Empire Co (TSX:EMP) reported fourth-quarter financial results on Thursday. The transcript from the company's fourth-quarter earnings call has been provided below.
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Summary
Empire Company reported a strong finish to fiscal 2026 with an 8.7% growth in adjusted EPS, driven by disciplined execution and strategic priorities.
The company plans to accelerate new store openings, with more than 20 stores planned for fiscal 2027 and over 70 in the next three years, focusing primarily on the discount format.
Empire's gross margin expanded by 14 basis points for the full year, and they aim for a 10 to 20 basis point annual expansion over time.
The company announced a 10.2% increase in its quarterly dividend and plans to renew its NCIB to repurchase approximately 9.6% of its public float.
Empire is focusing on growth in pharmacy, discount, and E-commerce, with strategic initiatives including a new entry into the Quebec discount wholesale segment through the Merand acquisition.
For fiscal 2027, Empire expects adjusted EPS growth at the high end of their 8% to 11% financial framework, supported by food sales growth, margin expansion, and cost discipline.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Empire Company Q4 2026 conference call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, June 18, 2026. I would now like to turn the conference over to Katie Bryan, VP Investor Relations.
Please go ahead.
Katie Bryan (VP Investor Relations)
Thank you. Joelle. Good morning and thank you for joining us today for Empire's fourth quarter fiscal 26 conference call. Today we will provide summary comments on our results and then open the call for questions. This call is being recorded and the audio recording will be available on the company's website at EmpireCo.ca. There is a short summary document outlining the points of our quarter available on our website as well. Joining me on the call this morning are Pierre St. Laurent, president and Chief Executive Officer, Kosta Pafernis, Chief Financial Officer and Luc Larcher, Chief Customer Officer. Before we begin, I would like to remind you that today's discussion includes forward looking statements. We caution that these statements are based on management's assumptions and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially. But refer you to our news release and MD&A for more information on these assumptions and factors.
With that, I'll turn the call over to Pierre.
Pierre St. Laurent (President and Chief Executive Officer)
Thanks, Katie. Good morning everyone. We delivered a very solid finish to fiscal 26 driven by disciplined execution across the business and continued progress against our strategic priorities. This translated into 8.7% adjusted Earnings Per Share growth for the year which is within our long term financial framework and gross margin expansion that is also within our target. We also continued operating with SG&A discipline that generated operating leverage especially in the back half of the year.
I'll focus on two topics today, our fourth quarter results and market trends and our expectation going forward, including strategic priorities as we move into fiscal 2027. Starting with our fourth quarter we delivered adjusted Earnings Per Share of $0.94 up 27% year over year excluding other income and share equity earnings. Largely real estate related Earnings Per Share grew 14.8% and looking at the full year in fiscal 26 we had a lower dependence on our real estate related income and delivered a core eps growth of 11.9%.
It is very important to management that we continue to build the strength of the core business and capitalize on market opportunities. Food sales grew 2.1% with same store sales up 1.4. Our two year same store sales stack improved sequentially through the year and was 5.3% in the quarter. This was driven by a strong performance in our full service network as well as continued momentum in discount. The solid performance that we are seeing across all of our formats give us confidence that customers continue to find value in our stores.
Fiscal 26 marked a clear shift towards new store growth. Following a period that was heavily focused on renovation and conversions, we are now accelerating new stores opening. With more than 20 stores already planned in fiscal 27 and more than 70 new stores planned over the next three years, we expect total food sales growth to outpace same store sales more meaningfully going forward. We will remain disciplined in how we allocate capital. Every new stores must deliver healthy returns, but we see significant opportunity and white space to capture new customers and drive top line growth.
In Q4 gross margin excluding fuel was flat year over year and expanded by 14bps into the full fiscal year within our target range of 10 to 20bps annually. This includes some pressure from higher outbound fuel costs in the second half of the quarter. While our margin has grown significantly over the past decade, we continue to see opportunities for consistent expansion including through enhancement of our merchandising tools and processes, growth of Empire Media plus and expansion of our personalization capabilities.
While quarterly performance may vary, we remain committed to our goal of delivering 10 to 20 basis point of annual margin expansion over time. Now I comment on what we're seeing in the current environment. Reported Consumer Price Index for food purchased from stores was 4.1% this quarter and our internal inflation remained well below that level. While we continue to see cost increase requests from suppliers, our national sourcing teams remain disciplined in protecting customer value.
Consistent to our approach on tariffs, we are pushing back on fuel related surcharges. We know many customers remain stretched and our focus is on continuing the strengthen of value proposition through deliveries we have including Scene Plus and targeted promotion along with our value size and on brand assortment. As we look ahead, our focus is on disciplined execution across our four strategic priorities customers, stores, growth and cost efficiency.
