- Earnings per share ("EPS") and adjusted EPS(1) of
$0.72 - Prior year EPS and adjusted EPS of
$0.68 - Same-store sales, excluding fuel, increased by 2.6%
- Gross margin, excluding fuel, increased by 58 bps
- Project Horizon successfully completed; added an incremental
$500 million in annualized EBITDA - Repurchased 9.4 million shares (
$350 million ) in fiscal 2023, an increase of 48% over fiscal 2022 - Capital allocation outlook for fiscal 2024:
- Declared a dividend increase of 10.6%
- Renewed NCIB with the intention to repurchase
$400 million of shares in fiscal 2024 - Capital investment program for fiscal 2024 expected to be approximately
$775 million
"With our six-year turnaround now complete, we have the tools, team, assets and capabilities needed to thrill our customers, compete and win," said
Dividend Declaration
The Company declared a quarterly dividend of
Normal Course Issuer Bid ("NCIB")
On
The Company intends to repurchase approximately
(1) | Adjusted Metrics include adjusted operating income, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted net earnings, and adjusted earnings per share ("EPS"). See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release. |
(2) | On |
Based on the average daily trading volume ("ADTV") of 337,583 shares over the last six months, daily purchases will be limited to 84,395 Class A shares (25% of the ADTV of the Class A shares), other than block purchase exemptions.
The Company has also renewed its automatic share purchase plan with its designated broker allowing the purchase of Class A shares for cancellation under its NCIB during trading black-out periods, subject to regulatory approval.
Under the Company's current NCIB, that commenced on
Shares purchased during the quarter and year-to-date ended
13 Weeks Ended | 14 Weeks Ended | 52 Weeks Ended | 53 Weeks Ended | |||||||||||
($ in millions, except per share amounts) | ||||||||||||||
Number of shares | 3,110,280 | 413,100 | 9,444,902 | 6,378,983 | ||||||||||
Weighted average price per share | $ | 35.91 | $ | 39.83 | $ | 37.06 | $ | 39.02 | ||||||
Cash consideration paid | $ | 111.7 | $ | 16.5 | $ | 350.0 | $ | 248.9 | ||||||
PROJECT HORIZON
The Company successfully completed its three-year growth strategy, Project Horizon, at the end of fiscal 2023. As part of this strategy, the Company realized significant benefits from the store renovation program, new store expansion (including
Project Horizon initiatives will continue to provide benefits in fiscal 2024 and beyond, including Scene+, personalization and a continued emphasis on developing the store network through renovations and new store expansion.
Over Project Horizon's three-year timeframe, the Company achieved a compound annual growth rate ("CAGR") in EPS of approximately 13% and an increase in EBITDA margin of approximately 60 basis points, consistent with management's updated expectations provided in the third quarter of fiscal 2023. Differences compared to the original Project Horizon targets of improving EBITDA margin by 100 basis points, which was expected to generate an EPS CAGR of at least 15% was largely due to delays in delivering some key initiatives as a result of the novel coronavirus ("COVID-19" or "pandemic") and the Cybersecurity Event (as defined under the heading "Business Update – Cybersecurity Event"), higher depreciation than originally anticipated resulting from higher capital spend, and the impact of significant and unexpected inflation.
The Company's calculation of the EPS CAGR and the EBITDA margin increase excludes the full impacts of the Cybersecurity Event (due to its unusual nature and the expectation that the timing of certain insurance recoveries will occur after the fiscal year end) and the one-time costs associated with the Grocery Gateway integration. See "Business Updates – Cybersecurity Event" and "Business Updates – Voilà" for more information on these adjustments.
COMPANY PRIORITIES
Over the last six years, the Company has successfully completed two transformation strategies, Project Sunrise and Project Horizon. These strategies have comprehensively reset Empire's foundation, enhanced the Company's data capabilities, deepened the understanding of customers, and prepared the business to effectively capture emerging trends. With these transformation strategies now accomplished and the turnaround complete, the Company aims to grow total adjusted EPS over the long-term through net earnings growth and share repurchases. The Company intends to continue improving sales, gross margin (excluding fuel) and adjusted EBITDA margin by focusing on priorities such as:
Continued Focus on Store:
Over recent years, the Company has accelerated investments in renovations, conversions, and new stores along with store processes, communications, training, technology and tools. Beyond fiscal 2023, investing in the store network will remain a priority, demonstrated by a sustained emphasis on renovations and continued store expansion in Discount. The Own Brands program enhancement will remain a priority through increased distribution, shelf placement and product innovation.
The Company intends to invest capital in its store network and is planning to renovate approximately 20% to 25% of the network over the next three years. This capital investment includes important sustainability initiatives such as refrigeration system upgrades, heating, ventilation and air conditioning ("HVAC") system upgrades and other energy efficiency initiatives.
Enhanced Focus on Digital and Data:
The focus on digital and data will include continued e-commerce expansion with Voilà, loyalty, through Scene+ (see "Business Updates – Voilà" and "Business Updates – Scene+" for more information), personalization, improved space productivity and the continued improvement of promotional optimization. Space productivity will further enhance the customer experience by improving store layouts, optimizing category and product adjacencies and tailoring product assortment for each store. The advanced analytics tools built for promotional optimization will continue to be refined through the partnership between the advanced analytics team and category merchants.
