Sobeys parent sees sales slide as grocery shopping begins to get back to normal

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Canada’s second largest supermarket chain is facing declining sales as the economy reopens and the once-dormant hospitality industry wrestles back its share of household budgets.

Empire Co. Ltd. — which owns Sobeys, Safeway, IGA and FreshCo, among others — said in an earnings update on Wednesday that consumer behaviours have started to “stabilize” as vaccination rates rise and COVID-19 infections drop across the country, causing a 1.3 per cent decline in sales during the company’s fourth quarter.

But sales are still up compared to pre-pandemic levels, which were thrown out of whack when public health restrictions forced a near-total shutdown in the hospitality sector and sent consumers dollars flooding into grocery stores. While those dollars have now started to tip back toward restaurants, Empire said it was confident that it would be able to hold onto “a percentage” of those sales, though it did not specify exactly how much.

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The economic reopening is also expected to redistribute sales inside Empire’s grocery business, as shoppers start to visit different types of grocery stores more often, rather than going once weekly to a traditional, full-service store to stock up — a common practice during the pandemic when public health authorities recommended fewer trips outside the home. That shift is likely to benefit discount grocery stores, such as FreshCo, which suffered “lower relative growth” in pandemic lockdowns than other store formats, Empire said.

“Management does not expect grocery customer behaviour to return fully to pre-pandemic levels for the foreseeable future,” the company said in Wednesday’s earnings update.

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Empire booked earnings of $171.9 million — down $5.9 million year over year — on sales of $6.9 billion in the quarter, ended May 1. Same-store sales, a common gauge on year-over-year performance in the retail sector, decreased by six per cent, excluding fuel.

Empire blamed the decline on a tough year-over-year comparison with the fourth quarter of 2020, when sales spiked during a rash of panic-buying at the start of the pandemic.

“Empire expects that during fiscal 2022, same-store sales will reduce, as industry volumes decrease, compared to the unusually high industry sales in fiscal 2021,” the company said.

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The company paid $9 million on weekly bonus payments of up to $100 for employees in lockdown regions during the quarter, more than double its forecast of $4 million.

“During the quarter a higher volume of government-mandated lockdowns occurred across the country resulting in actual costs exceeding the estimate,” the company said.

In its full-year results for 2021, Empire reported earnings of $702 million, an increase of $118 million compared to the 2020 fiscal year. The company also announced annual dividend increase 15.3 per cent, to 15 cents per share.

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