Trusted by 
Canadian 
Families

ABOUT THE COVER: This year’s cover image is taken from a Sobeys TV ad called “Hit Send on Summer.” A father and daughter plan a family backyard celebration and prepare the food they picked up at Sobeys, while keeping in touch with mom to see when she will be home from work to join the party. The ad is part of our “Get More Summer” campaign, which aims to inspire Canadians to make the most of every moment with their families.

Trusted by 
Canadian 
Families

For 111 years, our customers have been at the heart of our business. Canadians know they can trust us to provide the fresh, quality products they need to nurture their families. We are proud to be ranked as the most trusted grocer in Canada.*

*2018 Leger Corporate Reputation Study. Sobeys was ranked as the most admired company 
in the grocery/convenience store category, and sector champion for honesty and transparency.

Company Profile

Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered in Stellarton, Nova Scotia. Empire’s key businesses are food retailing and related real estate. With approximately $24.2 billion in sales and $8.7 billion in assets, Empire and its subsidiaries, franchisees and affiliates employ approximately 120,000 people.

Financial Highlights

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($ in millions, except per share amounts) 52 weeks ended
May 5, 2018
52 weeks ended
May 6, 2017
53 weeks ended
May 7, 2016
Sales $24,214.6 $23,806.2 $24,618.8
Operating income (loss) 346.5 333.0 (2,418.5)
Adjusted operating income(1) 601.7 378.5 713.7
EBITDA(1) 785.7 777.2 (1,944.7)
Adjusted EBITDA(1) 1,014.7 769.9 1,161.4
Net earnings (loss)(2) 159.5 158.5 (2,131.0)
per share (fully diluted) 0.59 0.58 (7.78)
Adjusted net earnings(1)(2) 344.3 191.3 410.2
per share (fully diluted) 1.27 0.70 1.50
Book value per common share(1) 13.62 13.40 13.23
Dividends per share 0.42 0.41 0.40
Sales
($ in billions)
CAGR(3)
5.6%
  • 0
  • 5
  • 10
  • 15
  • 20
  • 25
  • Adjusted Net Earnings(1)(2)
    ($ in millions)
    CAGR(3)
    3.6%
  • 0
  • 100
  • 200
  • 300
  • 400
  • 500
  • 600
  • Dividends
    ($ per share)
    CAGR(3)
    6.7%
  • 0
  • 0.1
  • 0.2
  • 0.3
  • 0.4
  • 0.5
  • (1) See “Non-GAAP Financial Measures & Financial Metrics” section of the Management’s Discussion and Analysis (“MD&A”).
    (2) Net of non-controlling interest.
    (3) Compound annual growth rate.

    Message from
    the CEO

    80%
    improvement in adjusted net earnings

    20%
    savings realized towards total three-year target of $500 million

    CEO

    On May 4th last year, Empire set out to rewrite the fundamentals of the Company through an ambitious 
three-year transformation program. Michael Medline, President & CEO of Empire Company Limited and its 
wholly-owned subsidiary Sobeys Inc., talks candidly about 
the transformation progress and the Company’s bold plans 
to take back market share, thrill its customers and excite 
its shareholders.

    Michael, it has been 18 months since you started at Empire. 
Has the Company made the progress you expected?

    Yes. I am very pleased with the progress we’ve made on our journey to turning around our company. In fact, we are a little bit ahead of where I thought we would be at this point. In the last 18 months we have stabilized the Company and found our bearings. We transformed our structure, sharpened our leadership team, stopped the market share bleeding, stabilized our margins, and improved our SG&A, EPS and EBITDA. Beyond the foundational changes, we also made strategic decisions to seize opportunities and set the Company up for future success. We announced the decision to expand discount to the West and invested in a partnership with Ocado to build the finest e-commerce solution in Canada.

    “We want to be the best, most innovative and customer-focused retailer in Canada. We want customers to think of us first when they shop for groceries.”

    — Michael Medline

    You are one year into a three year transformation, Project Sunrise. 
Are you delivering on the commitments that you have made?

    Our first year of Project Sunrise was a success. We are on track to take out at least $500 million of costs from our business on a run rate basis by the end of fiscal 2020. As expected, in fiscal 2018, we successfully realized 20% of our $500 million target, the majority of those savings coming from our organizational restructuring.

    Completing the restructuring of our organization was a very important milestone for us. We have moved from a byzantine regional structure to a new, efficient operating model that drives our business on a national basis, while acknowledging differences across regions. This work was tough, but it was necessary. I’m pleased we are seeing more stability as the team settles in to the new structure.

    But what I’m really excited about is that our new structure will now allow us to go for sales and tonnage, and earn back our market share. It’s time we set our sights on the big prize – sales. We are pivoting from being laser-focused on stabilizing our business to making strategic decisions for the future and mobilizing our plans for growth.