Efficiency and Cost Control:
The Company has significantly improved its efficiency and cost effectiveness through sourcing efficiencies, optimizing supply chain productivity and improving systems and processes. Beyond fiscal 2023, the Company will continue to focus on driving efficiency and cost effectiveness through initiatives related to strategic sourcing and supply chain productivity.
SUMMARY RESULTS – FOURTH QUARTER & FISCAL YEAR
The Company's fourth quarter and fiscal year ends on the first Saturday in May. As a result, the fourth quarter and fiscal year are usually 13 weeks and 52 weeks, respectively, but include results for an additional week every five to six years. The quarters ended
On
In addition, the Cybersecurity Event required certain operational systems to be shut down for several weeks. The inability to utilize these systems had a temporary negative impact on Empire's sales and operational effectiveness, further impacting third quarter and fiscal 2023 net earnings by at least
Empire is in the process of working with its insurance providers to make claims under its policies. Due to the complexity of the cyber insurance coverage and related claims, there is a time lag between the initial incurrence of costs and the recognition of anticipated insurance proceeds.
Longo's e-commerce business, Grocery Gateway, will be merged into Voilà in
($ in millions, except per | 13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | ||||||||||||
share amounts) | Change | Change | ||||||||||||||||
Sales | $ | 7,408.4 | $ | 7,840.8 | $ | (432.4) | $ | 30,478.1 | $ | 30,162.4 | $ | 315.7 | ||||||
Gross profit(1) | 1,959.0 | 2,004.0 | (45.0) | 7,792.7 | 7,659.7 | 133.0 | ||||||||||||
Operating income | 321.6 | 333.6 | (12.0) | 1,232.4 | 1,363.7 | (131.3) | ||||||||||||
Adjusted operating income(1) | 328.1 | 333.6 | (5.5) | 1,291.5 | 1,363.7 | (72.2) | ||||||||||||
EBITDA(1) | 592.3 | 586.2 | 6.1 | 2,263.0 | 2,330.8 | (67.8) | ||||||||||||
Adjusted EBITDA(1) | 598.8 | 586.2 | 12.6 | 2,322.1 | 2,330.8 | (8.7) | ||||||||||||
Net earnings(2) | 182.9 | 178.5 | 4.4 | 686.0 | 745.8 | (59.8) | ||||||||||||
Adjusted net earnings(1)(2) | 184.9 | 178.5 | 6.4 | 727.1 | 745.8 | (18.7) | ||||||||||||
Diluted earnings per | ||||||||||||||||||
share | ||||||||||||||||||
EPS(2) | $ | 0.72 | $ | 0.68 | $ | 0.04 | $ | 2.64 | $ | 2.80 | $ | (0.16) | ||||||
Adjusted EPS(1)(2) | 0.72 | 0.68 | 0.04 | 2.80 | 2.80 | - | ||||||||||||
Diluted weighted average | ||||||||||||||||||
number of shares | ||||||||||||||||||
outstanding (in millions) | 255.4 | 264.0 | 259.4 | 266.2 | ||||||||||||||
Dividend per share | $ | 0.165 | $ | 0.150 | $ | 0.66 | $ | 0.60 |
13 Weeks Ended | 14 Weeks Ended | 52 Weeks Ended | 53 Weeks Ended | |||||
Gross margin(1) | 26.4 % | 25.6 % | 25.6 % | 25.4 % | ||||
EBITDA margin(1) | 8.0 % | 7.5 % | 7.4 % | 7.7 % | ||||
Adjusted EBITDA margin(1) | 8.1 % | 7.5 % | 7.6 % | 7.7 % | ||||
Same-store sales(1) growth (decline) | 1.6 % | (0.1) % | 2.3 % | 0.0 % | ||||
Same-store sales growth (decline), excluding fuel | 2.6 % | (2.5) % | 1.5 % | (2.1) % | ||||
Effective income tax rate | 25.3 % | 23.1 % | 24.6 % | 25.0 % |
(1) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs included. Additionally, relating to the 52 weeks ended |
(2) | Attributable to owners of the Company. |
Sales
Sales for the quarter ended
Sales for the fiscal year ended
Gross Profit
Gross profit for the quarter ended
Gross margin for the quarter ended
Gross profit for the fiscal year ended
Gross margin for the fiscal year ended
Operating Income
13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | ||||||||||||
($ in millions) | Change | Change | |||||||||||||||
Food retailing | $ | 304.5 | $ | 321.2 | $ | (16.7) | $ | 1,140.1 | $ | 1,277.0 | $ | (136.9) | |||||
Investments and other operations: | |||||||||||||||||
Crombie REIT | 10.9 | 10.7 | 0.2 | 77.3 | 61.0 | 16.3 | |||||||||||
Genstar | 6.5 | 3.3 | 3.2 | 16.5 | 32.4 | (15.9) | |||||||||||
Other operations, net of corporate | |||||||||||||||||
expenses | (0.3) | (1.6) | 1.3 | (1.5) | (6.7) | 5.2 | |||||||||||
17.1 | 12.4 | 4.7 | 92.3 | 86.7 | 5.6 | ||||||||||||
Operating income | $ | 321.6 | $ | 333.6 | $ | (12.0) | $ | 1,232.4 | $ | 1,363.7 | $ | (131.3) | |||||
Adjustments: | |||||||||||||||||
Cybersecurity Event(1) | $ | (6.8) | $ | - | $ | (6.8) | $ | 45.8 | $ | - | $ | 45.8 | |||||
Grocery Gateway Integration(1) | 13.3 | - | 13.3 | 13.3 | - | 13.3 | |||||||||||
