Empire Company has a weak Quarter but a Good Year (2021)

    On June 23 Empire Company (EMP.A) released it's fourth quarter and annual 2021 report.Management described their fourt quarter results as strong but this blog sees it almost flat in terms of the change from Q4 2020.Yet it is also clear that fiscal year 2021 was a better than average year.For example, annual e.p.s showed a 21% increase over 2020; as 2020 had earnings of $2.15 compared to $2.60 in 2021.This was also the year that EMP made two major acquisitions;they acquired 51% of Longo and Gateway Groceries.Gateway is an online operation and shows Empire's emphasis on e-commerce.And in 2021 Empire introduced Project Horizon that strengthens online operations and renovates older stores.This is partly responsible for same-store sales growth of 10% in Q4.

   2022 Same-Store Sales 

 Empire has a three year growth plan -2021 was expected to have reasonable growth( 21%) while 2022 is expected to have a reduction in sales and 2023 will show improved growth.Probably they are counting on a reduction in the government pandemic cheques in 2022.But at the same time they expect to have a substantial capital expenditure program.A wiser move might have been to acquire only one new company-not 2 in one year.Or perhaps buy only a minority stake in Longo.Acquiring Grocery Gateway does fit in better with their Project Horizon plan to improve their e-commerce operation.And this blog sees this as a solid move.

    Regardless of Empire's prediction of sales and earnings for 2022 this blog sees their 2022 foecast as being too pessimistic.As the Retasil Sales Council forecasts moderate consumer price increases in 2022 and weak to moderate growth in sales.There will be some switching to services from goods but high-priced items will see  sales increases as consumers cash in their higher savings.In short, Empire is more likely to see flat or a small increase in sales revenues in 2022.However Empire expects a $.25-$.30 decrease in sales. But this blog sees a $.02-$.05 increase to a $.02-$.05 decrease in earnings as more likely to occur.

     What About Earnings?                

  In 2020 Empire had a pretty good year and earned $2.15 per share;this helped to move the stock price into the $35-$39 per share area.And in 2021 earnings jumped to $2.60 a share for a 21% increase.So Empire says in theitr annual report that they expect a drop in revenues and earnings of $.25-$.30 per share to $2.30-$2.35 per share.This blog disagrees with this forecast and predicts e.p.s. of $2.50-$2.75 per share.A hit of  $2.30-$2.35 will affect the share price in two ways as the price/earnings ratio will drop also.This blog believes it is more likely to see a fairly constant e.p.s. and P/E ratio.

   Empire has taken in 2021 a fairly large leap forwards.And some investors may be willing to wait patiently through their fiscal 2022 which has already started.It appears that Empire expects and hopes shareholders and investors will see ahead to fiscal 2023.This blog expects the stock price to trade in a tight range between $38 and $42 unless earnings show a better than average performance by Q2 2022.The Q1 2022 report will give investors a taste of what is to come.     https://www.moneysense.ca/  https://twitter.com/home