Empire (TSE:EMP.A) reported a record first-quarter fiscal 2027 diluted earnings per share of C$1.04, up 14.3% from a year earlier, as sales growth, cost controls, e-commerce changes and share repurchases supported results.
President and Chief Executive Officer Pierre St-Laurent said the grocery retailer’s performance reflected disciplined execution and progress on productivity initiatives despite a consumer environment characterized by a focus on affordability, fuel-price volatility and trade-related uncertainty.
Sales, e-commerce and margins
Food sales rose 1.7% in the quarter, while same-store sales increased 1.2%. St-Laurent said both the company’s full-service and discount businesses posted positive growth. Total e-commerce sales, including the company’s platforms and third-party partnerships, increased 11.3% from the prior year.
The company said it gained market share in full-service grocery while maintaining its discount position, even as discount formats expand across Canada. St-Laurent said Empire expects continued discount-store expansion to increasingly support share gains in that channel.
Gross margin excluding fuel was essentially unchanged from the prior-year period. Chief Financial Officer Constantine Pefanis said strong execution in full service offset higher fuel-related supply-chain costs. Empire continues to target annual gross-margin expansion excluding fuel of 10 to 20 basis points.
Empire’s EBITDA increased 6.1% year over year to C$712 million, and EBITDA margin rose 28 basis points to 8.4%. Pefanis described it as the company’s strongest EBITDA performance since Project Horizon began more than a decade ago.
Excluding depreciation and amortization, the SG&A rate improved by 80 basis points. Pefanis attributed the improvement to lower incentive-program expenses, a pension settlement gain, broader cost efficiencies and e-commerce operational improvements. Those factors more than offset investments in stores, tools and technology, as well as higher retail wages and business-expansion costs.
During the analyst question-and-answer session, Pefanis said Empire’s underlying SG&A run rate remains stable and is declining when inflationary costs are considered. He said management expects to generate operating leverage on an annual basis, though quarterly SG&A trends may not be linear.
Consumer behavior and competitive conditions
Management said consumer behavior has remained consistent, with customers seeking value and making purchasing decisions amid fuel-price changes and uncertainty over trade conditions. Luc L’Archevêque, Empire’s Chief Customer Officer, said promotional intensity in the market was stable based on third-party data.
St-Laurent said it was too early in the second quarter to provide a directional same-store-sales update, in part because of the timing of the Labor Day weekend relative to the prior year. He said the company had not seen major changes in customer behavior or competitive conditions.
Empire said its value strategy includes promotions, loyalty offers through Scene+, own-brand products, personalized offers and larger value-size packages. L’Archevêque said the company has revamped products and packaging in private label, and that both private label and the Scene+ program have been resonating with customers.
On Canada-U.S. trade tensions, L’Archevêque said the current tariff-related impact on the business has been minimal, with fewer affected categories than during prior trade disruptions. He said Empire had received cost-increase submissions from fewer than a handful of suppliers and would not accept tariff-related increases at this stage, instead working with supplier partners to find alternatives that preserve customer value.
St-Laurent said Empire’s full-service stores are positioned to offer customers alternatives to U.S. products because of their broad assortment and relationships with Canadian suppliers. Management said it does not expect the current situation to create inflationary pressure for its full-service or discount banners.
Store expansion and growth initiatives
Empire opened four new stores during the first quarter and added four Mayrand stores following its acquisition of the Quebec-based business in June. The company now expects to open more than 25 stores in fiscal 2027, up from its previous forecast of more than 20.
Management said recently opened stores are meeting or exceeding expectations. The new-store program is expected to contribute approximately 2% square-footage growth, according to St-Laurent, while Pefanis said planned new stores are expected to increase net square footage by about 1.5% before including Mayrand locations.
- Empire opened its first FreshCo store in Atlantic Canada in August.
- The company broke ground on a Mayrand location in Trois-Rivières, Quebec.
- Recent openings included two FreshCo locations in Calgary, an IGA Extra in Montreal, an IGA in Edmonton, a Safeway in Vancouver’s Oakridge Park development and a FreshCo in Paris, Ontario.
- More than 400 stores now use electronic shelf labels, according to management.
The company also expanded its pharmacy platform. In August, Empire named Nitu Singh senior vice president of pharmacy. It also acquired nine Morelli’s Pharmacies located with Longo’s stores in Ontario, which will be integrated into national pharmacy operations and rebranded as Longo’s Pharmacy.
Empire appointed Lara Skripitsky as chief technology and transformation officer. St-Laurent said Skripitsky brings more than 20 years of experience, including 12 years at a global consumer brand, and will focus on transformation, technology modernization and customer experience.
Capital allocation and outlook
Empire expects fiscal 2027 capital expenditures of about C$850 million, with roughly half earmarked for renovations and new-store expansion. The company had repurchased approximately 2 million shares for C$95 million as of the call.
In the first quarter, Empire sold its equity interest in Genstar for C$71 million in proceeds and recorded a C$4 million gain. Pefanis said the proceeds would be used to accelerate growth investments. The company maintained its fiscal 2027 outlook for other income and share of earnings from equity investments of C$90 million to C$110 million.
Management also cited opportunities to create additional revenue through supply-chain services, including backhaul and inbound freight partnerships, as well as retail media. However, it did not provide financial targets for either opportunity.
About Empire (TSE:EMP.A)
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 $32 billion in annual sales and $17 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.sedarplus.ca.
