Four generations of Sobeys have run Empire Co. Ltd., parent of the Sobeys grocery chain, since its founding in 1907—most recently Paul, for the 15 years leading up to 2013. Since then, things have been going downhill. Paul’s successor, Marc Poulin, was fired last year and replaced by CFO François Vimard until recruiting former Canadian Tire Corp chief executive Michael Medline for the role permanently. Medline is now tasked with rectifying company’s troubles, which started with the 2013 acquisition of Canada Safeway, the 213-store chain covering Western Canada—one of Paul Sobey’s last acts before stepping down.
The $5.8-billion price tag was, it appears, excessive; the subsequent integration, botched. Sobeys changed the things Safeway customers, employees and suppliers didn’t want changed, like house brands, point-of-sale systems and long-standing relationships, and didn’t alter those that needed refreshing, like the fading state of the stores. Plus, the oil price crash and subsequent recession in Alberta drove customers to discount competitors. In the past two quarters, same-store sales in Sobeys’ Western business unit, which includes Safeway and Sobeys stores, fell 3.6% and 3.9%, respectively. Empire lost $2.1 billion in fiscal 2016, a sum that will take a long time to recoup in such a low-margin business. In two moves last year, the company lopped $2.9 billion off Safeway’s book value—half what it paid for the business.
But early reactions to a restructuring program known as Project Sunrise is bringing much-needed optimism for the company and its shareholders. The company’s stock rose 1.88% in October following news that Sobeys was cutting 75 executive positions. The cuts are part of the grocers effort to cut $500 million in annual costs.
Though David and Donald Sobey retired as directors in 2015, five family members still sit on Empire’s 13-member board.
Updated Thursday, November 9, 2017