in the process of working with its insurance providers
to make claims under its policies. Due to the complexity of
the cyber insurance coverage and related claims, there will be a
time lag between the initial incurrence of costs and the
recognition of insurance proceeds.
($ in millions, except
per
|
13 Weeks
Ended
|
|
$
|
|
39 Weeks
Ended
|
|
$
|
|
share
amounts)
|
|
Feb. 4,
2023
|
|
Jan. 29,
2022
|
|
Change
|
|
|
Feb. 4,
2023
|
|
Jan. 29,
2022
|
|
Change
|
|
Sales
|
$
|
7,489.3
|
$
|
7,377.3
|
$
|
112.0
|
|
$
|
23,069.7
|
$
|
22,321.6
|
$
|
748.1
|
|
Gross
profit(1)
|
|
1,900.6
|
|
1,892.7
|
|
7.9
|
|
|
5,833.7
|
|
5,655.7
|
|
178.0
|
|
Operating
income
|
|
232.8
|
|
354.8
|
|
(122.0)
|
|
|
910.8
|
|
1,030.1
|
|
(119.3)
|
|
Adjusted operating
income(1)
|
|
285.4
|
|
354.8
|
|
(69.4)
|
|
|
963.4
|
|
1,030.1
|
|
(66.7)
|
|
EBITDA(1)
|
|
492.5
|
|
597.5
|
|
(105.0)
|
|
|
1,670.7
|
|
1,744.6
|
|
(73.9)
|
|
Adjusted
EBITDA(1)
|
|
545.1
|
|
597.5
|
|
(52.4)
|
|
|
1,723.3
|
|
1,744.6
|
|
(21.3)
|
|
Net
earnings(2)
|
|
125.7
|
|
203.4
|
|
(77.7)
|
|
|
503.1
|
|
567.3
|
|
(64.2)
|
|
Adjusted net
earnings(1)(2)
|
|
164.8
|
|
203.4
|
|
(38.6)
|
|
|
542.2
|
|
567.3
|
|
(25.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS(2)
|
$
|
0.49
|
$
|
0.77
|
$
|
(0.28)
|
|
$
|
1.93
|
$
|
2.13
|
$
|
(0.20)
|
|
Adjusted
EPS(1)(2)
|
$
|
0.64
|
$
|
0.77
|
$
|
(0.13)
|
|
$
|
2.08
|
$
|
2.13
|
$
|
(0.05)
|
|
Diluted weighted
average number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of shares outstanding
(in millions)
|
|
258.4
|
|
264.9
|
|
|
|
|
260.7
|
|
266.6
|
|
|
|
Dividend per
share
|
$
|
0.165
|
$
|
0.150
|
|
|
|
$
|
0.495
|
$
|
0.450
|
|
|
|
|
13 Weeks
Ended
|
39 Weeks
Ended
|
|
Feb. 4,
2023
|
Jan. 29,
2022
|
Feb. 4,
2023
|
Jan. 29,
2022
|
Gross
margin(1)
|
25.4 %
|
25.7 %
|
25.3 %
|
25.3 %
|
EBITDA
margin(1)
|
6.6 %
|
8.1 %
|
7.2 %
|
7.8 %
|
Adjusted EBITDA
margin(1)
|
7.3 %
|
8.1 %
|
7.5 %
|
7.8 %
|
Same-store
sales(1) growth
|
0.6 %
|
0.2 %
|
2.5 %
|
0.0 %
|
Same-store sales growth
(decline), excluding fuel
|
0.1 %
|
(1.7) %
|
1.1 %
|
(1.8) %
|
Effective income tax
rate
|
20.7 %
|
26.0 %
|
24.4 %
|
25.6 %
|
(1)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release for a description of the types of costs included.
Additionally, in the third quarter of fiscal 2023, certain
estimated financial impacts associated with the Cybersecurity Event
are not reflected in the Adjusted Metrics above as they relate to
sales declines which management considers are attributable to the
Event, as well as operational effectiveness which temporarily
declined during the Event. Management estimates that the impact of
these non-adjusted items on operating income and EBITDA to be at
least ($20.0) million, and the net earnings impact to be at least
($15.0) million.
|
(2)
|
Attributable to
owners of the Company.
|
Outlook
The Company continues to be well positioned to pursue growth
despite the impacts of higher than normal inflation and supply
chain challenges.
The industry continues to experience heightened levels of
inflationary pressures, particularly related to cost of goods sold
and fuel. Although it is difficult to estimate how long these
pressures will last, the Company is focused on supplier
relationships and negotiations to ensure competitive pricing for
consumers whose shopping behaviours have become more price
sensitive as a result of the heightened inflationary
environment.
The industry continues to experience supply chain challenges due
to ongoing labour shortages. Although it is difficult to estimate
the duration of these challenges, the Company remains focused on
utilizing alternative sourcing options where necessary and does not
expect significant adverse impacts to its supply chain.
The Company expects same-store sales will grow in fiscal 2023.
For the third quarter of fiscal 2023, same-store sales growth
excluding fuel was 0.1% compared to a decline of 1.7% in the same
quarter last year. Same-store sales growth was 0.4% and 3.1% in the
first and second quarter of fiscal 2023, respectively. Margins will
continue to benefit from Project Horizon initiatives and other
operating improvements in fiscal 2023. These benefits could be
partially offset by the effect of sales mix changes between banners
and the impact of higher fuel pricing.
The Company expects continued improvements in the results of
Voilà's Toronto Customer Fulfilment Centre ("CFC") as volumes
increase and efficiencies improve. At the same time, Voilà will
also incur additional costs as the Montreal CFC continues to ramp
up and the Calgary and Vancouver
CFCs are commissioned. The ramp up of the Montreal CFC resulted in
higher costs in the first half of fiscal 2023 with improved results
expected in the remainder of the year. Future earnings will be
primarily impacted by the rate of sales growth. The Company expects
Voilà's fiscal 2023 net earnings dilution to be approximately the
same as fiscal 2022.
