Empire Company (TSX:EMP.A) employs approximately 123,000 people and has approximately $25.1 billion in annual sales and $9.6 billion in assets. The company’s financial results are segmented into food retailing, through wholly owned Sobeys, and investment operations.
The company has a price-to-earnings ratio of 22.24, a price-to-book ratio of 2.59, and market capitalization of $9.49 billion. Debt is opportunistically used at Empire, as evidenced by a debt-to-equity ratio of 1.86. The company has average performance metrics with an operating margin of 2.87% and a return on equity of 11.85%.
Empire’s food retailing segment is carried out through Sobeys — a wholly owned subsidiary. Sobeys owns more than 1,500 stores in 10 Canadian provinces as well as more than 350 retail fuel locations. Sobeys is focused on improving products by expanding and renovating the company’s current store base. Management recently committed to focus on the core grocery business and separated out related businesses, including the pharmacy, wholesale, fuel, convenience, and liquor businesses, into a distinct functional structure.
Sobeys provides wholesale distribution of a full range of products and services to numerous retail stores and independent wholesale accounts. Sobeys also operates fuel locations in Atlantic Canada, Québec, and the West under the FastFuel, Shell, and Safeway banners. Sobeys has also expanded liquor retail operations under three banners in Western Canada and successfully launched the wine and beer business in six food store banners in Ontario and wine in the Sobeys banner in New Brunswick.
Sobeys also offers customers a coast-to-coast loyalty reward program, which provides customers with discounts, personalized offers and communications, the opportunity to participate in contests, and other loyalty rewards. This also provides the company with insight into customer buying habits as part of an overall customer relationship management strategy.
Sobeys has a strong real estate development team to support the company’s overall growth strategy. The real estate objective is to improve the company’s market share through expansions, renovations, and new stores, while continuing to identify long-term potential opportunities. Sobeys owns or keeps control of real estate development operations by acquiring land and buildings to preserve future opportunities, re-position stores, and to develop ancillary real estate that will enhance the company’s retail store productivity.
Sobeys owns certain retail store locations and leases stores from related parties and third-party landlords. Of the 40 million square feet of retail store space under operation, 8.5% is owned, 21.6% was leased from related parties, and the balance was leased from third-party landlords.
Sobeys operates in a dynamic and highly competitive market. Other national and regional food distribution companies, mass merchandisers, warehouse clubs and online retailers represent a competitive risk to Sobeys’s ability to attract customers and operate profitably. Sobeys has a strong national presence in the Canadian retail food and food distribution industry and operates in over 900 communities in Canada. Sobeys’s real estate development operations competes with numerous other developers, managers, and owners of real estate properties in seeking quality tenants and new properties to acquire.
Overall, Empire Company is one of the safest stocks in the world and should continue to provide excellent returns to long-term shareholders.
