- Earnings per share of $0.71
compared to $0.70 last year
- Same-store sales excluding fuel increased by 0.4%
- Excluding fuel, gross margin increased by 63 basis points
- Project Horizon strategy on track
- Scene+ launched in Atlantic
Canada in August 2022
STELLARTON, NS, Sept. 15,
2022 /CNW/ - Empire Company Limited ("Empire" or the
"Company") (TSX: EMP.A) today announced its financial results for
the first quarter ended August 6,
2022. For the quarter, the Company recorded net earnings of
$187.5 million ($0.71 per share) compared to $188.5 million ($0.70 per share) last year.
"We're off to a strong start in fiscal 2023 and are confident in
the momentum and continued underlying strength across our
businesses," said Michael Medline, President & CEO, Empire. "We
are very pleased with the recent launch of our Scene+
loyalty program in Atlantic
Canada, a great start for a foundational element in our
company's success going forward."
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 remains on track to achieve an incremental
$500 million in annualized EBITDA and
an improvement in EBITDA margin of 100 basis points by fiscal 2023
by growing market share and building on cost and margin discipline.
The Company expects to generate a compound average growth rate in
earnings per share of at least 15% over Project Horizon's
three-year timeframe.
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 2021 and 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.
Additional regional launches are planned across Canada in calendar 2022 and into early
calendar 2023. Project Horizon initiatives that are focused on
loyalty, store optimization and customer experience will largely
provide financial benefits in fiscal 2024 and beyond.
SUMMARY RESULTS – FIRST QUARTER
|
|
13 Weeks
Ended
|
|
|
$
|
($ in millions, except
per share amounts)
|
|
August 6,
2022
|
|
|
July 31,
2021
|
|
|
Change
|
Sales
|
$
|
7,937.6
|
|
$
|
7,626.0
|
|
$
|
311.6
|
Gross
profit(1)
|
|
1,977.9
|
|
|
1,912.2
|
|
|
65.7
|
Operating
income
|
|
344.1
|
|
|
347.4
|
|
|
(3.3)
|
EBITDA(1)
|
|
594.0
|
|
|
581.9
|
|
|
12.1
|
Net
earnings(2)
|
|
187.5
|
|
|
188.5
|
|
|
(1.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
EPS(2)(3)
|
$
|
0.71
|
|
$
|
0.70
|
|
$
|
0.01
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
263.0
|
|
|
268.1
|
|
|
|
Dividend per
share
|
$
|
0.165
|
|
$
|
0.150
|
|
|
|
|
13 Weeks
Ended
|
|
August 6,
2022
|
|
July 31,
2021
|
Gross
margin(1)
|
24.9 %
|
|
25.1 %
|
EBITDA
margin(1)
|
7.5 %
|
|
7.6 %
|
Same-store
sales(1) growth (decline)
|
3.3 %
|
|
(0.5) %
|
Same-store sales growth
(decline), excluding fuel
|
0.4 %
|
|
(2.2) %
|
Effective income tax
rate
|
25.6 %
|
|
24.5 %
|
(1) See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release.
|
(2) Attributable to
owners of the Company.
|
(3) Earnings per share
("EPS").
|
|
Outlook
The Company continues to be well positioned to pursue growth and
deliver on its Project Horizon targets despite the impacts of
higher than normal inflation and supply chain challenges.
The industry continues to experience 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.
The industry continues to experience supply chain challenges
primarily due to labour shortages. Although it is difficult to
estimate the duration of these challenges, management 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 first quarter of fiscal 2023, same-store sales growth
excluding fuel was 0.4% compared to a decline of 2.2% in the same
quarter last year and a decline of 2.4% in the fourth quarter of
fiscal 2022. Margins will continue to benefit from Project Horizon
initiatives and other operating improvements. These benefits could
be partially offset by the effect of sales mix changes between
banners and the impact of increasing fuel sales.
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 is expected
to have higher costs in the first half of fiscal 2023 with
improving results 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 41 stores now
operating. Newer stores are improving efficiency at a faster rate
than the early conversion stores as the business gains critical
mass across each province. The Company expects to open an
additional three stores in Alberta
in the remainder of fiscal 2023 for a total of 44 stores.
Management continues to expect to achieve its Project Horizon
targets and that associated benefits will continue into fiscal 2024
and beyond, including initiatives launching in fiscal 2023 that are
focused on loyalty, store optimization and customer experience.