The Company continues to expand its discount business in
Western Canada with 44 stores now
operating as of March 15, 2023. Newer
stores are improving efficiency at a faster rate than the early
conversion stores as the business gains critical mass across each
province.
On December 13, 2022, the Company
signed a definitive agreement between a wholly-owned subsidiary of
Sobeys and Canadian Mobility Services Limited, a wholly-owned
subsidiary of Shell Canada, to sell all 56 retail fuel sites in
Western Canada for approximately
$100.0 million. Closing of the
transaction is subject to customary conditions, including
regulatory approvals. The Company expects the transaction to close
in the first quarter of fiscal 2024.
The Company is on track to achieve an incremental $500 million in annualized EBITDA. Over Project
Horizon's three-year timeframe, the Company expects to
generate a compound average growth rate in EPS of approximately 13%
and an increase in EBITDA margin of approximately 50 basis points,
both excluding the full impact of the Cybersecurity Event and the
one-time costs associated with the Grocery Gateway integration.
The 53rd week of operations in fiscal 2022 accounted
for approximately $551.0 million in
sales and generated earnings per share of $0.07. This will have an impact on Empire's
year-over-year results in the fourth quarter of fiscal
2023.
The estimated impact of the Cybersecurity Event on adjusted net
earnings in the third quarter of fiscal 2023 is ($39.1) million, net of initial insurance
recoveries. The Company also estimates that additional impacts to
net earnings from declines in sales and operational effectiveness
due to impacts such as the temporary loss of advanced planning,
promotion and fresh item management tools, temporary closure of
pharmacies, and customers' inability to redeem gift cards and
loyalty points was at least ($15.0)
million in the third quarter of fiscal 2023.
The Company estimates that the final impact of the Cybersecurity
Event on net earnings over fiscal 2023 and fiscal 2024 will be
approximately ($32.0) million, net of
estimated insurance recoveries. Insurance recoveries are expected
to be received over the next several quarters.
The Company expects the costs of the integration of Grocery
Gateway operations into Voilà will be charged to earnings in
the fourth quarter of fiscal 2023 and are estimated to be
approximately $11.0 million after
tax.
Sales
Sales for the quarter ended February 4,
2023 increased by 1.5%, primarily driven by benefits from
Project Horizon initiatives, including the expansion of FreshCo in
Western Canada, higher food
inflation and increased fuel sales. This increase was partially
offset by the impact of the novel coronavirus ("COVID-19" or
"pandemic") restrictions in place during the third quarter of the
prior year, changing consumer purchasing behaviours as a result of
higher food inflation and the impact of the Cybersecurity
Event.
Gross Profit
Gross profit for the quarter ended February 4, 2023 increased by 0.4%, primarily as
a result of benefits from Project Horizon initiatives, such as Own
Brands and the expansion of FreshCo, Voilà and Farm Boy, partially
offset by the Cybersecurity Event and the change in customer
purchasing behaviours.
Gross margin for the quarter decreased to 25.4% from 25.7% in
the prior year. Gross margin decreased primarily as a result of the
impact of the Cybersecurity Event and the effect of higher fuel
sales, partially offset by benefits from Project Horizon
initiatives. Gross margin, excluding the mix impact of fuel was
flat to last year.
Operating Income
|
13 Weeks
Ended
|
|
|
$
|
39 Weeks
Ended
|
|
|
$
|
($ in
millions)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Food
retailing
|
$
|
212.3
|
$
|
313.1
|
$
|
(100.8)
|
$
|
835.6
|
$
|
955.8
|
$
|
(120.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments and other
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crombie REIT
|
|
18.5
|
|
32.7
|
|
(14.2)
|
|
66.4
|
|
50.3
|
|
16.1
|
|
Genstar
|
|
5.4
|
|
10.7
|
|
(5.3)
|
|
10.0
|
|
29.1
|
|
(19.1)
|
|
Other operations, net
of corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
(3.4)
|
|
(1.7)
|
|
(1.7)
|
|
(1.2)
|
|
(5.1)
|
|
3.9
|
|
|
|
20.5
|
|
41.7
|
|
(21.2)
|
|
75.2
|
|
74.3
|
|
0.9
|
Operating
income
|
$
|
232.8
|
$
|
354.8
|
$
|
(122.0)
|
$
|
910.8
|
$
|
1,030.1
|
$
|
(119.3)
|
Adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cybersecurity
Event(1)
|
|
52.6
|
|
-
|
|
52.6
|
|
52.6
|
|
-
|
|
52.6
|
Adjusted operating
income(1)
|
$
|
285.4
|
$
|
354.8
|
$
|
(69.4)
|
$
|
963.4
|
$
|
1,030.1
|
$
|
(66.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release for a description of the types of costs
included. Additionally, in the third quarter of fiscal
2023, certain estimated financial impacts associated with the
Cybersecurity Event are not reflected in the adjusted metric above
as it relates to sales declines which management considers are
attributable to the Event, as well as operational effectiveness
which temporarily declined during the Event. Management estimates
that the impact of this non-adjusted item on operating income to be
at least ($20.0) million.
|
For the quarter ended February 4,
2023, operating income from the Food retailing segment
decreased mainly due to higher selling and administrative expenses
and a decrease in other income, partially offset by higher sales
and gross profit. Selling and administrative expenses increased
primarily as a result of costs related to the Cybersecurity Event,
higher depreciation and investments in Project Horizon initiatives,
including the expansion of Voilà, FreshCo and Farm Boy. The
decrease in other income was caused by higher lease termination
income in the prior year.
Operating income from the Investments and other operations
segment for the quarter ended February 4,
2023 decreased primarily as a result of lower equity
earnings from Crombie REIT mainly due to higher property sales in
the same quarter last year.