6.5 | - | 6.5 | 59.1 | - | 59.1 | ||||||||||||
Adjusted operating income(1) | $ | 328.1 | $ | 333.6 | $ | (5.5) | $ | 1,291.5 | $ | 1,363.7 | $ | (72.2) |
(1) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs included. Additionally, relating to the 52 weeks ended |
For the quarter ended
For the quarter ended
For the fiscal year ended
For the fiscal year ended
EBITDA
For the quarter ended
For the fiscal year ended
13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | |||||||||||
($ in millions) | Change | Change | ||||||||||||||
EBITDA | $ | 592.3 | $ | 586.2 | $ | 6.1 | $ | 2,263.0 | $ | 2,330.8 | $ | (67.8) | ||||
Adjustments: | ||||||||||||||||
Cybersecurity Event(1) | (6.8) | - | (6.8) | 45.8 | - | 45.8 | ||||||||||
Grocery Gateway Integration(1) | 13.3 | - | 13.3 | 13.3 | - | 13.3 | ||||||||||
6.5 | - | 6.5 | 59.1 | 59.1 | ||||||||||||
Adjusted EBITDA(1) | $ | 598.8 | $ | 586.2 | $ | 12.6 | $ | 2,322.1 | $ | 2,330.8 | $ | (8.7) |
(1) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs included. Additionally, relating to the 52 weeks ended |
Income Taxes
The effective income tax rate for the quarter ended
The effective income tax rate for the fiscal year ended
Net Earnings
($ in millions, except | 13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | ||||||||||
per share amounts) | Change | Change | ||||||||||||||
Net earnings(1) | $ | 182.9 | $ | 178.5 | $ | 4.4 | $ | 686.0 | $ | 745.8 | $ | (59.8) | ||||
EPS (fully diluted) | $ | 0.72 | $ | 0.68 | $ | 0.04 | $ | 2.64 | $ | 2.80 | $ | (0.16) | ||||
Adjustment (net of income taxes of | ||||||||||||||||
Cybersecurity Event(2) | (5.0) | - | (5.0) | 34.1 | - | 34.1 | ||||||||||
Grocery | 7.0 | - | 7.0 | 7.0 | - | 7.0 | ||||||||||
Adjusted net earnings(1)(2) | $ | 184.9 | $ | 178.5 | $ | 6.4 | $ | 727.1 | $ | 745.8 | $ | (18.7) | ||||
Adjusted EPS (fully diluted)(2) | $ | 0.72 | $ | 0.68 | $ | 0.04 | $ | 2.80 | $ | 2.80 | $ | - | ||||
Diluted weighted average number of | ||||||||||||||||
shares outstanding (in millions) | 255.4 | 264.0 | (8.6) | 259.4 | 266.2 | (6.8) |
(1) | Attributable to owners of the Company. |
(2) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs included. Additionally, relating to the 52 weeks ended |
Capital Expenditures
The Company invested
For fiscal 2024, capital spend is expected to be approximately
(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 | 14 Weeks | 52 Weeks | 53 Weeks | ||||||||||||||||
Ended | Ended | $ | Ended | Ended | $ | ||||||||||||||
($ in millions) | Change | Change | |||||||||||||||||
Cash flows from operating activities | $ | 504.6 | $ | 469.5 | $ | 35.1 | $ | 1,605.3 | $ | 2,107.1 | $ | (501.8) | |||||||
Add: | proceeds on disposal of assets(1) | ||||||||||||||||||
and lease terminations | 29.4 | 25.5 | 3.9 | 48.9 | 175.6 | (126.7) | |||||||||||||
Less: | interest paid | (3.4) | (22.0) | 18.6 | (52.0) | (56.2) | 4.2 | ||||||||||||
payments of lease liabilities, net of | |||||||||||||||||||
payments received for finance subleases | (163.2) | (218.2) | 55.0 | (653.0) | (635.0) | (18.0) | |||||||||||||
acquisitions of property, equipment, | |||||||||||||||||||
investment property and intangibles | (158.2) | (205.9) | 47.7 | (757.7) | (780.3) | 22.6 | |||||||||||||
Free cash flow(2) | $ | 209.2 | $ | 48.9 | $ | 160.3 | $ | 191.5 | $ | 811.2 | $ | (619.7) |
(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
Free cash flow for the fiscal year ended
FINANCIAL PERFORMANCE BY SEGMENT
Food Retailing
13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | |||||||||||||
($ in millions) | Change | Change | ||||||||||||||||
Sales | $ | 7,408.4 | $ | 7,840.8 | $ | (432.4) | $ | 30,478.1 | $ | 30,162.4 | $ | 315.7 | ||||||
Gross profit | 1,959.0 | 2,004.0 | (45.0) | 7,792.7 | 7,659.7 | 133.0 | ||||||||||||
Operating income | 304.5 | 321.2 | (16.7) | 1,140.1 | 1,277.0 | (136.9) | ||||||||||||
Adjusted operating income(1) | 311.0 | 321.2 | (10.2) | 1,199.2 | 1,277.0 | (77.8) | ||||||||||||
EBITDA | 575.2 | 573.8 | 1.4 | 2,170.6 | 2,243.9 | (73.3) | ||||||||||||
Adjusted EBITDA(1) | 581.7 | 573.8 | 7.9 | 2,229.7 | 2,243.9 | (14.2) | ||||||||||||
Net earnings(2) | 163.5 | 165.2 | (1.7) | 610.1 | 677.9 | (67.8) | ||||||||||||
Adjusted net earnings(1)(2) | 165.5 | 165.2 | 0.3 | 651.2 | 677.9 | (26.7) | ||||||||||||
(1) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release for a description of the types of costs included. Additionally, relating to the 52 weeks ended |