    Mother and Daughter Shopping

    We are working to thrill our customers and strengthen their connection with our brand.

    When you think about the future for Empire and Sobeys, what does it look like?

    I think about what this company can and will be most every waking hour of my day. We have not strayed from the vision that we set out for this company a year ago. We want to be the best, most innovative and customer-focused retailer in Canada. We want customers to think of us first when they shop for groceries. And I want our employees to feel the pride of working for a company that is making a difference in the lives of our customers.

    Are we there yet? Not at all, but we’re making tangible progress. We have a lot of hard work in front of us. But, a year in, I am more confident than ever that we now have the foundation, the strategy, the tactics and, most importantly, the team to execute on this vision.

    Five Strategic Priorities

    Reset our Foundation
    Successful completion of Sunrise by end of fiscal 2020

    Bolster our
 Brand
    Strengthen the emotional connection to our banner brands

    Win in our 
Stores
    Improve service and offering in our conventional stores

    Enhance
 Discount
    Expand discount to Western Canada and refine our FreshCo model

    Win
 E-commerce
    Launch home delivery through Ocado partnership

    What are your strategic priorities for fiscal 2019?

    We have five strategic priorities for fiscal 2019:

    • First, we have to continue our focus on Project Sunrise. And by that, I mean really starting to leverage the scale of our new structure in fiscal 2019 to take more costs out of the business and get ready to go after sales and incremental margin.
    • Second, we’ll continue to bolster our brand. We need to be clearer about what we stand for to strengthen the emotional connection with consumers and continue to earn their confidence as their most trusted destination for their groceries.
    • Third, we absolutely need to win in our stores. The customer experience from the first steps into our conventional stores right through to the checkout experience needs to be great – not just good, great.

    And then we have two specific opportunities around which we have built solid strategies:

    • Our fourth priority is to expand discount, pushing west with our FreshCo banner and converting up to 25% of our Safeway and Sobeys stores in a market that is ripe for a discount offer.
    • And finally, we are playing to win grocery e-commerce in Canada, through our exclusive deal with Ocado to bring the world’s finest grocery e-commerce platform to our customers.

    Win in Our Stores

    We are committed to providing a great customer experience and carrying the items that customers want most.

    Win in our stores

    What does ‘Winning in our Stores’ look like in fiscal 2019?

    Each of our strategies includes a myriad of activities to thrill our customers. In this case, the top initiatives for fiscal 2019 include the work we are doing to review our product categories, from top to bottom, to ensure we carry the items that customers want most. Next, the product must be on the shelf when the customer comes looking for it. We have a significant focus on service levels to the stores and we’re seeing improvements; customers need to trust that everything on their list is on our shelves. And finally, we’re investing more capital to refresh some of our conventional stores in fiscal 2019.

    Woman helping man at the deli

    We will continue to improve our service and product offering in our stores to give customers the best possible experience.

    You recently announced changes to your executive team. How will this better 
 position the Company for the future?

    The key leadership changes we made really sharpen our focus on our five priorities and for the next phases of our transformation. The changes place strong leaders in key operations and merchandising roles and, for the first time, create a truly national merchandising team. We’ve also built Empire’s e-commerce and discount leadership for the long term. This leadership team will deliver results and strengthen our company to win in the future.

    120,000

    team members in over 900 communities across Canada

    “Our culture is rooted in a commitment to putting our customers first, supporting one another and supporting the communities we serve. I guarantee you that these cultural attributes aren’t about to change.”

    Do you see the Sobeys culture changing, and what is most important to keep?

    Sobeys’ culture is one of the things that attracted me to this great company. There is so much about the rich history of this family company that makes it a truly iconic, Canadian business and a great place to work. Our culture is rooted in a commitment to putting our customers first, supporting one another and supporting the communities we serve. I guarantee you that these cultural attributes aren’t about to change. They will remain foundational to everything we do. However, there are certainly some aspects of our culture that we need to continue to develop in order for us to strengthen our company to win in the future. We need to hold leaders more accountable for results and foster more of a culture of innovation.

    E-Commerce Platform

    E-Commerce Platform

    Our world-class e-commerce offering 
will redefine convenience for grocery customers.

    Do you have any final comments?

    I couldn’t end any conversation about our business without expressing my profound thanks to our customers, our Board of Directors and my teammates across the country. Sobeys has been built over the last five generations, community by community. Thank you to our customers in the over 900 communities that we serve coast-to-coast for visiting our stores. Thank you to our Board for their strong governance and support as we transform Sobeys; special thanks to Jim Dickson, our Chair, for his ongoing dedication to our company. Thanks goes to my 120,000 colleagues; I have been so impressed and encouraged by the determination and commitment of the team at every level of the organization as we forge a new future for our company. It’s really hard work. It’s massive change – they have shown heart and tenacity.