EBITDA
For the quarter ended February 4,
2023, EBITDA decreased to $492.5
million from $597.5 million in
the prior year mainly as a result of the factors affecting
operating income. EBITDA margin decreased to 6.6% from 8.1% in the
prior year.
|
|
13 Weeks
Ended
|
|
|
$
|
39 Weeks
Ended
|
|
|
$
|
($ in
millions)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
EBITDA
|
$
|
492.5
|
$
|
597.5
|
$
|
(105.0)
|
$
|
1,670.7
|
$
|
1,744.6
|
$
|
(73.9)
|
Adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cybersecurity
Event(1)
|
|
52.6
|
|
-
|
|
52.6
|
|
|
52.6
|
|
-
|
|
52.6
|
Adjusted
EBITDA(1)
|
$
|
545.1
|
$
|
597.5
|
$
|
(52.4)
|
$
|
1,723.3
|
$
|
1,744.6
|
$
|
(21.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release for a description of the types of costs included.
Additionally, in the third quarter of fiscal 2023, certain
estimated financial impacts associated with the Cybersecurity Event
are not reflected in the adjusted metric above as it relates to
sales declines which management considers are attributable to the
Event, as well as operational effectiveness which temporarily
declined during the Event. Management estimates that the impact of
this non-adjusted item on EBITDA to be at least ($20.0)
million.
|
For the quarter ended February 4,
2023, adjusted EBITDA decreased to $545.1 million from $597.5
million in the prior year. Adjusted EBITDA margin decreased
to 7.3% from 8.1% in the prior year.
Income Taxes
The effective income tax rate for the quarter ended February 4, 2023 was 20.7% compared to 26.0% in
the same quarter last year. The effective tax rate for the quarter
was lower than the statutory rate primarily due to the revaluation
of tax estimates, not all of which were recurring, and the benefit
of consolidated structured entities and capital items, both of
which are taxed at lower rates. The prior year effective tax rate
was lower than the statutory rate primarily due to consolidated
structured entities and capital gains, both of which are taxed at
lower rates, partially offset by adjustments for book and tax
differences.
Net Earnings
|
13 Weeks
Ended
|
|
|
$
|
39 Weeks
Ended
|
|
|
$
|
($ in millions, except
per share amounts)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Net
earnings(1)
|
$
|
125.7
|
$
|
203.4
|
$
|
(77.7)
|
$
|
503.1
|
$
|
567.3
|
$
|
(64.2)
|
EPS (fully
diluted)
|
$
|
0.49
|
$
|
0.77
|
|
|
$
|
1.93
|
$
|
2.13
|
|
|
Adjustment (net of
income taxes of $13.5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cybersecurity
Event(2)
|
|
39.1
|
|
-
|
|
39.1
|
|
39.1
|
|
-
|
|
39.1
|
Adjusted net
earnings(1)(2)
|
$
|
164.8
|
$
|
203.4
|
$
|
(38.6)
|
$
|
542.2
|
$
|
567.3
|
$
|
(25.1)
|
Adjusted EPS (fully
diluted)(2)
|
$
|
0.64
|
$
|
0.77
|
|
|
$
|
2.08
|
$
|
2.13
|
|
|
Diluted weighted
average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares outstanding (in
millions)
|
|
258.4
|
|
264.9
|
|
|
|
|
260.7
|
|
266.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Attributable to
owners of the Company.
|
(2)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release for a description of the types of costs included.
Additionally, in the third quarter of fiscal 2023, certain
estimated financial impacts associated with the Cybersecurity Event
are not reflected in the Adjusted Metrics above
as they relate to sales declines which management
considers are attributable to the Event, as well as operational
effectiveness which temporarily declined during the Event.
Management estimates that the impact of this non-adjusted item on
net earnings to be at least ($15.0) million.
|
Capital Expenditures
The Company invested $143.4 million in capital
expenditures(1) for the quarter ended February 4, 2023 (2022 – $159.5 million) including renovations and
construction of new stores, investments in advanced analytics
technology and other technology systems, FreshCo stores in
Western Canada and
Voilà CFCs.
(1)
Capital expenditures are calculated on an accrual basis and
includes acquisitions of property, equipment and investment
properties, and additions to intangibles.
|
Free Cash Flow
|
|
13 Weeks
Ended
|
39 Weeks
Ended
|
($ in
millions)
|
|
Feb. 4,
2023
|
|
Jan. 29,
2022
|
|
Feb. 4,
2023
|
|
Jan. 29,
2022
|
Cash flows from
operating activities
|
$
|
438.1
|
$
|
753.9
|
$
|
1,100.7
|
$
|
1,637.6
|
Add:
|
proceeds on disposal of
assets(1) and lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
terminations
|
|
2.2
|
|
135.3
|
|
19.5
|
|
150.1
|
Less:
|
interest
paid
|
|
(10.3)
|
|
(6.1)
|
|
(48.6)
|
|
(34.2)
|
|
payments of lease
liabilities, net of payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
received
for finance subleases
|
|
(164.4)
|
|
(156.9)
|
|
(489.8)
|
|
(416.8)
|
|
acquisitions of
property, equipment, investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
property
and intangibles
|
|
(187.6)
|
|
(180.8)
|
|
(599.5)
|
|
(574.4)
|
Free cash
flow(2)
|
$
|
78.0
|
$
|
545.4
|
$
|
(17.7)
|
$
|
762.3
|
(1)
Proceeds on disposal of assets include property, equipment and
investment property.
|
(2) See
"Non-GAAP Financial Measures & Financial Metrics" section of
this News Release.
|
Free cash flow for the quarter ended February 4, 2023 decreased versus prior year
primarily as a result of a decrease in cash flows from operating
activities, and lower proceeds on disposal of assets and lease
terminations. The decrease in cash flows from operating activities
is driven by unfavourable working capital changes, lower net
earnings and higher income taxes paid.