(2) | Attributable to owners of the Company. |
Investments and Other Operations
13 Weeks Ended | 14 Weeks Ended | $ | 52 Weeks Ended | 53 Weeks Ended | $ | |||||||||||||
($ in millions) | Change | Change | ||||||||||||||||
Operating income | ||||||||||||||||||
Crombie REIT | $ | 10.9 | $ | 10.7 | $ | 0.2 | $ | 77.3 | $ | 61.0 | $ | 16.3 | ||||||
Genstar | 6.5 | 3.3 | 3.2 | 16.5 | 32.4 | (15.9) | ||||||||||||
Other operations, net of | ||||||||||||||||||
corporate expenses | (0.3) | (1.6) | 1.3 | (1.5) | (6.7) | 5.2 | ||||||||||||
$ | 17.1 | $ | 12.4 | $ | 4.7 | $ | 92.3 | $ | 86.7 | $ | 5.6 | |||||||
CONSOLIDATED FINANCIAL CONDITION
($ in millions, except per share and ratio calculations) | |||||||
Shareholders' equity, net of non-controlling interest | $ | 5,200.4 | $ | 4,991.5 | $ | 4,372.7 | |
Book value per common share(1) | $ | 20.09 | $ | 18.82 | $ | 16.30 | |
Long-term debt, including current portion | $ | 1,012.3 | $ | 1,176.7 | $ | 1,225.3 | |
Long-term lease liabilities, including current portion | $ | 6,184.6 | $ | 6,285.4 | $ | 5,908.1 | |
Funded debt to total capital(1) | 58.1 % | 59.9 % | 62.0 % | ||||
Funded debt to adjusted EBITDA(1) | 3.1x | 3.2x | 3.3x | ||||
Adjusted EBITDA to interest expense(1) | 8.8x | 8.3x | 8.0x | ||||
Current assets to current liabilities | 0.8x | 0.8x | 0.9x | ||||
Total assets | $ | 16,483.7 | $ | 16,593.6 | $ | 15,173.9 | |
Total non-current financial liabilities | $ | 7,289.5 | $ | 7,220.0 | $ | 7,187.7 |
(1) | See "Non-GAAP Financial Measures & Financial Metrics" section of this News Release. |
During fiscal 2023, DBRS Morningstar ("DBRS") upgraded
Rating Agency | Credit Rating (Issuer rating) | Trend/Outlook |
DBRS | BBB | Stable |
S&P | BBB- | Stable |
Pursuant to an agreement dated
Pursuant to an agreement dated
For additional information on Empire's long-term debt, see note 15 of the Company's audited consolidated financial statements for the fiscal year ended
BUSINESS UPDATES
Cybersecurity Event
On
This Cybersecurity Event and the precautionary response caused some temporary challenges in the third quarter. For example, availability of some products was temporarily impacted, pharmacy services were shut down for four days while some in-store services, such as self-checkouts, gift cards and redemption of Scene+ points were impacted for approximately one week. Other than this, customers would have noticed very few changes to their normal shopping experience.
Empire's security teams, supplemented by leading cyber defense firms, worked to remediate this incident, implemented preventative measures, including proactively shutting down certain systems out of an abundance of caution, and took steps to supplement existing security monitoring, scanning and protective measures. During restoration efforts, the Company established certain workaround processes to ensure continuity of supply chain, product availability, costing and retail pricing. Empire completed its controlled and phased approach to systematically bringing information and administrative systems back online early in the fourth quarter of fiscal 2023.
The Company regards the protection of personal information as critically important and has taken all required steps with privacy regulators and potentially impacted individuals.
The Company has a multi-layered security approach involving cyber software tools, controls, policies, standards and procedures pertaining to security access, system development, change management and problem and incident management. This Cybersecurity Event has reinforced the importance of the investments already made in the cybersecurity area, as well as upcoming investments in the IT systems and people. Continuous enhancement of the Company's IT infrastructure will strengthen its defense against future such incidents.
The Company maintains a variety of insurance coverages, including cyber insurance. Empire is in the process of working with its insurance providers to make claims under its policies. Due to the complexity of the cyber insurance coverage and related claims, there is a time lag between the initial incurrence of costs and the recognition of anticipated insurance proceeds. While the operational impact of the Cybersecurity Event is behind the Company, management expects that there will be additional insurance recoveries in fiscal 2024.