    Sincerely,

    signed “Michael Medline”

    Michael Medline
    President and Chief Executive Officer, Empire Company Limited

    June 27, 2018

    Woman working in produce section

    We will build on the success of our discount model by expanding the FreshCo banner in Western Canada.

    Message from
    the Chair

    13
    of our 14 directors 
are independent

    More than 1/3
    of our directors

    are women

    CEO

    Fiscal 2018 was an exciting and transformational year for Empire Company Limited. During Michael Medline’s first full year as our President and CEO, he and his team have increased sales and reduced expenses, while also significantly improving operating margins, profitability and earnings per share.

    Remarkably, these improvements were accomplished against a backdrop of major change as Sobeys rebuilt its complex regional operational structure into a more efficient, national, functionally-led team. The majority of office employees at Sobeys finished fiscal 2018 in new roles or with new responsibilities. In addition, our team has set in motion key strategic initiatives such as the push west with our company’s FreshCo banner, and Sobeys’ exclusive agreement with Ocado to bring the world’s very best integrated grocery e-commerce platform to Canada. The leadership team is now well-poised to unlock the Company’s national scale, deliver significant cost savings and revitalize our relationship with our customers.

    And yet, our company’s progress is not just evident in its financial results. It is showing up in a new energy and focus across the broad leadership team. It is translating into improvements in Sobeys’ corporate reputation as reflected in Leger’s 2018 ranking of Canada’s 100 Most Admired Companies. It is palpable in the renewed confidence with which the team is tackling strategic priorities and building a stronger foundation for future growth.

    “The Board will continue to work with the executive team on every step of the journey to provide counsel and oversight throughout the transformation of the business.”

    — James M. Dickson

    Change of this magnitude and duration requires strong governance. The Board of Directors is responsible for stewardship of the Company and, as such, we are overseeing the strategic plan and its execution. We established our Transformation Oversight Committee with a mandate to oversee the transformation effort, monitor progress and review management’s strategies for mitigating the risks inherent in any initiative of this size. The Board also tied a portion of executive compensation to the successful completion of certain of those strategic initiatives.

    With the foundation in place, Michael Medline and our leadership team have set their focus on bolstering the brand, improving our conventional store offering, enhancing and expanding our successful discount model, and preparing to launch an e-commerce offering that will be superior to anything available today in the Canadian market.

    To date, our Board has been very satisfied that the strategic plan reflects the bold steps that the Company must take, and that leadership is demonstrating great focus and capability in successfully managing the transformation. One year into this major transformation, we believe Empire is already a much stronger company with a brighter future.

    Strong Governance

    I am proud to chair a Board that is highly engaged, experienced and diverse. The slate of directors we are proposing for election at this year’s annual general meeting consists of individuals with experience in the food business, retail, finance, e-commerce and consumer businesses. All of our directors are independent except for our CEO. Nine new independent directors have joined within the past six years, resulting in strong board renewal. In addition, the Board is fortunate to have five members of the Sobey family, each of whom has, in the past, served in senior level positions within Empire or Sobeys.

    With Thanks

    On behalf of the Board, I extend my appreciation to all the people in Empire’s and Sobeys’ operations, and our franchisees and affiliates. I would also like to thank the Sobey family for their commitment to long-term value creation, and all of Empire’s shareholders for your ongoing support and confidence.

    Sincerely,

    signed “James M. Dickson”

    James M. Dickson
    Chair, Empire Company Limited

    June 27, 2018

    Integral Part of
    Our Communities

    Proudly serving our communities is a deeply held core value at Sobeys. A great example of that pride shines through in our national partnership with Special Olympics – from providing employment opportunities to individuals with intellectual disabilities, to developing one of the most innovative nutrition programs in the global Special Olympics movement, to proudly co-presenting the Special Olympics Canada Summer Games 2018.

    Special Olympics Canada Summer Games 2018

    At Sobeys we think of ourselves as Special Olympics’ #BiggestFans and could not be more excited to be one of the biggest supporters of this year’s Canada Summer Games. Hosted in Antigonish, Nova Scotia – just down the road from our Stellarton head office – busloads of employees will make their way to the Games as part of our ‘Fans in the Stands Cheer Squad’. Sobeys will also make some noise at ‘Sobeys Square’ in the middle of the action, with activities, entertainment, videos and food sampling for visitors, athletes and coaches alike. As we celebrate every moment, big and small, the Sobeys team will provide more than 10,000 meals and snacks to the 900 athletes, 290 coaches and officials, and 600 volunteers.
    Special Olympics

    Sobeys is proud to co-present the Special Olympics Canada 2018 Summer Games in Antigonish, Nova Scotia.