FINANCIAL PERFORMANCE BY SEGMENT
Food Retailing
|
13 Weeks
Ended
|
|
$
|
39 Weeks
Ended
|
|
$
|
($ in
millions)
|
|
Feb 4,
2023
|
|
Jan 29, 2022
|
|
Change
|
|
Feb 4,
2023
|
|
Jan 29, 2022
|
|
Change
|
Sales
|
$
|
7,489.3
|
$
|
7,377.3
|
$
|
112.0
|
$
|
23,069.7
|
$
|
22,321.6
|
$
|
748.1
|
Gross profit
|
|
1,900.6
|
|
1,892.7
|
|
7.9
|
|
5,833.7
|
|
5,655.7
|
|
178.0
|
Operating
income
|
|
212.3
|
|
313.1
|
|
(100.8)
|
|
835.6
|
|
955.8
|
|
(120.2)
|
Adjusted operating
income(1)
|
|
264.9
|
|
313.1
|
|
(48.2)
|
|
888.2
|
|
955.8
|
|
(67.6)
|
EBITDA
|
|
471.9
|
|
555.7
|
|
(83.8)
|
|
1,595.1
|
|
1,669.9
|
|
(74.8)
|
Adjusted
EBITDA(1)
|
|
524.5
|
|
555.7
|
|
(31.2)
|
|
1,647.7
|
|
1,669.9
|
|
(22.2)
|
Net
earnings(2)
|
|
110.3
|
|
173.7
|
|
(63.4)
|
|
446.6
|
|
512.7
|
|
(66.1)
|
Adjusted net
earnings(1)(2)
|
|
149.4
|
|
173.7
|
|
(24.3)
|
|
485.7
|
|
512.7
|
|
(27.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release for a description of the types of costs included.
Additionally, in the third quarter of fiscal 2023, certain
estimated financial impacts associated with the Cybersecurity Event
are not reflected in the Adjusted Metrics above as they relate to
sales declines which management considers are attributable to the
Event, as well as operational effectiveness which temporarily
declined during the Event. Management estimates that the impact of
these non-adjusted items on operating income and EBITDA to be at
least ($20.0) million, and the net earnings impact to be at least
($15.0) million.
|
(2)
|
Attributable to
owners of the Company.
|
Investments and Other Operations
|
13 Weeks
Ended
|
|
|
$
|
39 Weeks
Ended
|
|
|
$
|
($ in
millions)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Change
|
Crombie REIT
|
$
|
18.5
|
$
|
32.7
|
$
|
(14.2)
|
$
|
66.4
|
$
|
50.3
|
$
|
16.1
|
Genstar
|
|
5.4
|
|
10.7
|
|
(5.3)
|
|
10.0
|
|
29.1
|
|
(19.1)
|
Other operations, net
of corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
(3.4)
|
|
(1.7)
|
|
(1.7)
|
|
(1.2)
|
|
(5.1)
|
|
3.9
|
|
$
|
20.5
|
$
|
41.7
|
$
|
(21.2)
|
$
|
75.2
|
$
|
74.3
|
$
|
0.9
|
For the quarter ended February 4,
2023, income from Investments and other operations decreased
primarily as a result of lower equity earnings from Crombie REIT,
mainly due to increased sales of properties in the same quarter
last year.
CONSOLIDATED FINANCIAL CONDITION
($ in millions, except
per share and ratio calculations)
|
|
Feb. 4,
2023
|
|
May 7, 2022
|
|
Jan. 29,
2022
|
Shareholders' equity,
net of non-controlling interest
|
$
|
5,151.7
|
$
|
4,991.5
|
$
|
4,789.9
|
Book value per common
share(1)
|
$
|
19.98
|
$
|
18.82
|
$
|
18.14
|
Long-term debt,
including current portion
|
$
|
1,011.9
|
$
|
1,176.7
|
$
|
1,144.1
|
Long-term lease
liabilities, including current portion
|
$
|
6,198.3
|
$
|
6,285.4
|
$
|
6,349.5
|
Funded debt to total
capital(1)
|
|
58.3 %
|
|
59.9 %
|
|
58.0 %
|
Funded debt to adjusted
EBITDA(1)(2)
|
|
3.1x
|
|
3.2x
|
|
3.3x
|
Adjusted EBITDA to
interest expense(1)(3)
|
|
8.4x
|
|
8.3x
|
|
8.6x
|
Trailing four-quarter
adjusted EBITDA(1)
|
$
|
2,309.5
|
$
|
2,330.8
|
$
|
2,259.0
|
Trailing four-quarter
interest expense
|
$
|
276.4
|
$
|
279.7
|
$
|
263.3
|
Current assets to
current liabilities
|
|
0.8x
|
|
0.8x
|
|
0.9x
|
Total assets
|
$
|
16,355.3
|
$
|
16,593.6
|
$
|
16,433.8
|
Total non-current
financial liabilities
|
$
|
7,343.9
|
$
|
7,220.0
|
$
|
7,831.1
|
(1) See
"Non-GAAP Financial Measures & Financial Metrics" section of
this News Release.
|
(2)
Calculation uses trailing four-quarter adjusted
EBITDA.
|
(3)
Calculation uses trailing four-quarter adjusted EBITDA and
interest expense.
|
Sobeys Inc.'s ("Sobeys") credit ratings remained unchanged from the
prior quarter. The following table shows Sobeys' credit ratings as
at March 15, 2023:
Rating
Agency
|
Credit Rating
(Issuer rating)
|
Trend/Outlook
|
|
DBRS
Morningstar
|
BBB
|
Stable
|
|
S&P
Global
|
BBB-
|
Stable
|
|
Pursuant to an agreement dated November 3,
2022, Empire amended and restated its senior, unsecured
revolving term credit agreement extending the maturity date to
November 4, 2027. The principal
amount was reduced from $250.0
million to $150.0 million. As
of February 4, 2023, the outstanding
amount of this facility was $94.1
million (2022 – $10.2
million). Interest payable on this facility fluctuates with
changes in the Canadian prime rate or bankers' acceptance
rates.
