We review Sobeys’ second quarter performance and progress against its turnaround plan, Project Sunrise, as it reaches the halfway mark.
Best performance since launching Project Sunrise
Sobeys delivered its strongest quarter since the launch of Project Sunrise last year. Total sales increased 3.1% to $6.2bn, with same-store sales (ex-fuel) up 2.5%. Adjusted net earnings were up 49.4% to $110.4m. This has provided the business with the momentum to push ahead with its strategic initiatives, developed to enable the business to better compete in the Canadian, market. Commenting on the results, Michael Medline, president and CEO, Empire Company Limited, stated,
”We have a ways to go, but we are setting ourselves up for long-term success through strategic moves such as Project Sunrise, FreshCo 2.0, our Ocado-driven ecommerce platform and the recent acquisition of Farm Boy.”
Category resets underpinning cost synergies
The business is on-track to realise the $500m cost synergies associated with its transformation. Having achieved 20% of these last year, it anticipates a further 30% will be realised this year. A large element of the savings will be driven by its category reset programme. This is delivering simplicity for the customer in-store and more innovative ranges. Sobeys has rationalised its supplier base, resulting in improved efficiencies and cost reductions, optimising its national scale for the first time.
Format developments poised to drive future growth
The most significant transaction in the quarter was the acquisition of Farm Boy. This will strengthen Sobeys’ business in urban markets and provides a platform to expand into new areas. Sobeys expects to double the size of this business over the next five years. The retailer also remains on-track to launch its first discount stores in western Canada. Last year it announced plans to convert 25% of its Safeway and Sobeys supermarkets in the region. The first two FreshCo stores will launch in Winnipeg next spring. It is also on-track to launch its Ocado-powered ecommerce offer in Greater Toronto Area in spring 2020.
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