Empire Company Limited, the parent company of Sobeys, has announced strong third-quarter results for fiscal 2025, marking a 3.1% increase in total sales and improved same-store food sales growth. The company reported net earnings of $146.1 million ($0.62 per share), an 8.9% increase from the previous year, despite ongoing economic pressures and shifts in consumer spending.
The continued expansion of its discount banner FreshCo, increased focus on digital transformation, and cost efficiency initiatives have contributed to the company’s stable financial performance.
“We are pleased to see our strong execution continue in Q3, highlighted by improving same-store sales and our ongoing discipline in managing margins,” said Michael Medline, President & CEO of Empire Company Limited.
Sales Growth and Profitability Trends
Empire’s Q3 sales totaled $7.73 billion, up from $7.49 billion in the same period last year. Same-store food sales grew 2.6%, while fuel sales saw a modest 0.8% increase. The company attributed the rise in food sales to its investments in store renovations, technology upgrades, and supply chain efficiencies.
Gross profit increased 4.8% year-over-year, reaching $2.08 billion, with a gross margin improvement to 27.0% from 26.5%. This was primarily driven by operational discipline aimed at reducing shrink, business expansion (including FreshCo and Farm Boy), and the continued rollout of private-label brands under its Own Brands program.
However, adjusted net earnings saw a slight decline, coming in at $146.1 million compared to $153.1 million in Q3 2024. The company attributed this to strategic investments in e-commerce, technology, and loyalty programs, including its growing Scene+ initiative.
Investments in Store Network and Sustainability
Empire continues to prioritize investments in its store network, with a goal to renovate 20% to 25% of its locations between fiscal 2024 and 2026. This includes capital allocated to store enhancements, refrigeration system upgrades, and other sustainability initiatives aimed at improving energy efficiency.
“Our investment in store renovations and sustainability initiatives will ensure we continue meeting evolving customer expectations,” said Medline. “By modernizing our stores and improving operational efficiencies, we are building a more resilient retail network.”
Additionally, the company remains committed to expanding its discount segment, with FreshCo now operating 48 locations in Western Canada, reinforcing its market presence in price-sensitive regions.
E-Commerce and Digital Expansion Fuel Growth
Empire’s digital strategy and e-commerce investments have started to pay off, with online sales increasing by 71.9% compared to last year.
While the company initially planned to open a fourth Customer Fulfillment Centre (CFC) in Vancouver, it has paused construction to focus on optimizing existing facilities in Toronto, Montreal, and Calgary. In a strategic shift, Empire ended its exclusive partnership with Ocado, allowing greater flexibility in its e-commerce expansion.
The company also expanded partnerships with Instacart and Uber Eats, completing a national rollout that enables same-day grocery delivery across its key banners, including Sobeys, Farm Boy, Longo’s, FreshCo, IGA, and Foodland.
“Our e-commerce strategy has been adjusted to ensure long-term profitability,” said Medline. “With a more flexible approach, we can better align our digital offerings with customer demand and the realities of the Canadian grocery market.”
Scene+ Loyalty Program Sees Major Growth
Empire’s co-ownership of the Scene+ loyalty program, alongside Scotiabank and Cineplex, has proven to be a key driver of customer engagement. Membership has grown from 10 million to over 15 million members since its launch, enhancing Empire’s ability to offer targeted promotions and personalized offers.
The company is leveraging machine learning and AI-driven analytics to tailor promotions, ensuring customers receive relevant deals based on their shopping habits. This data-driven approach is expected to further improve customer retention and spending.
Financial Stability and Share Repurchases
Empire maintained a stable financial position, with total assets of $16.75 billion. Free cash flow for the quarter, however, declined to $147.7 million from $349.0 million in the previous year, largely due to increased capital investments and lower operating cash flow.
In line with its commitment to returning value to shareholders, Empire repurchased 6.71 million Class A shares as part of its ongoing Normal Course Issuer Bid (NCIB) program.
The Board of Directors also declared a quarterly dividend of $0.20 per share, payable on April 30, 2025.
Outlook: Inflation, Tariffs, and Market Challenges
Looking ahead, Empire remains cautiously optimistic about its performance despite external economic challenges. The company anticipates that recent tariffs imposed by the U.S. and retaliatory tariffs from Canada could increase costs for imported goods, potentially contributing to higher inflation.
As a result, Empire is shifting focus toward increasing its Canadian-sourced products and securing alternative supply chains to mitigate cost increases.
Additionally, the company expects total capital expenditures to reach $700 million for fiscal 2025, with investments directed toward store renovations, e-commerce expansion, and logistics improvements.
“Despite the uncertain economic environment, we are confident in our ability to drive long-term growth through continued investment in our retail network, digital capabilities, and operational efficiencies,” Medline concluded.
Empire’s ability to adapt to changing consumer trends, optimize its supply chain, and enhance its digital presence positions it well for long-term resilience in the Canadian grocery market. As the company progresses through fiscal 2025, its strategic priorities remain focused on expansion, efficiency, and customer engagement.