The Cybersecurity Event is considered an unusual item and has been excluded from the Company's assessment of Project Horizon. For comparative purposes, the Company is presenting Adjusted Metrics to exclude certain impacts of the Cybersecurity Event. The net financial impact of incremental direct costs, inventory shrink and insurance recoveries on net earnings in the fourth quarter and fiscal year ended
In addition, certain financial impacts are not reflected in the Adjusted Metrics as they relate to sales declines which management considers are attributable to the Cybersecurity Event and the associated temporary decline in operational effectiveness during the Cybersecurity Event. Management estimates that the impact on net earnings in the fourth quarter was insignificant and the impact on the fiscal year ended
Empire estimates, based on available information, that the final impact on net earnings over fiscal 2023 and fiscal 2024 will be approximately
Scene+
In
As part of the Scene+ rollout, the Company launched its next generation recommendation engine for one-to-one, machine learning powered personalization at scale. The recommendation engine is focused on improving customer engagement and offer relevancy. The target algorithms will continue to improve over time, driving progressively better performance and results.
Farm Boy
The acquisition of Farm Boy on
In fiscal 2018, the Company announced plans to expand its
Through the
As at
Voilà
In fiscal 2021, the Company introduced its new e-commerce platform, Voilà, which is the future of online grocery home delivery in
The first CFC in
Longo's e-commerce business, Grocery Gateway, will be merged into Voilà in
Voilà's future earnings will primarily be impacted by the rate of sales growth, with operational efficiencies, margins, and cost discipline serving as important drivers to manage financial performance.
In the fourth quarter of fiscal 2023, the Company's four e-commerce platforms (Voilà, Grocery Gateway, IGA.net and ThriftyFoods.com) experienced a combined sales decline of 13.5% compared to the same quarter in the prior year (excluding the additional week of operations in the prior year). The decrease is primarily driven by higher online sales in the fourth quarter of fiscal 2022 as a result of the pandemic, which had an outsized impact on the Company's non-Voilà e-commerce businesses. According to third-party market data, Voilà continues to outperform the market over the last fiscal year.
Outlook
With the Company's turnaround complete, management aims to grow total adjusted EPS over the long-term through net earnings growth and share repurchases. The Company intends to continue improving sales, gross margin (excluding fuel) and adjusted EBITDA margin by focusing on priorities such as: a continued focus on stores (investing in renovations, Discount expansion, and Own Brands program enhancement), an expanded focus on digital and data (through key strategic initiatives including Voilà, Scene+, personalization, space productivity and promotional optimization), and driving efficiency and cost effectiveness through initiatives related to strategic sourcing and supply chain.
For fiscal 2024, capital spend is expected to be approximately
During fiscal 2024, the Company intends to purchase approximately
The Company continues to be well positioned to pursue growth despite the impacts of global economic uncertainties such as higher than normal inflation and supply chain challenges. The industry continues to experience heightened levels of 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 customers whose shopping behaviours become more price sensitive in a heightened inflationary environment.
On
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 plans to purchase for cancellation Class A shares under the normal course issuer bid, which may be impacted by market and macro-economic conditions, availability of sellers, changes in laws and regulations, and the results of operations;
- The Company's aim to increase total adjusted EPS through net earnings, growth, and share repurchases, as well as its intention to continue improving sales, gross margin (excluding fuel) and adjusted EBITDA margin, all of which could be impacted by several factors including a prolonged unfavourable macro-economic environment and unforeseen business challenges, as well as the factors identified in the "Risk Management" section of the fiscal 2023 MD&A;
- The Company's plans to further grow and enhance the Own Brand portfolio, which may be impacted by future operating costs and customer response;
- The Company's plan to invest capital in its store network including store expansions and renovations and renovate approximately 20% to 25% of the network over the next three years which could be impacted by cost of materials, availability of contractors, operating results, and other macro-economic impacts;
- The Company's expectation that it will continue its e-commerce expansion with Voilà, which may be impacted by future operating and capital costs, customer response and the performance of its technology provider, Ocado;
- The Company's expectation that it will continue to focus on driving efficiency and cost effectiveness initiatives which could be impacted by supplier relationships, labour relations, and other macro-economic impacts;
- Management's expectations regarding the scope and impact of the Cybersecurity Event, and the estimate of the impact on its financial results in 2024. These statements and expectations may be impacted by several factors including the nature, amount and timing of the insurance outcome;
- The FreshCo expansion in
Western Canada and Farm Boy expansion inOntario , 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 macro-economic environment and labour relations; - 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;
- The Company's plan to integrate Voilà and Grocery Gateway may be impacted by pre-existing supplier relationships;
- 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; and
- The Company's expectations on the timing of the disposition of 56 retail fuel sites in
Western Canada , which may be impacted by regulatory approval and closing conditions.
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 2023 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 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.
In addition, management adjusts measures and metrics, including operating income, EBITDA and net earnings in an effort to provide investors and analysts with a more comparable year-over-year performance metric than the basic measure by excluding certain items. These items may impact the analysis of trends in performance and affect the comparability of the Company's core financial results. By excluding these items, management is not implying they are non-recurring.