Each of these pillars are supported by clear tangible action and we will highlight a few examples. First, customers we continue to strengthen our value proposition across all formats and channels, ensuring customers have a great experience and see clear value wherever they shop. In Q4 we saw continued engagement across key elements of our customer value equation including growth in Scene participation, strong response to our promotional programs and continued momentum in our own brand and value size offerings.
Our focus remains on being the banner of choice in every market by delivering a consistently strong experience and clear value to customers at every shop Next Stores we are improving retail performance by investing in our store network and enhancing the in store experience for customers. In Q4, we completed 24 real estate projects including five new stores opening, four in discount and two conversions. Over the next three years, we plan to accelerate our level of activity, completing more than 90 projects annually, an increase of 25% compared to fiscal 25 and 26.
At the same time, we are continuing to activate several in stores program to make it easier for our teammates to serve customers. This includes effort like continued rollout in electronic shelf labels nationally as well as evolving in store processes and ways of working. Turning to Growth we remain focused on driving growth within our existing network, capitalizing on market opportunities and accelerating a key growth engines in areas such as discount pharmacy, E Commerce and retail media.
In Discount we are expanding into Atlantic Canada with three FreshCo locations opening in fiscal 26. Similar to our Western expansion, we have identified markets where we believe the banner can perform well, including one conversion from our existing network and two new locations. We were also pleased to announce the acquisition of Merand in April, which provides us with an entry point into the Quebec discount wholesale segment. We recently received court and regulatory approval and expect this transaction to close in the coming days.
Turning to Pharmacy the business is performing well and we see opportunities ahead. We finished our last fiscal year with strong results and are looking to continue that momentum. In terms of our strategy, right now we're focusing on optimizing the existing business and driving growth. Some immediate action we are taking include better leverage our central field capabilities and optimizing labor to improve both productivity and service to customers.
In parallel, we will continue to expand selectively, including adding pharmacy to new stores and being on the lookout for targeted opportunities to grow our network. You should think of this as the beginning of our journey pharmacy and we will share more details over time. In E Commerce, the closure of Alberta Customer Fulfillment CenterS represents another important step in improving the economics of the business. With continued sales growth and strong momentum, we see meaningful opportunity ahead through Vola and our third party partnerships including DoorDash, which has performed well since launching nationally in April.
We expect adjusted Earnings Per Share growth to be in the high end of our long term financial framework supported by food sales, growth, margin expansion, cost discipline and improving in E commerce economics. In closing, fiscal 26 reinforced the resilience of our business and our ability to deliver strong results in a challenging environment. We remain focused on delivering value for our customers as well as consistent, sustainable returns for our shareholders.
With that, I'll turn it over to Kosta.
Kosta Pafernis
In the fourth quarter we delivered adjusted Earnings Per Share of $0.94 up 27% year over year reflecting good top line growth, operating leverage, higher contribution from other income, a favorable tax rate and share repurchases. Excluding fuel gross margin was flat versus last year. Stronger performance across our banners were largely offset by the mix impact from higher wholesale contribution and by higher supply chain costs including higher fuel prices.
Katie Bryan (VP Investor Relations)
Thank you. Kafta Joelle, you may open the line for questions at this time.
OPERATOR
Vishal Sridhar (Equity Analyst)
Hi, thanks for taking my questions. I just wanted to start off with the strategic rationale of the Merand acquisition.
Pierre St. Laurent (President and Chief Executive Officer)
We're very excited internally by this opportunities. It was not on the table a year ago, but when we saw that opportunity we jump in and we're pleased with that. So we expect the closing in the next few days and the team already working on the integration plan and how can we drive this business forward?
Vishal Sridhar (Equity Analyst)
Okay. And should we expect, should we expect that business to grow substantially by via with network growth? And I understand that the business was under protection in the Bankruptcy and Insolvency Act. So do you see a quick path to profitability for that business? And also is it you anticipate it being a Quebec only discount banner, is that correct?
Pierre St. Laurent (President and Chief Executive Officer)
It's early to talk about plan but I know they had a plan for expansion and I can tell you this is going to be accredited day one for us. So it will be profitable day one for us. And we will sit with the MERA team to look at their plan, to look at how we can support them in their growth. But we see meaningful potential growth with that business.
Vishal Sridhar (Equity Analyst)
Okay, thank you. And I just wanted to get your new management's perspective on pharmacy. How large is that business? And I noticed there's been an appointment in pharmacy as well in terms of management team. So how should we think about the growth of that business over time? And will it be organic? Will it be acquisition? Any thoughts you can provide would be helpful.
Pierre St. Laurent (President and Chief Executive Officer)
It's two area where we are underdeveloped in our mind and so there's a lot of room for us to grow without cannibalization. So that's why we're excited by the future in those two businesses. Pharmacy is definitely in a real world going to focus.
Vishal Sridhar (Equity Analyst)
Thank you.