Sales
Sales for the quarter ended August 6,
2022 increased by 4.1% primarily driven by increased fuel
sales, higher food inflation and benefits from Project Horizon
initiatives, including the expansion of FreshCo in Western Canada, partially offset by the impact
of the novel coronavirus ("COVID-19" or "pandemic") restrictions
being in place for a portion of the first quarter of the prior
year.
Gross Profit
Gross profit for the quarter ended August
6, 2022 increased by 3.4% primarily as a result of benefits
from Project Horizon initiatives (including the use of advanced
analytical promotional optimization tools, Own Brands and the
expansion of FreshCo, Voilà and Farm Boy), partially offset by
sales mix changes as a result of consumer buying behaviour.
Gross margin for the quarter decreased slightly to 24.9% from
25.1% in the prior year. Gross margin decreased due to the effect
of increased fuel sales and higher supply chain costs, partially
offset by benefits from Project Horizon initiatives and sales mix
changes between non-fuel banners. Excluding the mix effect of
increased fuel sales, gross margin was 63 basis points higher than
the prior year.
Operating Income
For the quarter ended August 6,
2022, operating income from the Food retailing segment
decreased mainly due to an increase in selling and administrative
expenses and a decrease in other income, partially offset by higher
sales and gross profit. The decrease in other income was driven by
lease termination income in the prior year. Selling and
administrative expenses increased primarily as a result of
investments in Project Horizon initiatives (including the expansion
of FreshCo, Voilà and Farm Boy), higher depreciation and
amortization and increased costs related to the timing of marketing
spend in the current year versus the prior year.
For the quarter ended August 6,
2022, operating income from the Investments and other
operations segment increased primarily as a result of higher equity
earnings from Crombie Real Estate Investment Trust ("Crombie REIT")
due to operational improvements, partially offset by lower equity
earnings from Genstar as a result of higher property sales in the
prior year.
EBITDA
For the quarter ended August 6,
2022, EBITDA increased to $594.0
million from $581.9 million in
the prior year mainly as a result of the factors affecting
operating income (which excludes the increase in depreciation and
amortization). EBITDA margin decreased slightly to 7.5% from
7.6%.
Income Taxes
The effective income tax rate for the quarter ended August 6, 2022 was 25.6% compared to 24.5% in the
same quarter last year. The effective tax rate was lower than the
statutory rate primarily due to differing tax rates of various
entities. The effective tax rate in the same quarter last year was
lower than the statutory rate primarily due to non-taxable capital
items and the differing tax rates of various entities.
Net Earnings
|
|
|
13 Weeks
Ended
|
($ in millions, except
per share amounts)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
Net
earnings(1)
|
|
$
|
187.5
|
|
$
|
188.5
|
EPS (fully
diluted)
|
|
$
|
0.71
|
|
$
|
0.70
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
|
263.0
|
|
|
268.1
|
(1) Attributable to
owners of the Company.
|
|
Capital Expenditures
The Company invested $155.5
million in capital expenditures(1) for the
quarter ended August 6, 2022 (2022 –
$147.0 million), including
renovations and construction of new stores, investments in advanced
analytics technology and other technology systems, expansion of
FreshCo stores in Western Canada
and the construction of 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
|
|
|
$
|
($ in
millions)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
|
|
Change
|
Cash flows from
operating activities
|
|
$
|
386.7
|
|
$
|
424.6
|
|
$
|
(37.9)
|
Add:
|
proceeds on disposal of
assets(1) and lease terminations
|
|
|
2.7
|
|
|
10.4
|
|
|
(7.7)
|
Less:
|
interest
paid
|
|
|
(24.6)
|
|
|
(6.9)
|
|
|
(17.7)
|
|
payments of lease
liabilities, net of payments received for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
finance
subleases
|
|
|
(163.9)
|
|
|
(104.5)
|
|
|
(59.4)
|
|
acquisitions of
property, equipment, investment property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
intangibles
|
|
|
(169.6)
|
|
|
(215.0)
|
|
|
45.4
|
Free cash
flow(2)
|
|
$
|
31.3
|
|
$
|
108.6
|
|
$
|
(77.3)
|
(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 August 6, 2022 decreased versus prior year
primarily as a result of an increase in payments of lease
liabilities, net of payments received for finance subleases, and a
decrease in cash flows from operating activities, partially offset
by lower cash flows of capital investments.