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:
- The Cybersecurity Event adjustment includes the impact of incremental direct costs such as inventory shrink, hardware and software restoration costs, legal and professional fees, labour costs and insurance recoveries. Management believes that the Cybersecurity Event adjustment results in a useful economic representation of the underlying business on a comparative basis. The adjustment does not include management's estimate of the full financial impact of the Cybersecurity Event, as it excludes the net earnings impacts related to the estimated decline in sales and operational effectiveness from impacts such as the temporary loss of advanced planning, promotion and fresh item management tools, the temporary closure of pharmacies, and customers' temporary inability to redeem gift cards and loyalty points.
- The Grocery Gateway Integration adjustment includes the impact of the asset write-off related to the grocery gateway name and facility assets, severance, IT project costs and other costs.
- 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.
- Adjusted operating income is operating income excluding certain items to better analyze trends in performance. These items are excluded to allow for better period over period comparison of ongoing operating results. Adjusted operating income is reconciled to operating income in its respective subsection of the "Summary Results –
Fourth Quarter & Fiscal Year " section. - 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 | 14 Weeks Ended | 13 Weeks Ended | ||||||||
($ in millions) | ||||||||||
Net earnings | $ | 187.9 | $ | 193.4 | $ | 183.3 | ||||
Income tax expense | 63.5 | 58.2 | 45.0 | |||||||
Finance costs, net | 70.2 | 82.0 | 66.7 | |||||||
Operating income | 321.6 | 333.6 | 295.0 | |||||||
Depreciation | 237.0 | 227.8 | 200.2 | |||||||
Amortization of intangibles | 33.7 | 24.8 | 19.2 | |||||||
EBITDA | $ | 592.3 | $ | 586.2 | $ | 514.4 | ||||
52 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||
($ in millions) | ||||||||||
Net earnings | $ | 727.7 | $ | 811.3 | $ | 764.2 | ||||
Income tax expense | 237.7 | 270.3 | 265.9 | |||||||
Finance costs, net | 267.0 | 282.1 | 269.4 | |||||||
Operating income | 1,232.4 | 1,363.7 | 1,299.5 | |||||||
Depreciation | 916.0 | 872.3 | 768.7 | |||||||
Amortization of intangibles | 114.6 | 94.8 | 75.6 | |||||||
EBITDA | $ | 2,263.0 | $ | 2,330.8 | $ | 2,143.8 |
- EBITDA margin is EBITDA divided by sales.
- Adjusted EBITDA is EBITDA excluding certain items to better analyze trends in performance. These items are excluded to allow for better period over period comparison of ongoing operating results. Adjusted EBITDA is reconciled to EBITDA in its respective subsection of the "Summary Results –
Fourth Quarter & Fiscal Year " section. - Adjusted EBITDA margin is adjusted 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
($ in millions, except per share information) | |||||||||
Shareholders' equity, net of non-controlling interest | $ | 5,200.4 | $ | 4,991.5 | $ | 4,372.7 | |||
Shares outstanding (basic) | 258.8 | 265.2 | 268.3 | ||||||
Book value per common share | $ | 20.09 | $ | 18.82 | $ | 16.30 |
- 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
($ in millions) | |||||||||
Long-term debt due within one year | $ | 101.0 | $ | 581.0 | $ | 46.5 | |||
Long-term debt | 911.3 | 595.7 | 1,178.8 | ||||||
Lease liabilities due within one year | 563.7 | 509.5 | 490.5 | ||||||
Long-term lease liabilities | 5,620.9 | 5,775.9 | 5,417.6 | ||||||
Funded debt | 7,196.9 | 7,462.1 | 7,133.4 | ||||||
Total shareholders' equity, net of non-controlling interest | 5,200.4 | 4,991.5 | 4,372.7 | ||||||
Total capital | $ | 12,397.3 | $ | 12,453.6 | $ | 11,506.1 |
- Adjusted net earnings is net earnings, net of non-controlling interest, excluding certain items to better analyze trends in performance. These items are excluded to allow for better period over period comparison of ongoing operating results. Adjusted net earnings is reconciled in its respective subsection of the "Summary Results –
Fourth Quarter & Fiscal Year " section. - Adjusted EPS (fully diluted) is calculated as adjusted net earnings divided by diluted weighted average number of shares outstanding.
- Funded debt to total capital ratio is funded debt divided by total capital.
- Funded debt to adjusted EBITDA ratio is funded debt divided by trailing four-quarter EBITDA.
- Adjusted 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 | 14 Weeks Ended | 13 Weeks Ended | |||||||||
($ in millions) | |||||||||||
Finance costs, net | $ | 70.2 | $ | 82.0 | $ | 66.7 | |||||
Plus: | finance income, excluding interest | ||||||||||
income on lease receivables | 1.7 | 2.3 | 1.7 | ||||||||
Less: | pension finance costs, net | (2.7) | (2.0) | (2.1) | |||||||
Less: | accretion expense on provisions | (0.3) | (0.1) | (0.5) | |||||||
Interest expense | $ | 68.9 | $ | 82.2 | $ | 65.8 | |||||
52 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | |||||||||
($ in millions) | |||||||||||
Finance costs, net | $ | 267.0 | $ | 282.1 | $ | 269.4 | |||||
Plus: | finance income, excluding interest | ||||||||||
income on lease receivables | 5.3 | 7.3 | 9.8 | ||||||||
Less: | pension finance costs, net | (7.8) | (7.8) | (8.1) | |||||||
Less: | accretion expense on provisions | (1.4) | (1.9) | (2.3) | |||||||
Interest expense | $ | 263.1 | $ | 279.7 | $ | 268.8 |
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 fourth quarter ended
CONFERENCE CALL INFORMATION
The Company will hold an analyst call on
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, and then navigating to the "Empire Company Limited Quarterly Results Call" link.
