Empire Co. Ltd.'s CEO says the grocer is seeing sales of products from the U.S. "rapidly dropping" as shoppers look to support the Canadian economy and avoid the potential effects of tariffs.
"We have heard loud and clear from our customers that they want Canadian products," said Michael Medline on a call discussing the company's third-quarter results.
About 12 per cent of Empire's products are sourced from the U.S. in a normal year, said Medline — but this is not a normal year.
"This 12 per cent number has been decreasing over the last year and will continue to as we shift our supply to meet our customers' growing demand for Canadian and non-American products," he said.
Empire, which owns multiple banners across the country including Sobeys and FreshCo, has a roster of good alternatives in most categories, said Medline, but produce is the hardest to replace.
"In Canada, in the winter, we do not always have viable alternatives," he said.
"We could see an impact here, either through increased costs or reduced assortment, if the product is no longer competitive on our shelves over time."
However, Medline said Empire is working with its suppliers to ensure that unnecessary costs don't get passed to customers, and said some suppliers are proactively looking for solutions. He gave the example of chocolate maker Lindt, which is shifting its production so that all the chocolate supplied to Canada will come from Europe instead of the U.S. by this summer.
Canada is in the midst of a trade war with the U.S. after President Donald Trump enacted sweeping tariffs on Canadian goods, and Ottawa has responded with two rounds of retaliatory tariffs on U.S. imports.
Medline said he believes Empire and the industry as a whole can "roll with the punches," and that they won't be highly affected by tariffs — at least not directly.
"Ultimately, the biggest risk for us is not actually in our own business, but the impact on the Canadian economy as a whole," he said.
"I do not want to downplay this. A weaker consumer environment will hurt the retail sector as a whole."
Empire reported a third-quarter profit of $146.1 million as its sales rose during the period.
The parent company of grocery retailer Sobeys says the profit amounted to 62 cents per diluted share for the 13-week period ended Feb. 1, compared with a profit of $134.2 million or 54 cents per diluted share a year ago.
On an adjusted basis, Empire says it earned 62 cents per diluted share in its latest quarter, which was the same compared with its third quarter last year.
Sales for the quarter totalled $7.73 billion, up from $7.49 billion a year earlier.
The increase came as same-store sales rose 2.5 per cent. Same-store sales growth, excluding fuel sales, amounted to 2.6 per cent.
The growth was supported by stronger top-line performance in both full-service and discount banners, said Medline. He said the gap between the two continues to decline as previously mentioned "green shoots" of normalizing consumer behaviour continue to grow.
Other signs of this normalization include outsized growth in items like meat and produce, a growing basket size and a decline in people opting for discounted items, he said.
Another sign is consumers are shopping at fewer stores, said Pierre St-Laurent, chief operating officer.
Medline also had sunny remarks on Empire's e-commerce business. Total sales growth was 72 per cent between both the grocer's in-house service Voilà and third-party services like Instacart and UberEats, he said.
"We are excited by the growth potential of our e-commerce business, and believe we have the right assets in place to effectively serve this growing market," he said.
The company's operating income from investments and other operations decreased primarily due to increased member participation in the Scene+ loyalty program and redemption of loyalty points.
"What we are seeing in these current times is very high member participation and very strong redemption rates," said Matt Reindel, chief financial officer.
Competitor Loblaw took a similar hit in its most recent results for the same reason.
Empire announced that Reindel is set to retire, with Constantine Pefanis taking on the role in May.
On the call, Medline commended Reindel for his leadership during the pandemic and the period of inflation that followed it.
This report by The Canadian Press was first published March 13, 2025.
Companies in this story: (TSX:EMP.A)
Rosa Saba, The Canadian Press