Pursuant to an agreement dated November
3, 2022, Sobeys amended and restated its $650.0 million senior, unsecured revolving term
credit agreement extending the maturity date to November 4, 2027. As of February 4, 2023, the outstanding amount of this
facility was $279.7 million (2022 – $
nil) and Sobeys has issued $69.9
million in letters of credit against the facility (2022 –
$65.1 million). Interest payable on
this facility fluctuates with changes in the Canadian prime rate or
bankers' acceptance rates.
Dividend Declaration
The Company declared a quarterly dividend of $0.165 per share on both the Non-Voting Class A
shares ("Class A shares") and the Class B common shares that will
be payable on April 28, 2023 to
shareholders of record on April 14,
2023. These dividends are eligible dividends as defined for
the purposes of the Income Tax Act (Canada) and applicable provincial
legislation.
Normal Course Issuer Bid ("NCIB")
On June 21, 2022, the Company
renewed its NCIB by filing a notice of intention with the Toronto
Stock Exchange ("TSX") to purchase for cancellation up to
10,500,000 Class A shares representing 7.0% of the public float of
150,258,764 Class A shares outstanding as of June 17, 2022. The purchases will be made through
the facilities of the TSX and/or any alternative Canadian trading
systems to the extent they are eligible. The price that the Company
will pay for any such shares will be the market price at the time
of acquisition. The Company believes that repurchasing shares at
the prevailing market prices from time to time is a worthwhile use
of funds and in the best interest of the Company and its
shareholders. The NCIB expires on July 1,
2023.
Shares purchased during the quarter and year-to-date ended
February 4, 2023 compared to the same
periods of the previous fiscal year are shown in the table
below:
|
|
13 Weeks
Ended
|
|
39 Weeks
Ended
|
|
|
($ in millions, except
per share amounts)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Number of
shares
|
|
2,228,582
|
|
2,115,534
|
|
6,334,622
|
|
5,965,883
|
|
Weighted average price
per share
|
$
|
36.14
|
$
|
37.91
|
$
|
37.62
|
$
|
38.98
|
|
Cash consideration
paid
|
$
|
80.6
|
$
|
80.1
|
$
|
238.3
|
$
|
232.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company engages in an automatic share purchase plan with its
designated broker allowing the purchases of Class A shares for
cancellation under its NCIB program during trading black-out
periods.
Including purchases made subsequent to the end of the quarter,
as at March 14, 2023 the Company has
purchased 7,356,194 Class A shares (March 8,
2022 – 6,378,983) at a weighted average price of
$37.46 (March
8, 2022 – $39.00) for a total
consideration of $275.6 million
(March 8, 2022 – $248.8 million).
Company Strategy
In the first quarter of fiscal 2021, the Company launched
Project Horizon, a three-year strategy focused on core business
expansion and the acceleration of e-commerce. For additional detail
on Project Horizon, please refer to Empire's Management's
Discussion and Analysis ("MD&A") for the third quarter ended
February 4, 2023.
Business Updates
Cybersecurity Event
On November 4, 2022, Empire
experienced IT system issues related to a Cybersecurity Event. Upon
discovery, the Company immediately activated its incident response
and business continuity plans, including the engagement of
world-class experts, isolated the source and implemented measures
to prevent further spread.
This Cybersecurity Event and the precautionary response caused
some temporary challenges. For example, availability of some
products was temporarily impacted, pharmacy services were shut down
for four days while some in-store services, such as self checkouts,
gift cards and redemption of Scene+ points were
impacted for approximately one week. Other than this, customers
would have noticed very few changes to their normal shopping
experience.
Empire's security teams, supplemented by leading cyber defense
firms, worked to remediate this incident, implemented preventative
measures, including proactively shutting certain systems down out
of an abundance of caution, and took steps to supplement existing
security monitoring, scanning and protective measures. During
restoration efforts, the Company established certain workaround
processes to ensure continuity of supply chain, product
availability, costing and retail pricing. Empire has substantially
completed its controlled and phased approach to systematically
bringing information and administrative systems back
online.
The Company regards the protection of personal information as
critically important and has taken all required steps with privacy
regulators and potentially impacted individuals.
The Company has a multi-layered security approach involving
cyber software tools, controls, policies, standards and procedures
pertaining to security access, system development, change
management and problem and incident management. This Cybersecurity
Event has reinforced the importance of the investments already made
in the cybersecurity area, as well as upcoming investments in the
IT systems and people. Continuous enhancement of the Company's IT
infrastructure will strengthen its defense against future such
incidents.
The Company maintains a variety of insurance coverages,
including cyber insurance. Empire is in the process of working with
its insurance providers to make claims under its policies. Due to
the complexity of the cyber insurance coverage and related claims,
there will be a time lag between the initial incurrence of costs
and the recognition of insurance proceeds. While the impact of the
Cybersecurity Event is substantially behind the Company, management
expects that there will be some additional costs incurred after the
third quarter of fiscal 2023.
The Cybersecurity Event is considered an unusual item and will
be excluded from the Company's assessment of Project Horizon. For
comparative purposes, the Company is presenting Adjusted Metrics to
exclude the impact of the Cybersecurity Event. The financial impact
of incremental direct costs and inventory shrink on net earnings in
the third quarter is estimated to be ($39.1)
million, net of estimated insurance recoveries to date.
Please refer to the "Summary Results – Third Quarter" section of
this document for a reconciliation of these non-GAAP financial
measures.
In addition, certain financial impacts are not reflected in the
Adjusted Metrics described above, as they relate to sales declines
which management considers are attributable to the Event, as well
as operational effectiveness which temporarily declined during the
Event. Management estimates that the impact on net earnings in the
third quarter was at least ($15.0)
million from impacts such as the temporary loss of advanced
planning, promotion, and fresh item management tools, temporary
closures of pharmacies and customers' inability to redeem gift
cards and loyalty points.