FINANCIAL PERFORMANCE BY SEGMENT
Food Retailing
|
|
|
13 Weeks
Ended
|
|
|
$
|
($ in
millions)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
|
|
Change
|
Sales
|
|
$
|
7,937.6
|
|
$
|
7,626.0
|
|
$
|
311.6
|
Gross profit
|
|
|
1,977.9
|
|
|
1,912.2
|
|
|
65.7
|
Operating
income
|
|
|
330.9
|
|
|
337.3
|
|
|
(6.4)
|
EBITDA
|
|
|
580.7
|
|
|
571.7
|
|
|
9.0
|
Net
earnings(1)
|
|
|
178.3
|
|
|
179.5
|
|
|
(1.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Attributable to
owners of the Company.
|
|
Investments and Other Operations
|
|
|
13 Weeks
Ended
|
|
|
$
|
($ in
millions)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
|
|
Change
|
Crombie REIT
|
|
$
|
12.7
|
|
$
|
7.4
|
|
$
|
5.3
|
Genstar
|
|
|
1.1
|
|
|
5.9
|
|
|
(4.8)
|
Other operations, net
of corporate expenses
|
|
|
(0.6)
|
|
|
(3.2)
|
|
|
2.6
|
|
|
$
|
13.2
|
|
$
|
10.1
|
|
$
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended August 6,
2022, income from Investments and other operations increased
primarily as a result of higher equity earnings from Crombie REIT
due to operational improvements, partially offset by lower equity
earnings from Genstar as a result of higher property sales in the
prior year.
CONSOLIDATED FINANCIAL CONDITION
($ in millions, except
per share and ratio calculations)
|
|
August 6,
2022
|
|
May 7, 2022
|
|
July 31,
2021
|
|
Shareholders' equity,
net of non-controlling interest
|
|
$
|
5,049.0
|
|
$
|
4,991.5
|
|
$
|
4,587.5
|
|
Book value per common
share(1)
|
|
$
|
19.26
|
|
$
|
18.82
|
|
$
|
17.18
|
|
Long-term debt,
including current portion
|
|
$
|
866.5
|
|
$
|
1,176.7
|
|
$
|
1,228.1
|
|
Long-term lease
liabilities, including current portion
|
|
$
|
6,286.9
|
|
$
|
6,285.4
|
|
$
|
6,168.2
|
|
Funded debt to total
capital(1)
|
|
|
58.6 %
|
|
|
59.9 %
|
|
|
61.7 %
|
|
Funded debt to
EBITDA(1)(2)
|
|
|
3.1x
|
|
|
3.2x
|
|
|
3.5x
|
|
EBITDA to interest
expense(1)(3)
|
|
|
8.5x
|
|
|
8.3x
|
|
|
8.1x
|
|
Trailing four-quarter
EBITDA
|
|
$
|
2,342.9
|
|
$
|
2,330.8
|
|
$
|
2,143.2
|
|
Trailing four-quarter
interest expense
|
|
$
|
276.9
|
|
$
|
279.7
|
|
$
|
263.9
|
|
Current assets to
current liabilities
|
|
|
0.7x
|
|
|
0.8x
|
|
|
0.8x
|
|
Total assets
|
|
$
|
16,302.0
|
|
$
|
16,593.6
|
|
$
|
15,922.6
|
|
Total non-current
financial liabilities
|
|
$
|
7,223.3
|
|
$
|
7,220.0
|
|
$
|
7,651.4
|
|
(1) See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release.
|
(2) Calculation uses
trailing four-quarter EBITDA.
|
(3) Calculation uses
trailing four-quarter EBITDA and interest expense.
|
|
On July 11, 2022, DBRS Morningstar
("DBRS") upgraded Sobeys Inc.'s ("Sobeys") credit rating from BBB
(low) with a positive trend to BBB with a stable trend. The
following table shows Sobeys' credit ratings as at September 14, 2022:
Rating
Agency
|
Credit Rating
(Issuer rating)
|
Trend/Outlook
|
|
DBRS
|
BBB
|
Stable
|
|
S&P
Global
|
BBB-
|
Stable
|
|
The redemption of the 4.70% Series 2013-2 Notes due August 8, 2023, which was announced in the fourth
quarter of fiscal 2022, was completed on June 2, 2022. The total redemption payment of
$516.5 million included the remaining
aggregate principal balance of $500.0
million and $16.5 million in
accrued interest and prepayment costs.
