STELLARTON, N.S. – Shoppers in Western Canada can expect to pay a little less for groceries as a sluggish economy has forced the company behind the Sobeys and Safeway grocery chains to rethink prices in the western provinces.
Empire Company Ltd.’s (TSX:EMP.A) Safeway banner and its western business unit have seen sales erode in a difficult economic environment, mainly in Alberta and Saskatchewan, president and CEO Marc Poulin said during a conference call Thursday after the company reported third-quarter earnings.
“We’re not dealing with the same customer psyche that we were dealing with, you know, even a year ago. The behaviour of the customer has changed in Western Canada and we have to acknowledge that,” Poulin said.
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The company plans to bring down prices long term on fruits, vegetables and meat after initiating a pricing and promotion campaign in January.
Poulin said the western business unit’s back-office team will have finished its transition to new roles by the end of the company’s fiscal year in April.
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Empire wrote down the value of its western business, primarily the Safeway chain, resulting in a loss of $1.36 billion in its latest quarter. The loss was largely due to a recognition that the long-term value of the Safeway business is lower than previously estimated, the company said.
Sobeys paid $5.8 billion to acquire the Canadian assets of Safeway in 2013.
Writedown
Excluding the Safeway writedown and certain other items, Empire would have had $82.5 million of adjusted earnings in its fiscal third quarter – down 36.1 per cent from $118.6 million in the comparable year-earlier period.
The net loss amounted to $5.03 per share, which included a $1.59-billion writedown of goodwill associated with the Safeway purchase.
After adjustments, Empire earned 30 cents per share in the 13 weeks ended Jan. 30.
A year earlier, Empire’s fiscal third-quarter had $123.6 million of net income or 45 cents per share and $118.6 million of adjusted earnings, or 43 cents per share.
Revenue was up $86.7 million over the 13 weeks ended Jan. 30 to $6.03 billion from $5.94 billion in last year’s third quarter, mainly because of food inflation and the acquisition of Co-op Atlantic.
The company’s stock was trading below its 52-week low Thursday afternoon, down $3.54 or more than 13 per cent at $23.23 on the TSX.
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