Irene Nettel (Equity Analyst)
Your next question comes from Irene Nettel with RBC Capital Markets. Your line is now open. Thanks and good morning everyone. Could you provide some color around what you saw in terms of consumer buying behavior through the quarter? You know whether you saw an intensification of value seeking behavior as fuel prices went up and also how you're seeing your current cost environment with fuel places still, even though supposedly we have a
Pierre St. Laurent (President and Chief Executive Officer)
deal elevated, there's no one better than our chief customer officer to answer that question. I'll ask Luke to answer.
Luc Larchevec (Chief Customer Officer)
So there's no surge on cost increases coming from suppliers. And our position on fuel is very well known. So we're not accepting anything. It's too volatile, it's too unpredictable. But to your point, now there's an agreement apparently. So hopefully this will also put some relief to the customers as fuel prices should go down from now on.
Irene Nettel (Equity Analyst)
That's really helpful. Thank you. And then just a housekeeping question. Can you share what the benefit to the SG and A line was as a result of the changes on the cfc? Because I believe the benefit. You said the Benefits began in Q4 but you didn't quantify it. I don't believe.
Kosta Pafernis
Yeah, we benefited in the quarter, Irene, at the expectation that we set up about $50 million.
OPERATOR
Okay, thank you. Your next question comes from Michael Van Nuys with TD Cowan. Your line is now open.
Michael Van Nuys (Equity Analyst)
Hi, good morning. I wanted to ask about your E Commerce growth which was up I think 6%. This was reasonably below the 20% that your two public company peers reported. And I'm kind of curious as to how much of that might have been caused by scaling back of Vola's footprint in Calgary and what you're doing to ensure that you hold your share in the third party E commerce channels like Uber and Instacart that are growing faster than the industry.
Pierre St. Laurent (President and Chief Executive Officer)
You know and in terms of future quarters, we're not going to be commenting on where total E commerce growth will be but we're going to be assuming more contribution due to the DoorDash partnership. So you know, we're looking forward to more, more good things to come. As it relates to our E commerce strategy.
Michael Van Nuys (Equity Analyst)
Are you able to give us any sense as to how much of a drag we can expect the exiting of the or the closure of the Calgary CFC to cause or to have on your E Commerce growth over the next few quarters?
Pierre St. Laurent (President and Chief Executive Officer)
Michael Van Nuys (Equity Analyst)
Well, I just wanted to, I just wanted to ask for a bit of clarity there on, on some of the trends within the E commerce because I'm curious As to whether the, the difference in the growth rates has, has something to do with like the channels, the discount versus the, the full service channel within E Commerce specifically.
Pierre St. Laurent (President and Chief Executive Officer)
Very pleased with how the team did handle that. They handled that really, really well. The team is focusing on driving profitable growth right now and the best is yet to come.
Michael Van Nuys (Equity Analyst)
Perfect. Thank you very much.
Pierre St. Laurent (President and Chief Executive Officer)
And if I may, Michael, we understand that is your last call with us. I wish you all the best on behalf of the entire Empire team. Thanks so much.
Michael Van Nuys (Equity Analyst)
Thank you. Thank you guys. It's been a pleasure.
Pierre St. Laurent (President and Chief Executive Officer)
Thank you, Michael. Thank you.
OPERATOR
Your next question comes from Chris Lee with Deshaun. Your line is now open.
Chris Lee (Equity Analyst)
Oh, good morning everyone. Costa, I just maybe have a couple of numbers questions for you. First, I want to confirm the EPS growth guidance. I just want to confirm that it does include other income and share of earnings from investments. Is that correct? I asked because the midpoint of your guidance for this year obviously implies a decline versus last year. So I want to make sure that that growth, 8 to 11% includes that decline.
Kosta Pafernis
It's all included. Yes.
Chris Lee (Equity Analyst)
Perfect. Okay. And then just on the gross margin, you know that it was negatively impacted by the wholesale mix. Are you able to sort of quantify how much that was in the quarter and then when will you start to lap that impact?
Kosta Pafernis
Yeah. So I won't comment on the first part of your question, but the lapping on the mix will be in Q2, so we'll lap it fully in Q1 and then Q2 being a full year.
Chris Lee (Equity Analyst)
Okay, that's great. And then my last question, I guess maybe for Pierre is can you comment just when you look at the new stores that have been open, you know, recently, how, how has the growth been versus your expectations?
Pierre St. Laurent (President and Chief Executive Officer)
Chris Lee (Equity Analyst)
Okay, great. Thanks very much and all the best.
Pierre St. Laurent (President and Chief Executive Officer)
Thank you.
OPERATOR
The next question comes from John Vampiro with Scotiabank. Your line is now open.
