As the COVID-19 pandemic continues to affect Canadians’ food-buying habits, Sobeys owner Empire Co. Ltd. Empire Co. Ltd. is planning to accelerate the expansion of its e-commerce business.
The Stellarton, N.S.-based retailer announced on Thursday that it will move up construction of a third order-fulfilment centre in Calgary for its online grocery service Voilà. The company launched the service in the Greater Toronto Area this past summer, with plans to launch Voilà under its IGA banner in Quebec and in Ottawa in early 2022. Now, Empire says that it will launch online ordering for store pick-up under the Voilà brand in Alberta next year, and will launch home delivery from the new fulfilment centre in 2023.
Empire had already planned to build four fulfilment centres for the Voilà service across Canada, but is speeding up the expansion to Alberta as demand for online grocery shopping has swelled during the pandemic.
Before launching Voilà, Empire already had e-commerce services in Quebec and B.C. through its IGA and Thrifty Foods banners. The newer service, through a partnership with British online grocer Ocado Group PLC, operates out of vast warehouses that use robotic technology to fill orders to be packed and shipped to customers’ homes. Empire’s e-commerce sales more than tripled in its second quarter, growing 241 per cent.
Empire chief executive officer Michael Medline touted the high customer satisfaction rates for the new e-commerce service on Thursday, taking a shot at online grocery competitors. Voilà is winning customers over “because people do not have access to a reliable service that treats the customer with respect,” he said.
“We are giving Canadians an e-commerce solution they can trust, will show up when expected, and will deliver the products they ordered,” Mr. Medline said.
On Thursday, Empire reported sales of nearly $7-billion in the 13 weeks ended Oct. 31, up 8.4 per cent compared with the same period last year. All of Canada’s largest grocers have seen sales gains this year as people stayed home to curb the spread of COVID-19, and cooked for themselves more often. While people are shopping less often, they stock up on more items during each trip. Empire said that its grocery stores also gained market share in the second quarter.
Empire reported that same-store sales – an important metric that tracks sales growth not affected by new store openings – rose 8.7 per cent in the second quarter, not including fuel sales at its gas stations.
Empire is preparing for a winter during which safety measures related to COVID-19 will continue, including limits on the number of shoppers in stores. The company is planning to install outdoor heaters and shelters at some locations to make customers more comfortable while they wait in lineups. It is also working on ways for shoppers to register in a “virtual queue” so that they can wait in the warmth of their cars until it is their turn to enter a store. Competitor Metro Inc. also signaled in its earnings call last month that it was preparing for outdoor lineups and may need to build shelters.
The company is trying to gain further market share from competitors by improving the productivity of its stores, expanding e-commerce, increasing sales of private label products such as those under its revamped Compliments brand, by opening more Farm Boy stores in Ontario, and by continuing to expand its discount Freshco banner in Western Canada. The company has 255 Safeway and Sobeys locations in the West, about one-quarter of which will be converted to Freshco.
The company reported $14-million in pandemic-related costs in the quarter ended Oct. 31, and said it expects $15-million to $20-million a quarter in additional costs attributable to COVID-19. Last month, the company announced that it would reinstate temporary pay bonuses for some front-line workers in regions where governments have mandated a new round of pandemic lockdowns, beginning with Manitoba and parts of Ontario. Based on current lockdowns, Empire estimates the bonuses will cost roughly $5-million a quarter.
Grocers across the industry are facing “material cost pressures” on some of the items they sell, such as lettuce and poultry, as farmers and suppliers cope with increased costs and supply chain challenges. “These are real, significant commodity increases which are being felt at the store,” Mr. Medline said. Aside from that, the company is “pushing back on price increases,” he added.
Empire reported second-quarter net earnings of $161.4-million or 60 cents a share, compared with $154.6-million or 57 cents a share in the same quarter last year. Empire’s net earnings from food retailing – which does not include investments and other operations, largely in real estate – rose 27.3 per cent to $162.8-million.
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