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 October 31, 2022 to
shareholders of record on October 14,
2022. 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 22, 2021, the Company
renewed its NCIB by filing a notice of intention with the Toronto
Stock Exchange ("TSX") to purchase for cancellation up to 8,468,408
Class A shares representing 5.0% of the 169,368,174 Class A shares
outstanding. As at July 1, 2022,
under this filing, the Company purchased 5,659,764 (July 1, 2021 – 6,063,806) Class A shares at a
weighted average price of $39.11
(July 1, 2021 – $38.00) for a total consideration of $221.3 million (July 1,
2021 – $230.4 million). The
NCIB expired on July 1, 2022.
On June 21, 2022, the Company
renewed its NCIB by filing a notice of intention with the TSX to
purchase for cancellation up to 10,500,000 Class A shares
representing 7.0% of the public float of 150,258,764 Class A shares
outstanding as of June 17, 2022. The
purchases will be made through the facilities of the TSX and/or any
alternative Canadian trading systems to the extent they are
eligible. The price that Empire will pay for any such shares will
be the market price at the time of acquisition. The Company
believes that repurchasing shares at the prevailing market prices
from time to time is a worthwhile use of funds and in the best
interest of Empire and its shareholders. The NCIB expires on
July 1, 2023.
Shares purchased during the quarter ended August 6, 2022 compared to the same period in the
previous fiscal year are shown in the table below:
|
|
13 Weeks
Ended
|
|
($ in millions, except
per share amounts)
|
August 6,
2022
|
|
|
July 31,
2021
|
Number of
shares
|
|
1,803,247
|
|
|
3,271,082
|
Weighted average price
per share
|
$
|
40.26
|
|
$
|
39.74
|
Cash consideration
paid
|
$
|
72.6
|
|
$
|
130.0
|
|
|
|
|
|
|
|
|
|
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 September 13, 2022, the Company
has purchased 3,143,281 Class A shares (September 7, 2021 – 3,349,282) at a weighted
average price of $39.42 (September 7, 2021 – $39.75) for a total consideration of $123.9 million (September
7, 2021 – $133.1 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 first quarter ended
August 6, 2022.
Business Updates
Farm Boy
The acquisition of Farm Boy on December
10, 2018 added 26 locations to the Company's Ontario store network with plans to double the
store count in five years from the acquisition date, mainly in the
Greater Toronto Area ("GTA"). As
at September 14, 2022, Farm Boy has
44 stores and in fiscal 2023 the Company expects to open four
additional Farm Boy stores.
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 first quarter of fiscal
2023. The Company expects to have 44 FreshCo stores in Western Canada by the end of fiscal 2023.
Three stores are expected to open in Alberta in fiscal 2023.
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, Ontario began deliveries on
June 22, 2020 and has been
successfully operating for over two years.
The second CFC in Montreal
began deliveries to customers on March 7,
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 has 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 sales capture of the market continues to
be strong. However, in the first quarter of fiscal 2023, overall
e-commerce industry sales were lower than anticipated as
restrictions eased and lockdowns were lifted compared to the prior
year. Management expects that Voilà's net earnings dilution for
fiscal 2023 to be approximately the same as fiscal 2022.
In the first quarter of fiscal 2023, the Company's four
e-commerce platforms experienced combined sales decline of 21%. The
decrease was primarily due to elevated sales levels in the prior
year during COVID-19 related lockdowns.
Longo's
On May 10, 2021, the Company,
through a wholly-owned subsidiary, acquired 51% of Longo's, a
long-standing, family-built network of specialty grocery stores in
the GTA, and its Grocery Gateway e-commerce business. The purchase
price of the transaction was $660.6
million. For additional detail, please refer to Empire's
MD&A for the first quarter ended August
6, 2022.
Store Closure, Conversion and Lease Terminations
During the first quarter of fiscal 2023, the Company expensed
$1.0 million in store closure and
conversion costs related to FreshCo conversions (2022 –
$6.3 million).
During the first quarter of fiscal 2022, the Company engaged in
lease termination transactions which resulted in other income of
$11.6 million.
Sustainable Business Reporting
Environmental, Social and Governance ("ESG") has deep roots in
the Company's history, and the principles of ESG have been a part
of the organization since the Company started 115 years ago.
