Evaluating Empire Co Ltd's Strategic Turnaround and Earnings Resilience in a Challenging Retail Landscape

The retail sector has long grappled with the dual pressures of shifting consumer behavior and macroeconomic volatility. For Empire Co Ltd (TSE: EMP.A), a Canadian grocery retail giant, the past few years have tested its ability to adapt. A narrative of declining earnings per share (EPS) from 2023 to 2024 raised concerns about its long-term value creation. However, a closer look at its strategic recalibration-centered on e-commerce innovation and disciplined capital allocation-reveals a company poised to regain momentum. This analysis examines Empire's financial trajectory, the efficacy of its digital transformation, and its positioning in a competitive retail landscape.

EPS Trends: From Decline to Recovery

Empire's EPS performance has been a rollercoaster. In fiscal 2024, the company reported an EPS of $0.61, a 15.3% drop from the $0.72 recorded in 2023. This decline coincided with broader challenges in the grocery sector, including inflationary pressures and rising logistics costs. However, fiscal 2025 marked a turning point. Adjusted EPS rebounded to $0.74, an 8.8% increase year-over-year, driven by a 3.0% rise in total sales to $7,637 million. By Q1 of fiscal 2026, the company's EPS had further climbed to $0.89, signaling sustained momentum.

This recovery was not merely a function of cyclical factors but a result of deliberate strategic shifts. Empire's decision to pause the expansion of its Voilà e-commerce fulfillment centers and renegotiate supplier agreements to enhance profitability directly contributed to margin improvements. These moves, part of its broader "Project Horizon" initiative, underscore a shift from aggressive growth to disciplined execution.

E-Commerce Strategy: Digital-First Resilience

Empire's e-commerce strategy has been a cornerstone of its turnaround. The Voilà service, its online grocery platform, reported 17.3% same-store sales growth in fiscal 2024 and 26% in Q4 2025. These figures outpace industry benchmarks, where the average e-commerce conversion rate in 2025 stands at 2.9% according to industry analysis. For context, the food and beverage sector-a key segment for Empire-achieves a 4.9% conversion rate, highlighting the company's competitive edge in a high-margin vertical according to market research.

The launch of Scene+, a loyalty program integrated with personalized digital experiences, has further strengthened customer retention. By leveraging data analytics and AI-driven personalization, Empire has improved basket sizes and repeat purchase rates. This aligns with broader industry trends: retailers adopting AI-powered tools like Generative Discovery have seen a 20-30% reduction in cart abandonment.

Capital Allocation and Shareholder Returns

Empire's capital allocation strategy has also played a critical role in restoring investor confidence. In fiscal 2026, the company announced a $400 million share repurchase program and a 10% increase in its annualized dividend rate. These moves signal a commitment to returning value to shareholders while maintaining flexibility for reinvestment. Notably, the company repurchased $400 million of shares in both 2024 and 2025, demonstrating consistency in its approach.

The dividend hike, in particular, is significant. With the retail sector facing margin compression, Empire's ability to raise payouts by double digits-despite a 14% drop in share price over three years-reflects confidence in its earnings resilience. This contrasts with peers who have prioritized cost-cutting over shareholder returns, a strategy that may erode long-term value.

Competitive Positioning: Navigating Industry Benchmarks

Empire's e-commerce strategy is not without challenges. The global e-commerce sector entered a slower growth phase in 2025, with online retail accounting for 16.3% of U.S. retail sales in Q2. However, Empire's focus on localized fulfillment and in-market inventory positions it to capitalize on regulatory shifts, such as the U.S. suspension of de minimis duty-free treatment, which has increased cross-border shipping costs according to market reports.

Moreover, the company's customer acquisition costs (CAC) are competitive. While the retail sector averages $250 CAC, Empire's targeted marketing for Voilà and Scene+ has kept costs closer to $150, a 40% discount to industry norms. This efficiency is critical in an environment where customer acquisition costs for consumer electronics-often used as a benchmark-reach $750.

Challenges and the Path Forward

Despite these strides, risks remain. The second quarter of fiscal 2025 saw adjusted EPS fall short of estimates, underscoring the fragility of the recovery. Additionally, the broader retail sector faces headwinds from rising interest rates and shifting consumer spending patterns. However, Empire's focus on digital-first operations and its $500 million EBITDA target under Project Horizon provide a buffer according to industry analysis.

Looking ahead, the company's success will hinge on its ability to scale Voilà while maintaining profitability. The planned re-acceleration of e-commerce growth in 2026, as macroeconomic pressures ease, offers a tailwind. Investors should also monitor the impact of its Scene+ loyalty program on customer lifetime value, a metric that could differentiate Empire from peers.

Conclusion: A Strategic Turnaround with Long-Term Potential

Empire Co Ltd's journey from declining EPS to earnings resilience illustrates the power of strategic agility. By refocusing on e-commerce efficiency, disciplined capital allocation, and customer-centric innovation, the company has positioned itself to thrive in a challenging retail landscape. While past volatility in its share price and quarterly results may concern short-term investors, the long-term narrative is one of value creation. For those willing to look beyond near-term fluctuations, Empire's strategic turnaround offers a compelling case for sustained growth.