One of Canada's biggest supermarket chains is positioning itself as Canada's "fair but tough" grocery retailer, reinstating pay bonuses for front-line workers and refusing to unilaterally impose fee increases on suppliers.
"There's a right way to do business and there's a wrong way to do business," Empire Company Ltd. president and CEO Michael Medline told analysts during a conference call on Wednesday. "We're fair but tough."
His comments come as the parent company of Sobeys, FreshCo, Safeway and other grocery banners reported a surge in sales during the latest quarter as the pandemic continued to impact how Canadians shop for food.
The Stellarton, N.S.-based grocer recorded a 10.7 per cent increase in same-store sales, excluding fuel, in its third quarter ending Jan. 30. That momentum continued into the current quarter, with sales up nine per cent in the first five weeks.
Yet Empire cautioned that sales results could appear skewed going forward as it approaches the one-year mark of the pandemic.
Many shoppers stockpiled food and household goods at the onset of the COVID-19 outbreak due to fears around supply chain reliability and other uncertainties, resulting in an unprecedented 18 per cent increase in same-store sales in the fourth quarter of last year.
"The company has begun to lap the period when significant stock up activity was experienced in stores," the grocer said in a release. "Sales in the fourth quarter compared to last year will be less meaningful as they will not provide a full indication of underlying performance."
Food retailers in Canada have seen sales soar during the pandemic as many restaurants closed or had capacity curtailed and most provinces ordered non-essential workers to stay home.
While online food sales spiked and have stayed elevated – Empire noted its e-commerce sales grew 315 per cent in the third quarter – many people relied on brick-and-mortar supermarkets.
Grocery chains offered workers so-called hero pay increases of $2 an hour at the outset of the pandemic in recognition of their essential role and the risk of working with the public.
The retailers faced public outcry last June, however, when those bonuses were cancelled despite ongoing record profits.
But Empire reintroduced the pay bump for front-line employees in stores and distribution centres during the latest wave of lockdowns.
The company paid out an extra $9 million in bonuses for workers in impacted areas, Empire said.
"We've kept our commitment to offer our front-line and distribution centre teammates a lockdown bonus, even while much of the industry did not do so," Medline said. "To us, it was certainly the right thing to do."
Metro Inc. provided its front-line workers with gift cards ranging from $75 to $300 at a total cost of about $8 million in its latest quarter, the company said in an email Wednesday. Loblaw Companies Ltd. did not immediately respond to questions about whether it had reinstated a bonus during the most recent lockdowns or other measures.
Meanwhile, grocery retailers have also come under fire in recent months for imposing fee increases on suppliers.
Walmart Canada announced a fee hike last July that prompted United Grocers Inc., a national buying group that represents Metro Inc., to tell suppliers it expected the same. Loblaw followed suit, telling suppliers the cost of getting products on shelves would go up in January.
But Sobeys refused to follow in its competitor's footsteps, indicating that it would take a different approach.
"I believe our strong margin performance this quarter shows that you don't need to send unilateral letters to your suppliers to do well in this business," Medline said. "We try to treat our supplier partners with respect and transparency.
"We believe that a values-driven approach garners better results for both sides," he said. "It doesn't mean we're not talking. We are. But we negotiate the right way."
Medline added that while the company negotiates hard and "not everybody is going to be happy," the grocer will continue to be fair.
Overall, Empire's third quarter profit increased to $176.3 million from $120.5 million a year earlier amid higher sales.
In addition to pandemic shopping trends, Empire said the jump in sales was also driven by the expansion of its FreshCo banner in Western Canada and Farm Boy banner in Ontario.
The gains were partially offset by lower fuel sales and temporary store closures in Western Canada pending conversion to FreshCo.
This report by The Canadian Press was first published March 10, 2021.
Companies in this story: (TSX:EMP.A)
Brett Bundale, The Canadian Press