The Company published its 2022 Sustainable Business Report in
July 2022 which set bold,
science-based emissions reduction targets in support of
Canada's transition to a
low-carbon economy. This is a significant step forward in the
Company's plan to help combat climate change and is the latest step
in the journey to commit and invest in sustainability. As part of
the Company's sustainability commitments and corporate governance
practices, the Company will launch a newly established Sustainable
Business Council ("Council") in fiscal 2023. In conjunction with
the Company's science-based targets (which are being validated by
the Science-Based Targets initiative), the Council will ensure
accurate reporting of carbon emissions for internal monitoring and
external reporting.
The Company is focused on several initiatives as part of a
continuing ESG journey such as working to remove plastics from the
business, focusing on avoidable and hard-to-recycle plastics,
expanding the Company's efforts to cultivate a fair, equitable and
inclusive environment for all and embedding sustainable business
mandates within the Company's performance management goals.
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:
- 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 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 impact 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 plans to purchase for cancellation 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.
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:
- 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.
- Earnings before interest, taxes, depreciation and amortization
("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
|
($ in
millions)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
Net earnings
|
|
$
|
208.3
|
|
$
|
211.9
|
Income tax
expense
|
|
|
71.8
|
|
|
68.7
|
Finance costs,
net
|
|
|
64.0
|
|
|
66.8
|
Operating
income
|
|
|
344.1
|
|
|
347.4
|
Depreciation
|
|
|
224.9
|
|
|
213.5
|
Amortization of
intangibles
|
|
|
25.0
|
|
|
21.0
|
EBITDA
|
|
$
|
594.0
|
|
$
|
581.9
|
- EBITDA margin is 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 August 6,
2022, May 7, 2022 and
July 31, 2021:
($ in millions, except
per share information)
|
|
August 6,
2022
|
|
May 7, 2022
|
|
July 31,
2021
|
Shareholders' equity,
net of non-controlling interest
|
|
$
|
5,049.0
|
|
$
|
4,991.5
|
|
$
|
4,587.5
|
Shares outstanding
(basic)
|
|
|
262.2
|
|
|
265.2
|
|
|
267.0
|
Book value per common
share
|
|
$
|
19.26
|
|
$
|
18.82
|
|
$
|
17.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 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 August 6, 2022, May 7, 2022 and July 31,
2021, respectively:
($ in
millions)
|
|
|
August 6,
2022
|
|
|
May 7, 2022
|
|
|
July 31,
2021
|
Long-term debt due
within one year
|
|
$
|
283.0
|
|
$
|
581.0
|
|
$
|
101.1
|
Long-term
debt
|
|
|
583.5
|
|
|
595.7
|
|
|
1,127.0
|
Lease liabilities due
within one year
|
|
|
519.6
|
|
|
509.5
|
|
|
560.6
|
Long-term lease
liabilities
|
|
|
5,767.3
|
|
|
5,775.9
|
|
|
5,607.6
|
Funded debt
|
|
|
7,153.4
|
|
|
7,462.1
|
|
|
7,396.3
|
Total shareholders'
equity, net of non-controlling interest
|
|
|
5,049.0
|
|
|
4,991.5
|
|
|
4,587.5
|
Total
capital
|
|
$
|
12,202.4
|
|
$
|
12,453.6
|
|
$
|
11,983.8
|
- Funded debt to total capital ratio is funded debt divided by
total capital.
- Funded debt to EBITDA ratio is funded debt divided by trailing
four-quarter EBITDA.
- 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
|
($ in
millions)
|
|
|
August 6,
2022
|
|
|
July 31,
2021
|
Finance costs,
net
|
|
$
|
64.0
|
|
$
|
66.8
|
Plus:
|
finance income,
excluding interest income on lease receivables
|
|
|
1.3
|
|
|
1.9
|
Less:
|
pension finance costs,
net
|
|
|
(1.7)
|
|
|
(1.9)
|
Less:
|
accretion expense on
provisions
|
|
|
(0.4)
|
|
|
(0.8)
|
Interest
expense
|
|
$
|
63.2
|
|
$
|
66.0
|
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
first quarter ended August 6, 2022
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, September 15, 2022 beginning at
1:00 p.m. (Eastern Standard Time)
during which senior management will discuss the Company's financial
results for the first quarter of fiscal 2023. To join this
conference call, dial (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.
Replay will be available by dialing (888) 390-0541 and entering
access code 526605 until midnight September 29, 2022, 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 and
related real estate. With approximately $30.5 billion in annualized sales and
$16.3 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.
SOURCE Empire Company Limited