Replay will be available by dialing (888) 390-0541 and entering access code 984059 until midnight
SELECTED FINANCIAL INFORMATION
The following financial information is derived from our audited annual consolidated financial statements for the year ended
Consolidated Balance Sheets | ||||||
As At | ||||||
(in millions of Canadian dollars) | 2023 | 2022 | ||||
ASSETS | ||||||
Current | ||||||
Cash and cash equivalents | $ | 221.3 | $ | 812.3 | ||
Receivables | 683.4 | 558.8 | ||||
Inventories | 1,743.3 | 1,591.5 | ||||
Prepaid expenses | 131.0 | 127.6 | ||||
Leases and other receivables | 85.2 | 73.8 | ||||
Income taxes receivable | 90.8 | 48.7 | ||||
2,955.0 | 3,212.7 | |||||
Leases and other receivables | 587.0 | 549.1 | ||||
Investments, at equity | 701.9 | 681.5 | ||||
Other assets | 26.3 | 21.7 | ||||
Property and equipment | 3,338.1 | 3,159.2 | ||||
Right-of-use assets | 4,860.9 | 4,999.7 | ||||
Investment property | 166.8 | 146.8 | ||||
Intangibles | 1,375.6 | 1,338.5 | ||||
2,067.8 | 2,059.0 | |||||
Deferred tax assets | 404.3 | 425.4 | ||||
$ | 16,483.7 | $ | 16,593.6 | |||
LIABILITIES | ||||||
Current | ||||||
Accounts payable and accrued liabilities | $ | 3,028.6 | $ | 2,988.9 | ||
Income taxes payable | 61.3 | 127.6 | ||||
Provisions | 29.9 | 32.7 | ||||
Long-term debt due within one year | 101.0 | 581.0 | ||||
Lease liabilities due within one year | 563.7 | 509.5 | ||||
Other liabilities due within one year | 73.0 | - | ||||
3,857.5 | 4,239.7 | |||||
Provisions | 42.7 | 44.2 | ||||
Long-term debt | 911.3 | 595.7 | ||||
Long-term lease liabilities | 5,620.9 | 5,775.9 | ||||
Other long-term liabilities | 279.2 | 366.0 | ||||
Employee future benefits | 166.6 | 178.2 | ||||
Deferred tax liabilities | 268.8 | 260.0 | ||||
11,147.0 | 11,459.7 | |||||
SHAREHOLDERS' EQUITY | ||||||
Capital stock | 1,914.7 | 2,026.1 | ||||
Contributed surplus | 50.1 | 37.2 | ||||
Retained earnings | 3,216.0 | 2,914.2 | ||||
Accumulated other comprehensive income | 19.6 | 14.0 | ||||
5,200.4 | 4,991.5 | |||||
Non-controlling interest | 136.3 | 142.4 | ||||
5,336.7 | 5,133.9 | |||||
$ | 16,483.7 | $ | 16,593.6 |
Condensed Consolidated Statements of Earnings | 13 and 14 Weeks Ended | 52 and 53 Weeks Ended | |||||||||
(in millions of Canadian dollars, | |||||||||||
except share and per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||
Sales | $ | 7,408.4 | $ | 7,840.8 | $ | 30,478.1 | $ | 30,162.4 | |||
Other income | 39.9 | 25.8 | 60.8 | 86.8 | |||||||
Share of earnings from investments, at equity | 17.2 | 14.7 | 87.7 | 93.1 | |||||||
Operating expenses | |||||||||||
Cost of sales | 5,449.4 | 5,836.8 | 22,685.4 | 22,502.7 | |||||||
Selling and administrative expenses | 1,694.5 | 1,710.9 | 6,708.8 | 6,475.9 | |||||||
Operating income | 321.6 | 333.6 | 1,232.4 | 1,363.7 | |||||||
Finance costs, net | 70.2 | 82.0 | 267.0 | 282.1 | |||||||
Earnings before income taxes | 251.4 | 251.6 | 965.4 | 1,081.6 | |||||||
Income tax expense | 63.5 | 58.2 | 237.7 | 270.3 | |||||||
Net earnings | $ | 187.9 | $ | 193.4 | $ | 727.7 | $ | 811.3 | |||
Earnings for the period attributable to: | |||||||||||
Non-controlling interest | $ | 5.0 | $ | 14.9 | $ | 41.7 | $ | 65.5 | |||
Owners of the Company | 182.9 | 178.5 | 686.0 | 745.8 | |||||||
$ | 187.9 | $ | 193.4 | $ | 727.7 | $ | 811.3 | ||||
Earnings per share | |||||||||||
Basic | $ | 0.72 | $ | 0.68 | $ | 2.65 | $ | 2.81 | |||
Diluted | $ | 0.72 | $ | 0.68 | $ | 2.64 | $ | 2.80 | |||
Weighted average number of common shares | |||||||||||
outstanding, in millions | |||||||||||
Basic | 254.9 | 263.0 | 258.8 | 265.2 | |||||||
Diluted | 255.4 | 264.0 | 259.4 | 266.2 |
13 and 14 Weeks Ended | 52 and 53 Weeks Ended | ||||||||||
