Empire Company (A) (EMP.A.TO)

(Market Call Minute.) Being punished because of the Safeway acquisition.

It has had its struggles with the Safeway acquisition. His model price is $25.50, a 20% upside. It should hold here at EBV+2. All his Canadian picks he is not crazy about.

This is going to have the issues of taking over Safeway, which hasn’t been going smoothly. The exit of the CEO is indicative of that. These things just don’t happen in 6 months or a year, and all of a sudden get turned around. It could take a long time to settle out.

Made a major acquisition on the retail grocery side in Western Canada, that turned out to be a disaster. The CEO is now gone, and they have a replacement. This is a tough business to be in. It is going to take them a little while to sort out. Once you lose clients in the retail grocery business, it is hard to get them back.

(Market Call Minute) Messed up with Safeway acquisition. It is reflected in the price, which has been hit. It is probably too early to be buying.

We still haven’t seen a good quarter. Every quarter seems to have a write off and the numbers are disappointing. Wait until you see a turn around and they are reporting better numbers.

This was down about 10%, because they reported their numbers which were very weak. They acquired Safeway a few years ago, and have had difficulty in integrating that. Safeway is very dominant in Western Canada, and with crude oil prices coming down, the Alberta economy has been weak. CEO stepped down, and when there is a senior management change, there might be a write down of goodwill. She would wait to see what evolves at the senior management level. (See Top Picks.)

CEO just left. A very tough industry to be in. Margins are paper thin and there are always things happening. There is more concern about contamination, biochemicals getting into the foods, etc. The takeover looked good on the surface, but this company’s emphasis was in the Maritimes and Québec. They might as well go to a different country, based on the psychology and culture, as to going out West.

They’ve admitted making a significant error in their acquisition of Safeway on the West Coast, and took a huge write down. Thinks they are correct in that there will be synergies that will come to the surface, and that eventually it will turn out to be a good thing for them. The stock is trading at a significant discount to where it has been for the last year or 2.

Really getting hammered today. A lot of it is self-inflicted from their acquisition of Safeway. Out West they are having a lot of integration problems having made some bad news in marketing and pricing. Eventually they will get it right. Not sure that now is the time to buy.

Has finally joined the club of grocery chains that has messed up and fallen flat on their face. It looks like they bought Safeway right at the top. Integration is not going well. Last 2 quarters have been poor. It is going to take some time. If you are a patient, long-term investor, this is an excellent time to buy. 1.9% dividend yield.

This is the parent company of the Sobey family, with Sobey’s being the biggest asset. This is the type of stock he would like to own because supermarkets are generally a good business. The problem is that Sobey’s bought the Canadian assets of Safeway, and it had a very, very tough time integrating those assets. Until they show the are doing a better job of bringing it around, he would avoid the stock.

Consumer staple stocks tend to do well in the summer. This is a time when you want to collect things with yield. This one has a bit of yield at 1.7%. It tends to run up to a September peak. There is a decent gain, but the technicals leave much to be desired. There is a long-term declining trend, and gapped lower in March, which tends to act as resistance. Not the best consumers staple. (See Top Picks.)

Sobey’s had some difficulties lately. The last quarter showed they were having some degree of trouble in integrating their Western Canada operations. About every 10 years, they seem to go through these cycles. This time it seems to be the integration of Safeway’s. Discount grocery stores are really stealing share away from the major banners. Let things settle out a little bit more, especially in Alberta. Dividend yield is under 2%.

They’ve had some problems integrating the Safeway acquisition. Thinks that over time they will get that right. Also, Western Canada will start firing on all cylinders again. Long-term you are okay. You’ll just have a little bit of difficulty in the short term. Valuation is getting to be very attractive right now.