Empire Reports Fiscal 2026 First Quarter Results

Executive Summary

• Empire Company Limited reported fiscal 2026 first-quarter net earnings of $212 million ($0.91 per share), marking the strongest quarterly earnings per share in the company's history.
• Total sales reached $8,258 million, a 1.5% increase year-over-year, driven by a 2.6% rise in food sales, while fuel sales declined 13.7% due to lower prices following the removal of the government carbon tax.
• The company announced a quarterly dividend of $0.22 per share and provided fiscal 2026 guidance, including expected capital spend of approximately $850 million and other income/earnings from investments in the range of $120 million to $140 million.

Key Details

• Financial Performance:
  • Net earnings: $212 million (vs. $208 million prior year).
  • Adjusted net earnings: $212 million (vs. $219 million prior year).
  • Earnings per share (EPS): $0.91 (vs. $0.86 prior year).
  • Adjusted EPS: $0.91 (vs. $0.90 prior year).
  • Sales: $8,258 million (up 1.5%); Food sales $7,791 million (up 2.6%); Fuel sales $467 million (down 13.7%).
  • Gross profit: $2,235 million (up 5.1%); Gross margin 27.1% (up from 26.1%).
  • Gross margin excluding fuel increased by 63 basis points.
  • Operating income: $382 million (up from $369 million).
  • Adjusted operating income: $382 million (vs. $383 million prior year).
  • EBITDA: $671 million (up from $645 million).
  • Adjusted EBITDA: $671 million (vs. $659 million prior year); Adjusted EBITDA margin remained at 8.1%.
  • Free cash flow: $63 million (down from $187 million prior year).
  • Effective income tax rate: 26.0% (vs. 22.6% prior year).
• Segment Results:
  • Food Retailing (Sobeys): Net earnings of $205 million (up from $197 million); Operating income of $369 million (up from $358 million).
  • Investments and Other Operations: Operating income of $13 million (up from $11 million), primarily driven by higher equity earnings from Crombie REIT.
• Capital and Shareholder Returns:
  • Capital expenditures: $138 million for the quarter.
  • Fiscal 2026 capital spend expected to be approximately $850 million (approx. 50% for renovations/new stores, 25% for IT/business development).
  • NCIB: Renewed to purchase up to 11,500,000 Class A shares (approx. 9.6% of public float); purchases commenced July 2, 2025.
  • Dividend: Declared $0.22 per share, payable October 31, 2025, to shareholders of record on October 15, 2025.
  • Share repurchases: Intends to repurchase up to $400 million of Class A shares in fiscal 2026.
• Operational Updates:
  • E-commerce: Ended mutual exclusivity agreement with Ocado (incurred $12 million non-cash charge in Q1 FY2025); partnered with Instacart and Uber Eats for national grocery rollout. E-commerce platforms generated an 80.9% sales increase in Q1 FY2026.
  • FreshCo: Opened two new stores in Western Canada during the quarter; expects to open four more in FY2026. Total Western Canada stores at 51 as of Sept 10, 2025.
  • Technology: Migrating legacy ERP to SAP S/4HANA; full deployment expected over next two fiscal years.
  • Scene+: Loyalty program grew from 10 million to over 15 million members; focusing on personalization via AI/ML.
• Outlook & Risks:
  • Expected aggregate pre-tax earnings from Other income plus Share of earnings from investments: $120 million to $140 million in FY2026.
  • Risks include potential US/Canadian tariff volatility impacting import costs and supply chains.

Notable Quotes

• "Fiscal 2026 is off to a solid start as we delivered another quarter of strong bottom line growth, the strongest quarterly earnings per share in our history, underscoring the fact our team's execution continues to improve," said Michael Medline, President & CEO, Empire.