STELLARTON, Nova Scotia — Sobeys last week said productivity initiatives and other efforts to keep costs down would allow it to keep pricing sharp and profits up.
The retailer said such efforts were behind increases in fourth-quarter and fiscal year sales and earnings, and would likely continue to be as Sobeys tightens prices throughout its network.
“We have continued to get sharper and sharper on pricing at a methodical and steady pace and we're very comfortable with our pricing position, format by format, across the country, but that has had a downward pressure on margins,” Bill McEwan, Sobeys chief executive officer, said during a conference call last week discussing financial results for Sobeys and its parent company, Empire Cos. “Where we're covering that is in innovation and product mixes. The majority of our improvement in operating earnings will come through productivity initiatives and cost saving, which will further fuel our ability to remain competitive on pricing.”
McEwan said inflation during the fourth quarter, which ended May 7, was “zero in aggregate,” although he acknowledged Sobeys had a hand in keeping it that way, particularly in Ontario where it is in the process of revamping its discount stores to the new FreshCo brand, and in Western Canada, where it has made an effort to be more aggressive in fresh pricing vs. discounters.
Sobeys expects capital expenditures in the new fiscal year would be between $673 million and $725 million (U.S.), up from around $611 million this year. Much of that will support ongoing construction of an automated distribution center in Terrebonne, Quebec, based on a similar project Sobeys opened in Ontario in 2009.
McEwan said the company was reviewing the results of several conventional stores that introduced “dramatic” changes in store designs and layouts in recent months, including a store near Halifax built around a health and wellness offering. “Our plan is to optimize on a companywide basis what we'll do in our full-service stores by sharing, learning and applying it with an even greater determination than we've done so far.”
McEwan said that would likely result in marketwide store renovation efforts when possible. The company said around 75% of its stores are up to standard now, including 61 former Price Chopper discount stores as of the end of the fourth quarter. McEwan said around 73 would be converted by the end of the first quarter.
Sobeys accounts for more than 98% of Empire's revenues and earnings. The retailer posted 14-week fourth-quarter sales of $4.2 billion (U.S.), an increase of 9.3% from a 13-week quarter in 2010. Adjusted for the extra week, sales increased 0.9%, and same-store sales increased 1%. For the 53-week fiscal year, sales of $16.2 billion (U.S.) increased 3.4% from the 52-week year. Adjusted for the extra week, annual sales improved 1.2%.
Net earnings of $84.4 million (U.S.) for the quarter increased by 31.8%. Net earnings of $277.4 million for fiscal year increased by 2.7%.