Empire estimates, based on available information, that the final
impact on net earnings over fiscal 2023 and fiscal 2024 will be
approximately ($32.0) million, net of
estimated insurance recoveries.
Farm Boy
The acquisition of Farm Boy on December
10, 2018 added 26 locations to the Company's Ontario store network. The Company expects to
open an additional 22 stores in the five years following the
acquisition date, mainly in the Greater
Toronto Area ("GTA"). The Company opened one new location in
each of the second and third quarters of fiscal 2023, and has
opened an additional location subsequent to the end of the third
quarter for a total of three new stores to date in fiscal 2023. As
at March 15, 2023, Farm Boy has 47
stores open and operating. One store opening originally planned for
fiscal 2023 has been delayed to the first half of fiscal 2024.
FreshCo
In fiscal 2018, the Company announced plans to expand its
FreshCo discount format to Western
Canada with expectations of converting up to 25% of the 255
Safeway and Sobeys full-service format stores in Western Canada to the FreshCo banner. The
Company opened one FreshCo store in Alberta during the third quarter of fiscal
2023 and opened another store in Alberta subsequent to the end of the third
quarter. As at March 15, 2023,
FreshCo has 44 stores in Western
Canada open and operating.
Voilà
In fiscal 2021, the Company introduced its new e-commerce
platform, Voilà, which is the future of online grocery home
delivery in Canada. Voilà is powered
by industry-leading technology provided by Ocado
Group plc ("Ocado"), through its automated CFCs. Robots assemble
orders efficiently and safely, resulting in minimal
product handling, while Voilà teammates deliver
orders directly to customers' homes.
The Company will operate four CFCs across Canada. With
these four CFCs, the supporting spokes and curbside
pickup, the Company
will be able to serve approximately 75% of
Canadian households representing approximately 90% of Canadians'
projected e-commerce spend. The first CFC in Toronto began deliveries on June 22, 2020 and has been successfully operating
for almost three years.
The second CFC in Montreal
began deliveries in March 2022,
beginning with a phased transition of customers
to Voilà par IGA from IGA.net. The rollout was completed in
the first quarter of fiscal 2023 and Voilà par IGA now services
over 100 municipalities from Gatineau to Montreal to Quebec
City. The Montreal
CFC is progressing well with increasing weekly
order volume and strong customer experience
metrics, including on-time delivery and fulfilment.
Crombie REIT completed the construction of the building for
Voilà's third CFC in Calgary and
has turned it over to Ocado to build the internal grid. The CFC
will service the majority of Alberta, with deliveries expected to start in
the first quarter of fiscal 2024.
On February 7, 2022, the Company
announced that its fourth CFC will be located in Vancouver and will service customers in B.C.
starting in calendar 2025.
In fiscal 2021, the Company launched Voilà curbside pickup,
which currently services 98 stores in locations across Atlantic Canada, Ontario, Manitoba, Saskatchewan, Alberta and B.C. The curbside pickup solution
is powered by Ocado technology and serves customers
in areas where future CFCs will not, or are not yet,
operating.
Voilà's future earnings will primarily be impacted by the rate
of sales growth. Voilà's capture of the market continues to be
strong. Management expects that Voilà's net earnings dilution for
fiscal 2023 will be approximately the same as fiscal 2022.
Longo's e-commerce business, Grocery Gateway, will be merged
into Voilà in July 2023 thereby
capturing logistics and delivery synergies. Operating as a 'shop in
shop' will increase the reach of Longo's within Ontario and increase Voilà's product count by
approximately 2,000 Longo's products. The costs of the integration
will be charged to earnings in the fourth quarter of fiscal 2023
and are estimated to be approximately $11.0 million after tax.
In the third quarter of fiscal 2023, Voilà delivered sequential
growth of 9.4% versus the second quarter of fiscal
2023. Overall, the Company's four e-commerce platforms (Voilà,
Grocery Gateway, IGA.net and ThriftyFoods.com) experienced a
combined sales decline of 14.7% compared to the same quarter in the
prior year. The decrease is primarily driven by higher online sales
in the third quarter of fiscal 2022 as a result of the
pandemic.
Forward-Looking Information
This document contains forward-looking statements which are
presented for the purpose of assisting the reader to contextualize
the Company's financial position and understand management's
expectations regarding the Company's strategic priorities,
objectives and plans. These forward-looking statements may not be
appropriate for other purposes. Forward-looking statements are
identified by words or phrases such as "anticipates", "expects",
"believes", "estimates", "intends", "could", "may", "plans",
"predicts", "projects", "will", "would", "foresees" and other
similar expressions or the negative of these terms.
These forward-looking statements include, but are not limited
to, the following items:
- Management's expectations regarding the scope and impact of the
Cybersecurity Event, and the estimate of the impact on its
financial results in the third quarter of fiscal 2023 and
subsequent quarters. These statements and expectations may be
impacted by several factors including the nature, amount and timing
of the insurance outcome;
- The Company's expectation of the impacts of cost inflationary
pressures, which may be impacted by supplier relationships and
negotiations and the macro-economic environment;
- The Company's expectation that labour shortages will not have
further significant impacts on supply chain challenges, which may
be impacted by labour force availability;
- The Company's expectations that fiscal 2023 will achieve growth
of same-store sales, which may be impacted by the effects of
inflationary pressures on consumer buying behaviours;
- The Company's expectations for net earnings dilution for the
Voilà program for fiscal 2023, which may be impacted by future
operating and capital costs, customer response and the performance
of its technology provider, Ocado;
- The FreshCo expansion in Western
Canada and Farm Boy expansion in Ontario, including the Company's expectations
regarding future operating results and profitability, the amount
and timing of expenses, the projected number of store openings, and
the location, feasibility and timing of construction, all of which
may be impacted by construction schedules and permits, the economic
environment and labour relations;
- The Company's expectations on the timing of the disposition of
56 retail fuel sites in Western
Canada, which may be impacted by regulatory approval and
closing conditions;
- The Company's plan to integrate Voilà and Grocery Gateway may
be impacted by supplier transition of platforms;
- The Company's expectations regarding the financial impact and
benefits of Project Horizon and its underlying initiatives, which
could be impacted by several factors, including the time required
by the Company to complete the initiatives and the effects of
inflationary pressures;
- The Company's plans to purchase for cancellation Non-Voting
Class A shares under the normal course issuer bid, which may be
impacted by market and economic conditions, availability of
sellers, changes in laws and regulations, and the results of
operations; and
- The Company's expectations regarding the amount and timing of
expenses relating to the completion of any future CFC, which may be
impacted by supply of materials and equipment, construction
schedules and capacity of construction contractors.