Consolidated Statements of Cash Flows | |||||||||||
(in millions of Canadian dollars) | 2023 | 2022 | 2023 | 2022 | |||||||
Operations | |||||||||||
Net earnings | $ | 187.9 | $ | 193.4 | $ | 727.7 | $ | 811.3 | |||
Adjustments for: | |||||||||||
Depreciation | 237.0 | 227.8 | 916.0 | 872.3 | |||||||
Income tax expense | 63.5 | 58.2 | 237.7 | 270.3 | |||||||
Finance costs, net | 70.2 | 82.0 | 267.0 | 282.1 | |||||||
Amortization of intangibles | 33.7 | 24.8 | 114.6 | 94.8 | |||||||
Net gain on disposal of assets | (35.5) | (3.7) | (44.7) | (23.1) | |||||||
Net gain on lease terminations | - | (23.6) | - | (47.0) | |||||||
Impairment losses (reversals) of non-financial | |||||||||||
assets, net | 9.0 | (7.0) | 6.2 | (7.4) | |||||||
Impairment losses of long-lived assets | 6.7 | - | 6.7 | - | |||||||
Amortization of deferred items | 2.1 | 0.6 | 1.6 | 1.8 | |||||||
Equity in earnings of other entities, net of | |||||||||||
distributions received | (5.0) | (0.9) | (10.2) | 9.5 | |||||||
Employee future benefits | (1.1) | (2.5) | (3.9) | (12.0) | |||||||
(Decrease) increase in long-term provisions | (0.3) | 2.8 | (2.9) | (0.7) | |||||||
Equity based compensation | 5.2 | 6.0 | 17.3 | 14.6 | |||||||
Net change in non-cash working capital | (2.6) | (37.9) | (307.4) | (46.8) | |||||||
Income taxes paid, net | (66.2) | (50.5) | (320.4) | (112.6) | |||||||
Cash flows from operating activities | 504.6 | 469.5 | 1,605.3 | 2,107.1 | |||||||
Investment | |||||||||||
Increase in equity investments | (1.0) | (83.0) | (3.4) | (124.5) | |||||||
Property, equipment and investment property | |||||||||||
purchases | (105.5) | (128.5) | (574.2) | (633.0) | |||||||
Intangible purchases | (52.7) | (77.4) | (183.5) | (147.3) | |||||||
Proceeds on disposal of assets | 29.4 | 25.5 | 48.9 | 165.6 | |||||||
Proceeds on lease terminations | - | - | - | 10.0 | |||||||
Leases and other receivables, net | (35.5) | 15.7 | (34.8) | 25.4 | |||||||
Other assets and other long-term liabilities | (3.4) | (2.1) | (6.7) | (28.9) | |||||||
Business acquisitions | (2.4) | (6.0) | (18.7) | (242.0) | |||||||
Payments received for finance subleases | 21.9 | 27.3 | 84.8 | 79.4 | |||||||
Interest received | 0.5 | 1.5 | 2.9 | 3.9 | |||||||
Cash flows used in investing activities | (148.7) | (227.0) | (684.7) | (891.4) | |||||||
Financing | |||||||||||
Issuance of long-term debt | 21.7 | 15.2 | 87.1 | 94.6 | |||||||
Repayments of long-term debt | (18.1) | (13.4) | (590.2) | (96.8) | |||||||
(Repayments) advances on credit facilities, net | (3.2) | 30.4 | 337.9 | (83.2) | |||||||
Interest paid | (3.4) | (22.0) | (52.0) | (56.2) | |||||||
Payments of lease liabilities (principal portion) | (125.6) | (182.6) | (507.6) | (482.8) | |||||||
Payments of lease liabilities (interest portion) | (59.5) | (62.9) | (230.2) | (231.6) | |||||||
Repurchase of common shares | (111.7) | (16.5) | (350.0) | (248.9) | |||||||
Dividends paid, common shares | (41.9) | (37.6) | (170.2) | (156.8) | |||||||
Non-controlling interest | (3.5) | (6.4) | (36.4) | (32.2) | |||||||
Cash flows used in financing activities | (345.2) | (295.8) | (1,511.6) | (1,293.9) | |||||||
Increase (decrease) in cash and cash equivalents | 10.7 | (53.3) | (591.0) | (78.2) | |||||||
Cash and cash equivalents, beginning of period | 210.6 | 865.6 | 812.3 | 890.5 | |||||||
Cash and cash equivalents, end of period | $ | 221.3 | $ | 812.3 | $ | 221.3 | $ | 812.3 |
2023 ANNUAL REPORT
The Company's audited consolidated financial statements and the notes thereto for the fiscal year ended
The Company's 2023 Annual Report will be available on or about
ABOUT EMPIRE
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
© Canada Newswire, source