John Vampiro (Equity Analyst)
I wonder if you could share any observations about or or comments on cadence of SAM store sales through the quarter. Was the one and a half roughly stable through FQ4? Was there any volatility month to month and apologies if I missed it during your prepared remarks, but was there any color or any color you can add on discount versus conventional performance?
Pierre St. Laurent (President and Chief Executive Officer)
John Vampiro (Equity Analyst)
Okay, understood. I wanted to follow up on the prior question about the wholesale mix and just given that there is still some level of increased wholesale sales impacting gross margin expansion, is it fair to expect gross margin gains ex fuel in F27 could be on the lower end of the long term algo.
Kosta Pafernis
No, no, no. We fully expect to be able to deliver with our expectations of what we've said in the past. So I think it's. It's just a matter of us lapping these wholesale mixes. So that's, that's pretty much the commentary in terms of any forward guidance.
John Vampiro (Equity Analyst)
All right, understood. And then one last one. Returning to the topic of pharmacy, can you confirm growth in pharmacy for you is above the overall pace of growth for the retail business? And can you add or do you plan to add pharmacies to existing stores as part of your regular renovation plan?
Pierre St. Laurent (President and Chief Executive Officer)
Absolutely, absolutely. We have room to allocate capital to pharmacy if there's meaningful return in project that we have in front of us. Absolutely.
John Vampiro (Equity Analyst)
Okay, I'll pass it on.
Pierre St. Laurent (President and Chief Executive Officer)
Thank you.
OPERATOR
Your next Question comes from Etienne Ricard with BMO Capital Markets. Your line is now open.
Etienne Ricard (Equity Analyst)
Thank you and good morning. To circle back on Pharmacy, you mentioned the potential to improve the current network. So what do you think you can do better in pharmacy? And as you look at potentially expanding, what do you want to be best known for to customers in this segment?
Pierre St. Laurent (President and Chief Executive Officer)
So both growing top line and bottom line in productivity, it's going to improve our performance. And last year Pharmacy did overperform the rest of the business. And it's just the beginning. So we're encouraged by what we're seeing in front of us to drive that business in the next level. And Pierre, as you reflect on your
Etienne Ricard (Equity Analyst)
first six months as CEO, what would you say has been the most significant change to the culture and priorities of the company?
Pierre St. Laurent (President and Chief Executive Officer)
Etienne Ricard (Equity Analyst)
Awesome. Thank you very much.
OPERATOR
Ladies and gentlemen. As a reminder, should you have a question, please press star one. Your next question comes from Mark Feitre with cibc. Your line is now open.
Mark Feitre (Equity Analyst)
Pierre St. Laurent (President and Chief Executive Officer)
Mark Feitre (Equity Analyst)
Understood. Appreciate that. Also wanted to follow up on the SGA opportunity and cost efficiency. Would it be reasonable to expect leverage in fiscal 27 and would that even be the case if same store sales growth holds at the Q4 level, the 1.5%?
Kosta Pafernis
Pierre St. Laurent (President and Chief Executive Officer)
If it's not good for stores, it's not simplifying stores life, it's not driving growth. We won't do it. We will do meaningful investment according to that focus. Less is more and we strongly believe this is going to drive ESGN in the right direction.
Mark Feitre (Equity Analyst)
Yep. Okay, appreciate that. And then my last follow up just specifically around the plan for new stores, 20 new in fiscal 27, I assume maybe 25 each year in the following two years. I think you said that skews to discount, but could you just give us maybe a more specific number for fiscal 27 and then does that mix change in 28 and 29, or is it still about the same?
Pierre St. Laurent (President and Chief Executive Officer)
About the same. As we said before, I think more than 75% of the new stores are going to be discounted. But you will see new opening in Farmboy and Longos and IG because there's room to grow. There's new development where we believe full service is the best format for that neighborhood. So Farmboy is doing extremely well. Longo's is going to open a new store next week. Farmboy just opened the store today. IG is going to open two new stores next year.
So it's a combination of all our formats, but more than 75% are going in discount because discount is a white space for us. We have a lot of room to grow in discount without cannibalization of our network.
Mark Feitre (Equity Analyst)
Yeah, okay. But that doesn't include any new pharmacies. Is that right?
Pierre St. Laurent (President and Chief Executive Officer)
In that 70 new stores, no pharmacy? We will provide more details in the future, but you should expect seeing growth in the store counts as well.
Mark Feitre (Equity Analyst)
Yeah. Okay. Okay. Appreciate that, and all the best.
Pierre St. Laurent (President and Chief Executive Officer)
Thank you.
OPERATOR
There are no further questions at this time. I will now turn the call over to Kayte for closing remarks.
Katie Bryan (VP Investor Relations)
Thank you, Joelle. We appreciate your continued interest in Empire. If there are any unanswered questions, please contact me by phone or email. We look forward to having you join us for our first quarter fiscal 2027 conference call on September. Talk soon.