By its nature, forward-looking information requires the Company
to make assumptions and is subject to inherent risks, uncertainties
and other factors which may cause actual results to differ
materially from forward-looking statements made. For more
information on risks, uncertainties and assumptions that may impact
the Company's forward-looking statements, please refer to the
Company's materials filed with the Canadian securities regulatory
authorities, including the "Risk Management" section of the fiscal
2022 annual MD&A.
Although the Company believes the predictions, forecasts,
expectations or conclusions reflected in the forward-looking
information are reasonable, it can provide no assurance that such
matters will prove correct. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating the
forward-looking information and are cautioned not to place undue
reliance on such forward-looking information. The forward-looking
information in this document reflects the Company's current
expectations and is subject to change. The Company does not
undertake to update any forward-looking statements that may be made
by or on behalf of the Company other than as required by applicable
securities laws.
NON-GAAP FINANCIAL MEASURES & FINANCIAL METRICS
There are measures and metrics included in this news release
that do not have a standardized meaning under generally accepted
accounting principles ("GAAP") and therefore may not be comparable
to similarly titled measures and metrics presented by other
publicly traded companies. Management believes that certain of
these measures and metrics, including gross profit and EBITDA, are
important indicators of the Company's ability to generate liquidity
through operating cash flow to fund future working capital
requirements, service outstanding debt and fund future capital
expenditures and uses these metrics for these purposes.
In addition, management adjusts measures and metrics, including
operating income, EBITDA and net earnings in an effort to provide
investors and analysts with a more comparable year-over-year
performance metric than the basic measure by excluding certain
items. These items may impact the analysis of trends in performance
and affect the comparability of the Company's core financial
results. By excluding these items, management is not implying they
are non-recurring.
The Company includes these measures and metrics because it
believes certain investors use these measures and metrics as a
means of assessing financial performance. Empire's definition of
the non-GAAP terms included in this News Release are as
follows:
- The Cybersecurity Event adjustment includes the impact of
incremental direct costs such as inventory shrink, hardware and
software restoration costs, legal and professional fees, and labour
costs. Management believes that the Cybersecurity Event adjustment
results in a useful economic representation of the underlying
business on a comparative basis. The adjustment does not include
management's estimate of the full financial impact of the
Cybersecurity Event, as it excludes the net earnings impacts
related to the estimated decline in sales and operational
effectiveness from impacts such as the temporary loss of advanced
planning, promotion and fresh item management tools, the temporary
closure of pharmacies, and customers' temporary inability to redeem
gift cards and loyalty points.
- Same-store sales are sales from stores in the same location in
both reporting periods.
- Same-store sales, excluding fuel are sales from stores in the
same location in both reporting periods excluding the fuel sales
from stores in the same location in both reporting periods.
- Gross profit is calculated as sales less cost of sales.
- Gross margin is gross profit divided by sales.
- Adjusted operating income is operating income excluding certain
items to better analyze trends in performance. These adjustments
result in a truer economic representation of the underlying
business on a comparative basis. Adjusted operating income is
reconciled to operating income in its respective subsection of the
"Summary Results – Third Quarter" section.
- EBITDA is calculated as net earnings before finance costs (net
of finance income), income tax expense, depreciation and
amortization of intangibles.
The following table reconciles net earnings to EBITDA:
|
13 Weeks
Ended
|
|
|
39 Weeks
Ended
|
|
($ in
millions)
|
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Feb. 4,
2023
|
Jan. 29,
2022
|
Net earnings
|
$
|
130.8
|
$
|
213.7
|
|
$
|
539.8
|
$
|
617.9
|
Income tax
expense
|
|
34.2
|
|
75.1
|
|
|
174.2
|
|
212.1
|
Finance costs,
net
|
|
67.8
|
|
66.0
|
|
|
196.8
|
|
200.1
|
Operating
income
|
|
232.8
|
|
354.8
|
|
|
910.8
|
|
1,030.1
|
Depreciation
|
|
229.6
|
|
215.4
|
|
|
679.0
|
|
644.5
|
Amortization of
intangibles
|
|
30.1
|
|
27.3
|
|
|
80.9
|
|
70.0
|
EBITDA
|
$
|
492.5
|
$
|
597.5
|
|
$
|
1,670.7
|
$
|
1,744.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- EBITDA margin is EBITDA divided by sales.
- Adjusted EBITDA is EBITDA excluding certain items to better
analyze trends in performance. These adjustments result in a truer
economic representation of the underlying business on a comparative
basis. Adjusted EBITDA is reconciled to EBITDA in its respective
subsection of the "Summary Results – Third Quarter" section.
- Adjusted EBITDA margin is adjusted EBITDA divided by
sales.
- Free cash flow is calculated as cash flows from operating
activities, plus proceeds on disposal of property, equipment and
investment property and lease terminations, less acquisitions of
property, equipment, investment property and intangibles, interest
paid and payments of lease liabilities, net of payments received
from finance subleases.
