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Healthier foods helping Sobeys boost bottom line in recent results: executive

Michael Tutton, The Canadian Press

A Sobeys grocery store is seen in Halifax on Thursday, Sept. 11, 2014. Empire Co. Ltd., parent company of the supermarket chain, reported a big increase in first-quarter net profit and a more than 35% increase in revenue as a result of its acquisition of Canada Safeway.THE CANADIAN PRESS/Andrew Vaughan
A Sobeys grocery store is seen in Halifax on Thursday, Sept. 11, 2014. Empire Co. Ltd., parent company of the supermarket chain, reported a big increase in first-quarter net profit and a more than 35% increase in revenue as a result of its acquisition of Canada Safeway.THE CANADIAN PRESS/Andrew Vaughan

The chief executive of Empire Co. Ltd. says he's counting on Canadians' desire to buy healthier foods to help keep profits rolling in for the firm's Sobeys Inc. supermarket chain.

Marc Poulin said healthier and easy-to-prepare food products introduced into the supermarket chain over the past year are part of the reason for the recent profit jump at the stores.

Canadians are changing their outlook on food, Poulin said Thursday.

"They truly understand with the obesity problem we have ... they clearly understand there is something broken in the relationship Canadians have with food," he said in an interview after the company's annual shareholders meeting.

"They have decided we are going to be the ones helping them in a transition."

Poulin, who became Empire's CEO as well as chief executive of Sobeys in January, said some examples of new programs in stores include a greater variety of breads, pre-marinated meats, and meals that replace home cooking.

He declined to quantify how much the specific programs are adding to revenues.

However, results released on Wednesday say same-store sales, at locations open at least a year, were up 1.3 per cent despite a market that has become fiercely competitive.

Poulin's comments came the day after the Nova Scotia-based firm, which has one of Canada's largest grocery chains, announced a net profit of $123.1 million or $1.33 for quarter from May 4 to Aug. 2 this year.

Empire's adjusted net earnings, which are more closely watched by analysts, were $131.7 million or $1.43 per share, well ahead of the average of estimate of $1.35 per share.

Revenue in the three months to Aug. 2 rose to $6.22 billion, up from just under $4.6 billion in the prior-year period — in line with estimates — mostly because of additional Safeway Canada stores in a $5.8 billion transaction that closed in November.

The profit for the latest quarter was a turn-around from the fourth-quarter ended May 3, when net income dropped to $800,000, or a penny per diluted share, as the company recognized at $169.8 million accounting charge for administrative and sales costs from its restructuring plan.

Poulin says the closure of 50 less successful supermarkets, announced in June, played only a marginal role in the results. He said only about half of the announced closures have taken place.

He also described the impact of store closures on the bottom line as "immaterial" so far.

The company has said it will continue to focus on integrating the Canada Safeway business and will continue to look for ways to cut costs.

"We expect this program (the closures) to take up to a year," Poulin said.

He declined to indicate what the closures will mean to the bottom line or to provide figures on the total layoffs that will result.

Analysts have said Sobeys faces fierce price competition in the grocery business.