    Making Better Nutrition Possible for Special Olympics Athletes Year-Round

    Empowering Special Olympics athletes to live healthier lives has been a mission for Sobeys from the earliest days of our national partnership. To that end, Sobeys and Special Olympics teamed up to create a truly innovative nutrition program, developed specifically to address the unique health risks experienced by many individuals with intellectual disabilities. Our Better Food Nutrition Sessions are hands-on, fun and interactive workshops for Special Olympians, led by more than 100 Sobeys employee volunteers across the country. With a focus on quick and easy recipes and nutrition education, our goal is to reach over 20,000 athletes, caregivers and coaches by the end of 2019.
    Special Olympics

    Gary, a Sobeys Vancouver, BC employee and Nutrition Session volunteer, says “Being part of an organization that helps educate our athletes on nutrition is exciting, fulfilling and something I really identify with.”

    EMPLOYEE PROFILE

    Employee

    “My job does not feel like a job; it feels like a family.”

    — Michael Jacques

    Michael Jacques

    As extraordinary young people go, Michael Jacques is one for the books! Diagnosed with autism and an intellectual disability at a young age, today Michael is an advocate, guest speaker, valued employee at Sobeys, a Special Olympics athlete, and the author of Can’t Read, Can’t Write, Here’s My Book. – an inspiring and heartwarming autobiography of looking past disabilities to find purpose in promoting inclusion.

    Michael is an ally for the Re:Action4Inclusion initiative, touring the province of Ontario and talking to students about the impact they could have in their own schools by being more accepting of others’ differences. He is also a member of Community Living Ontario’s Board of Directors.

    Since 2010, Michael has been a valued member of the team at his local Sobeys in the Niagara region of Ontario. As much as Michael shares his love of his job and thanks Sobeys for giving him the opportunity, the store team is just as thankful to Michael for building their understanding of how to create diverse and inclusive teams, supporting all and celebrating different abilities. Fellow employees help Michael with new ways to do his job such as colour-coding product codes and using numbers to help him memorize different sections of the store.

    Directors of

    Empire Company Limited

    Cynthia Devine<sup>(2)(5)(7)</sup>

    Cynthia Devine(2)(5)(7)

    Toronto, Ontario

    Director since 2013

    Chief Financial Officer, Maple Leaf Sports & Entertainment

    James M. Dickson

    James M. Dickson

    Halifax, Nova Scotia

    Director since 2015

    Chair of Empire Company Limited
    Counsel, Stewart McKelvey

    Sharon Driscoll<sup>(1)</sup>

    Sharon Driscoll(1)

    Vancouver,
    British Columbia

    Director since 2018

    Chief Financial Officer, Ritchie Bros. Auctioneers Inc.

    Gregory Josefowicz<sup>(3)</sup>

    Gregory Josefowicz(3)

    Fennville, Michigan, USA

    Director since 2016

    Corporate Director

    Sue Lee<sup>(3)</sup>

    Sue Lee(3)

    Calgary, Alberta

    Director since 2014

    Corporate Director

    William Linton<sup>(4)(5)(7)</sup>

    William Linton(4)(5)(7)

    Toronto, Ontario

    Director since 2015

    Corporate Director

    Michael Medline

    Michael Medline

    Toronto, Ontario

    Director since 2017

    President & Chief Executive Officer, Empire Company Limited and Sobeys Inc.

    Martine Reardon<sup>(1)</sup>

    Martine Reardon(1)

    New York, New York, USA

    Director since 2017

    Corporate Director

    Frank C. Sobey<sup>(5)</sup>

    Frank C. Sobey(5)

    Pictou County,
    Nova Scotia

    Director since 2007

    Chairman, Crombie REIT

    John R. Sobey<sup>(1)</sup>

    John R. Sobey(1)

    Pictou County,
    Nova Scotia

    Director since 1979

    Corporate Director

    Karl R. Sobey<sup>(3)</sup>

    Karl R. Sobey(3)

    Halifax, Nova Scotia

    Director since 2001

    Corporate Director

    Paul D. Sobey<sup>(5)</sup>

    Paul D. Sobey(5)

    Pictou County,
    Nova Scotia

    Director since 1993

    Corporate Director

    Rob G. C. Sobey<sup>(3)(5)</sup>

    Rob G. C. Sobey(3)(5)

    Stellarton, Nova Scotia

    Director since 1998

    Corporate Director

    Martine Turcotte<sup>(1)(6)(8)</sup>

    Martine Turcotte(1)(6)(8)

    Verdun, Québec

    Director since 2012

    Vice Chair, Québec, BCE Inc. and Bell Canada

    (1) Audit Committee member
    (2) Audit Committee chair
    (3) Human Resources Committee member
    (4) Human Resources Committee chair

    (5) Corporate Governance Committee member
    (6) Corporate Governance Committee chair
    (7) Nominating Committee member
    (8) Nominating Committee chair