- Book value per common share is shareholders' equity, net of
non-controlling interest, divided by total common shares
outstanding.
The following table shows the calculation of Empire's book value
per common share as at February 4,
2023, May 7, 2022 and
January 29, 2022:
($ in millions, except
per share information)
|
Feb. 4,
2023
|
May 7, 2022
|
Jan. 29,
2022
|
Shareholders' equity,
net of non-controlling interest
|
$
|
5,151.7
|
$
|
4,991.5
|
$
|
4,789.9
|
Shares outstanding
(basic)
|
|
257.9
|
|
265.2
|
|
264.1
|
Book value per common
share
|
$
|
19.98
|
$
|
18.82
|
$
|
18.14
|
|
|
|
|
|
|
|
|
|
|
- Funded debt is all interest-bearing debt, which includes bank
loans, bankers' acceptances, long-term debt and long-term lease
liabilities.
- Total capital is calculated as funded debt plus shareholders'
equity, net of non-controlling interest.
The following table reconciles the Company's funded debt and
total capital to GAAP measures as reported on the balance sheets as
at February 4, 2023, May 7, 2022 and January
29, 2022, respectively:
($ in
millions)
|
|
Feb. 4,
2023
|
|
May 7, 2022
|
|
Jan. 29,
2022
|
Long-term debt due
within one year
|
$
|
103.1
|
$
|
581.0
|
$
|
53.8
|
Long-term
debt
|
|
908.8
|
|
595.7
|
|
1,090.3
|
Lease liabilities due
within one year
|
|
545.0
|
|
509.5
|
|
556.2
|
Long-term lease
liabilities
|
|
5,653.3
|
|
5,775.9
|
|
5,793.3
|
Funded debt
|
$
|
7,210.2
|
$
|
7,462.1
|
$
|
7,493.6
|
Total shareholders'
equity, net of non-controlling interest
|
|
5,151.7
|
|
4,991.5
|
|
4,789.9
|
Total
capital
|
$
|
12,361.9
|
$
|
12,453.6
|
$
|
12,283.5
|
- Adjusted net earnings is net earnings, net of non-controlling
interest, excluding certain items to better analyze trends in
performance. These adjustments result in a truer economic
representation of the underlying business on a comparative basis.
Adjusted net earnings is reconciled in its respective subsection of
the "Summary Results – Third Quarter" section.
- Adjusted EPS (fully diluted) is calculated as adjusted net
earnings divided by diluted weighted average number of shares
outstanding.
- Funded debt to total capital ratio is funded debt divided by
total capital.
- Funded debt to adjusted EBITDA ratio is funded debt divided by
trailing four-quarter EBITDA.
- Adjusted EBITDA to interest expense ratio is trailing
four-quarter EBITDA divided by trailing four-quarter interest
expense.
- Management calculates interest expense as interest expense on
financial liabilities measured at amortized cost and interest
expense on lease liabilities.
The following table reconciles finance costs, net to interest
expense:
|
|
13 Weeks
Ended
|
|
|
39 Weeks
Ended
|
|
($ in
millions)
|
Feb. 4,
2023
|
Jan. 29,
2022
|
|
Feb. 4,
2023
|
Jan. 29,
2022
|
Finance costs,
net
|
$
|
67.8
|
$
|
66.0
|
|
$
|
196.8
|
$
|
200.1
|
Plus:
|
finance income,
excluding interest income on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
lease
receivables
|
|
1.2
|
|
2.2
|
|
|
3.6
|
|
5.0
|
Less:
|
pension finance costs,
net
|
|
(1.1)
|
|
(1.9)
|
|
|
(5.1)
|
|
(5.8)
|
Less:
|
accretion expense on
provisions
|
|
(0.4)
|
|
(0.5)
|
|
|
(1.1)
|
|
(1.8)
|
Interest
expense
|
$
|
67.5
|
$
|
65.8
|
|
$
|
194.2
|
$
|
197.5
|
For a more complete description of Empire's non-GAAP measures and
metrics, please see the section headed "Non-GAAP Financial Measures
& Financial Metrics" in Empire's MD&A for the third quarter
ended February 4, 2023 available on
SEDAR at www.sedar.com, which section is incorporated by reference
into this press release.
CONFERENCE CALL INFORMATION
The Company will hold an analyst call on Thursday, March 16, 2023 beginning at
12:30 p.m. (Eastern Standard Time)
during which senior management will discuss the Company's financial
results for the third quarter of fiscal 2023. To instantly join the
conference call by phone, please use the following URL to easily
register yourself and be connected into the conference call
automatically: https://emportal.ink/3YDagQi. You can also be
entered to the call by an Operator by dialing (888) 390-0546
outside the Toronto area or (416)
764-8688 from within the Toronto
area.
To secure a line, please call 10 minutes prior to the conference
call; you will be placed on hold until the conference call
begins. The media and investing public may access this conference
call via a listen mode only. You may also listen to a live
audiocast of the conference call by visiting the "Quick Links"
section of the Company's website located at www.empireco.ca, and
then navigating to the "Empire Company Limited Quarterly Results
Call" link.
Replay will be available by dialing (888) 390-0541 and entering
access code 944679 until midnight March
30, 2023, or on the Company's website for 90 days following
the conference call.
ABOUT EMPIRE
Empire Company Limited (TSX: EMP.A) is a Canadian company
headquartered in Stellarton, Nova
Scotia. Empire's key businesses are food retailing, through
wholly-owned subsidiary Sobeys Inc., and related real estate. With
approximately $30.9 billion in annual
sales and $16.4 billion in assets,
Empire and its subsidiaries, franchisees and affiliates employ
approximately 130,000 people.
Additional financial information relating to Empire, including
the Company's Annual Information Form, can be found on the
Company's website at www.empireco.ca or on SEDAR at
www.sedar.com.
For further information, please contact:
SOURCE Empire Company Limited