06/29/2016 08:35 EDT

Sobeys, Safeway Owner Posts Massive Loss Amid 'Challenges' In Western Canada

Empire Co. stumbles over its acquisition of Safeway.


STELLARTON, N.S. -- Empire Company Ltd., parent of the Sobeys supermarket chain, has reported a massive fourth-quarter net loss of more than $900 million, citing "challenges'' related to its Canada Safeway acquisition in Western Canada.

Empire said the loss, net of non-controlling interest, was $942.6 million or $3.47 per diluted share, compared with a net profit of $55.4 million or 20 cents per share in last year's fourth quarter.

That contributed to a consolidated net loss for all of fiscal 2016 of $2.13 billion or $7.78 per diluted share, compared with net income of $419 million or $1.51 per diluted share in fiscal 2015.

Empire said in its earnings release issued Tuesday after markets closed that integration of the Safeway operations had "resulted in a number of operational issues that have had an impact on financial results.''

Safeway Inc. signage is displayed at a grocery store in Vancouver, British Columbia, Canada, on Thursday, June 13, 2013. (Photo: Ben Nelms/Bloomberg via Getty Images)

"In addition, increased promotional activity and a difficult economic environment mainly in the Alberta and Saskatchewan markets, resulted in sales, gross margin and earnings erosion in the West business unit.''

Sales for the quarter were $6.28 billion, up $512.7 million or 8.9 per cent from $5.77 billion, helped by an extra week in the quarter compared with 2015 that added about $461.2 million.

Same-store sales, an important metric in retail, decreased 1.8 per cent. However, excluding the negative impact of fuel sales and the retail West business unit, same-store sales would have increased 0.2 per cent, it said.

Adjusted net earnings for the quarter were $95.3 million or 35 cents per diluted share, down from $136.7 million or 49 cents in the year earlier period.

Full-year sales, covering a 53-week period versus 52 weeks in fiscal 2015, were $24.618 billion, up $690 million or 2.9 per cent.

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