Empire Q4 Sales and Profit Drop, Dividend Hiked 15.3%; Shares Lose More Than 5%

Shares of Empire Co. (EMP.A), the owner of grocery chains Sobeys, Safeway, FreshCo, IGA, FreshCo, and others, fell more than 5% on Wednesday after the company reported lower sales and profit in the fourth quarter than in the year earlier.

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Sales came in at C$6.9 million for the quarter ended May 1, 2021, a decrease of 1.3% from C$7.0 million in the prior-year quarter. Grocery spending rose in the fourth quarter of last year as Canadians stocked up on essential food and household items during the early days of COVID-19. Sales are still up significantly in Q4 2021 compared to before the pandemic.

Same-store sales excluding fuel decreased 6.1% compared to last year’s inventory period.

Meanwhile, net income for Q4 2021 amounted to C$171.9 million (C$0.64 per share), compared to C$177.8 million (C$0.66 per share) in the same quarter a year ago.

Empire President and CEO Michael Medline said, “Despite the challenge of lapping last year’s outsized COVID-driven results, we are pleased to report that our team delivered a very strong Q4, matching last year’s outstanding bottom-line performance and delivering two-year same-store sales growth of 10.4%. These strong results are driven by our continued progress on day-to-day execution and Project Horizon, the benefits of which will be sustained long beyond COVID-19. I am so proud of our great team in stores and behind the scenes, who continue to drive real sales growth while maintaining cost control.”

For the full year ended May 1, Empire sales rose 6.3% to C$28.3 billion. The grocery retailer’s net income for the year was C$764.2 million (C$2.61 per share), compared to C$612.8 million (C$2.16 per share) the year before.

The company increased its quarterly dividend paid to shareholders by 15.3%, to C$0.15 per share.

Empire expects grocery sales to decline in the early part of fiscal 2022. Buying habits are likely to change as COVID-19 restrictions are eased. (See Empire stock chart on TipRanks)

Last week, RBC Capital analyst Irene Nattel kept a Hold rating on EMP.A with a C$45.00 price target. This implies 13% upside potential.

Consensus among analysts is that EMP.A is a Moderate Buy based on 2 Buys and 1 Hold. The average Empire analyst price target of C$45.33 implies 13.9% upside potential to current levels.