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Sobeys parent company Empire Co. Ltd. is taking an estimated $25-million hit as a result of a cybersecurity breach that affected the retailer’s operations last month.

The IT system issues began on Nov. 4, causing many pharmacy services to shut down for four days, and affecting other operations for roughly a week, including self-checkout terminals, gift cards, and redemption of points in the Scene+ loyalty program. On a call to discuss the company’s second-quarter results on Thursday, Empire executives gave an update on the issues, saying the disruption had no effect on its supply chain.

Empire, which owns grocery banners including Sobeys, Safeway, IGA and FreshCo, is still bringing some of its information and administrative systems back online. Those systems were shut down when the company became aware of the breach, which executives on Thursday referred to as a “cybersecurity event.” CBC, citing unnamed employees, reported last month that the disruption was the result of a ransomware attack.

Empire spokesperson Karen White-Boswell declined to answer a question on Thursday about whether ransom was paid as a result of the breach.

Empire is still investigating the incident, and said in a statement that if any sensitive data has been taken from its systems, the company will work with provincial privacy regulators and any individuals whose information is involved.

While the retailer has insurance coverage for such events, the company’s $25-million estimate deals with the costs to the business after insurance. Because the incident occurred late in the quarter, it had no impact on the second-quarter results.

Empire reported that profits in its second quarter, which ended Nov. 5, rose by 8.3 per cent. This was aided by the conversion of stores to discount formats in Western Canada, higher sales of private-label brands as customers change their buying habits in response to inflation and investments in analytics that help to optimize promotional strategies.

Inflation pressures are continuing: requests for price increases from suppliers have not slowed down, executives said on Thursday’s call. While the rate of inflation is likely to slow in the coming months – as companies begin to report results that compare with a period last year when inflation was already surging – Empire’s sourcing team is still in regular negotiations with vendors on these requests.

“It’s a balancing act between accepting a cost increase when it’s justified, and pushing back when we believe that that could hurt customers and it’s not justified,” chief operating officer Pierre St-Laurent said.

Empire’s discount grocery chains such as FreshCo saw double-digit increases in same-store sales – an important metric that tracks sales growth not due to new store openings – as shoppers look for deals. Over all, same-store sales increased by 3.1 per cent, not including fuel. Empire has also seen double-digit growth in its private-label brands, which tend to perform well during periods of inflation.

Sales for the 13 weeks ended Nov. 5 totalled $7.6-billion, up 4.4 per cent compared with the same quarter last year.

Grocers have been under increasing scrutiny as inflation has reached record levels.

Empire chief executive officer Michael Medline has expressed frustration over accusations of “greedflation” in the past, and reiterated on Thursday that the company is not profiting from the surging grocery bills that are hitting Canadians’ wallets.

“Inflation does not help our [profit] margin. It does not help our company,” Mr. Medline said on a conference call to discuss the results.

Empire reported net earnings of $189.9-million or 73 cents a share in the second quarter, up from $175.4-million or 66 cents in the same period last year.

The company also announced on Thursday that it is getting out of the gas station business in Western Canada, selling 56 of its locations to Shell Canada subsidiary Canadian Mobility Services Ltd. for approximately $100-million in cash.

Empire will continue to operate more than 350 fuel sites in Quebec and Atlantic Canada. The deal is subject to regulatory approvals, and is expected to close in the first quarter of 2024.

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