Empire's Strong Finish to Fiscal 2026 Masks a Radical Strategic Pivot

STELLARTON, NS – June 18, 2026 – Empire Company Limited, the parent of Sobeys, capped off its fiscal year with a powerful fourth-quarter performance that saw adjusted earnings per share soar 27% to $0.94, handily beating analyst expectations. The grocery giant also announced a 10.2% dividend hike, marking its 31st consecutive year of increases—a clear signal of confidence to shareholders. Yet, beneath the surface of these robust financials, the company is executing a profound strategic recalibration, marked by a massive write-down of its high-tech e-commerce ambitions and a determined pivot toward discount retail and operational discipline.

"We delivered a solid finish to fiscal 2026, with adjusted EPS growth of 27 per cent, reflecting disciplined execution and continued progress against our strategic priorities," said Pierre St-Laurent, President & CEO of Empire. He noted that heading into fiscal 2027, the focus remains on growth, value, and navigating a "challenging economic environment."

The results paint a picture of a company successfully managing the complexities of the current market. Quarterly sales rose 2.2% to $7.8 billion, with same-store food sales climbing a respectable 1.5%. The company's ability to maintain its gross margin at 27.6% and expand its adjusted EBITDA margin by 40 basis points points to a tight grip on costs and an effective promotional strategy, even as it claims its internal food inflation remains below the national average.

The E-commerce Reality Check

The most significant strategic narrative buried in the full-year results is Empire's dramatic course correction in e-commerce. The company took a staggering $746 million pre-tax impairment charge in the third quarter related to its online grocery network. This move was driven by the immediate closure of its automated Customer Fulfillment Centre (CFC) in Calgary and the halting of development for a similar facility in Vancouver.

The decision represents a pragmatic acknowledgment that the capital-intensive, centralized fulfillment model, powered by its partner Ocado, was not delivering the expected returns in Western Canada, where the market for online grocery proved smaller and slower to develop than anticipated. Instead of doubling down, Empire is pivoting to a more flexible, asset-lighter hybrid strategy.

The company will continue to operate its successful Voilà by Sobeys service in the high-density markets of Toronto and Montreal, leveraging its existing CFCs. For the rest of the country, it is aggressively expanding its partnerships with third-party delivery platforms. The recent addition of DoorDash, which completed its national rollout in the fourth quarter, joins existing collaborations with Instacart and Uber Eats. This allows Empire to offer online shopping and delivery from its various banners—including Sobeys, Safeway, and FreshCo—without the massive overhead of building more CFCs. This combined approach drove a 6.0% increase in e-commerce sales in the quarter.

Empire projects this e-commerce reset will unlock approximately $95 million in annualized operating income improvements starting in fiscal 2027, a significant portion of which is expected to flow directly to the bottom line. It's a bold move that trades the dream of a fully vertically-integrated digital empire for the more immediate and tangible benefits of profitability and operational agility.

A Multi-Pronged Assault on Market Share

While rightsizing its digital ambitions, Empire is simultaneously launching an aggressive ground campaign to capture market share through its physical stores. The strategy is multi-pronged, focusing on the booming discount sector, targeted regional acquisitions, and a deepening loyalty ecosystem.

The centerpiece of this offensive is the expansion of its FreshCo discount banner. After successfully converting stores in Western Canada, the company is now making a major push into Atlantic Canada in fiscal 2027, a market where discount grocery options have been limited. This directly challenges rival Loblaw's No Frills banner and taps into the intense consumer demand for value amidst persistent inflation. With plans to open approximately 15 new FreshCo stores across Canada next year, Empire is clearly staking its future growth on the value-conscious shopper.

In Quebec, Empire has made a shrewd move by acquiring Mayrand Food Group, a well-established food retailer in the Greater Montreal Area. Expected to close in the first quarter of fiscal 2027, this acquisition gives Empire an immediate foothold in the region's warehouse-style discount segment without having to build a new brand from the ground up.

Underpinning these retail efforts is the continued expansion of the Scene+ loyalty program, which Empire co-owns with Scotiabank and Cineplex. Now boasting over 15 million members, the program is becoming a powerful tool for driving customer engagement. Recent partnerships with Shell and Tangerine Bank broaden the program's reach, creating a more integrated rewards ecosystem. For Empire, the goal is to leverage the vast data from Scene+ to deliver highly personalized offers, a critical capability in a market where every grocery dollar is fiercely contested.

Balancing Shareholder Rewards with Future-Proofing Investments

Empire’s 31-year streak of dividend increases, coupled with a renewal of its share buyback program, underscores a firm commitment to shareholder returns. The company repurchased $400 million of its shares in fiscal 2026 and intends to renew its Normal Course Issuer Bid to buy back up to 10.75 million more shares.

However, this is not a company resting on its laurels. Management is simultaneously planning a significant capital expenditure of approximately $850 million for fiscal 2027. A major portion of this investment is earmarked for future-proofing the business. About half will fund new stores and renovations, with a goal to refresh 20-25% of the entire network over the next three years.

Another critical investment is the company-wide migration to a modern SAP S/4HANA platform, a massive IT project expected to be substantially complete by the end of fiscal 2027. This new system promises to streamline operations, provide real-time data for better decision-making, and centralize financial reporting and supply chain management. It is a foundational investment that, while costly, is essential for generating the cost efficiencies and operational leverage that Empire's new three-year strategy demands. This dual approach of returning capital to shareholders while investing heavily in store modernization and technology infrastructure highlights a disciplined strategy aimed at securing both short-term performance and long-term competitive advantage.

The strong close to fiscal 2026 shows a retailer that is not afraid to make tough decisions, as seen in its e-commerce pivot, while methodically executing a clear plan for growth in its core brick-and-mortar business.