The early morning conference call to discuss Empire Company Ltd.’s fourth-quarter results began as scheduled at 8 a.m. ADT, June 29, 2016. It was supposed to last an hour. Instead, the question-and-answer session plunged past 95 minutes. That’s because more than the usual number of retail stock market analysts queued up to electronically question the company’s top brass. And they had more than the usual number of questions.
That’s because the night before — just after the markets closed — Empire had released its latest financial results. The numbers were dismal. Again. Still.
Thanks largely to the ongoing, seemingly never-ending complications that Sobeys (Empire’s iconic, wholly-owned, fourth-generation supermarket subsidiary) had to deal with digesting the 2013 purchase of the Canada Safeway chain, Empire had racked up a staggering $942.6-million loss for the fourth quarter alone. The numbers for the full fiscal year highlighted even more blood-red ink: the overall net loss topped $2.1 billion. And the company had written down nearly half the value of what had been its triumphant three-year-old, $5.8-billion Safeway acquisition.
Marc Poulin, president and chief executive officer for both Sobeys and Empire, acknowledged the obvious. “Clearly, a very disappointing quarter for our organization,” he told the analysts. But he did his boss-best to find some fancy bows to tart up his numbers beast. Sobeys had made “progress in executing our integration plan,” he explained, management in the west was “now operational as one team” and the company was focusing on “three key areas” — pricing structure, network renewal and increasing efficiencies — “to strengthen our business across the country.”
But Poulin could offer no timeline for a return to profitability (“the stabilization and eventual return to an acceptable level of growth in our business is still going to take time”) and, worse, he had to admit the company was already detecting seismic “early evidence of a softening sales trend in other regions of the country.”
Awful seemed headed for abysmal.
“Having said that,” Poulin was quick to add cheerily, “we are confident we have the right strategy to compete in the Canadian food marketplace.”
The Canadian stock marketplace thought otherwise. David Hartley, a Credit Suisse analyst who’d sat in on the conference call, sent out a report to his clients later that day describing the latest write-down as “shocking” and pointing out Poulin’s obvious lack of a timetable “for a fix to ongoing operational and demand issues.” By the end of the week, the price of Empire Co. Ltd. shares had cliff-dropped 10 per cent.
What that meant for the Sobey family — which holds 90 per cent of Empire’s Class B shares — was that their personal fortunes had also cratered… by more than a billion dollars in less than a year!
What that meant for Marc Poulin was an end to Atlantic Canada’s highest paying corporate executive gig. On July 8, 2016, a little over a week after the conference call, the board of directors of Empire and Sobeys issued a terse joint statement announcing Poulin had “left the companies effective immediately.”
What had gone so wrong so fast? And how will Empire fix it? And who will do the fixing? Oh yes, and who’s idea was this anyway?