Empire's Record Quarter Is a Cost Story — and a Conspicuous Non-Tariff-Refund Story
Empire posts its best EBITDA since Project Horizon on operating leverage, while the rest of the market banks IEEPA refunds it never mentions.
EMP-A.TO · Earnings Call · 2026-09-10
A record quarter built on cost, not the top line
Empire's first quarter of fiscal 27 was, by management's own measure, an execution milestone: “a record high first quarter EPS of $1.04, up 14.3% year over year” — Pierre St-Laurent, President and CEO · 2026-09-10. Yet the headline masks a top line that is still sluggish. Food sales grew just 1.7% and same-store sales only 1.2%, with total e-commerce up 11.3% across Voilà and third-party partnerships. The profit came from below the sales line — SG&A excluding depreciation improved 80 basis points, driven by lower incentive compensation, a pension settlement gain and genuine cost work.
EBITDA was $712 million, higher by 6.1% year over year and our EBITDA margin was 8.4%... It was the strongest EBITDA performance that we have delivered since Project Horizon began more than 10 years ago.
The lever is Empire's cost efficiency program, now in its third consecutive quarter of operating leverage. This is the through-line of the Pierre St-Laurent era: last December he framed the whole agenda as “we made a lot of investment in the past... now it's time to deliver the benefit” — Pierre St-Laurent · 2025-12-11. The messaging has been consistent, and the numbers are finally corroborating it. Management still anchors gross margin expansion, ex-fuel, at 10–20 basis points annually — a modest target that Empire has repeatedly beaten, and one tied to financial framework guidance of 8–11% adjusted EPS growth, at the high end for fiscal 27.
The tariff story Empire is not telling
Here is the most interesting contrast in the data. The global keyword board is dominated by net tariff refunds, IEEPA recoveries and "benefit of tariff refunds" — and a parade of recent reporters is booking them: AEO, ASO, CULP, DBI, JILL, LAKE, LOVE, M, SIG and VNCE all lean on tariff-refund language. Empire is a conspicuous non-participant. Its only tariff mention is as a tariff situation risk, not a windfall. Luc L'Archeveque notes fewer impacted categories and "less than a handful of suppliers" submitting cost increases, then draws the line: “we will not accept any cost increases related to tariffs” — Luc L'Archeveque, Chief Customer Officer · 2026-09-10. Pierre reinforces that the breadth of Empire's assortment makes this manageable: “this is not an inflationary pressure for our full service and discount stores” — Pierre St-Laurent, President and CEO · 2026-09-10.The delta versus a year ago is stark. On the March 2025 call, management quantified exposure at “our exposure to US product is around 12% annually” — Pierre St-Laurent, COO · 2025-03-13 and treated tariffs as a live inflation threat. Today it is described as minimal and non-inflationary — a genuine evolution. Empire is a Canadian-domestic grocer largely insulated from the US import-cost shock that is squeezing its American peers, which cuts both ways: no refund windfall, but no refund dependency either.
Growth pipeline and quiet capital moves
What is genuinely new this quarter is capital allocation. Empire raised its new-store count to “more than 25 stores” — Pierre St-Laurent, President and CEO · 2026-09-10 for the year, up from 20, opened its first FreshCo in Atlantic Canada, and is integrating the acquired Mērahs stores in Quebec while breaking ground on a new Trois-Rivières location. Sold as roughly 2% square footage growth, this is a deliberate shift in the real estate mix — a shift first signalled on the 2025 third-quarter call when the returns on new stores overtook renovations.Less trumpeted: Empire liquidated its equity interest in Genstar for $71 million of proceeds and a $4 million gain, redeploying into growth; bought nine leased pharmacies co-located with Longo stores; and named a new Chief Technology and Transformation Officer. These are small but directionally telling — Empire is monetising legacy real estate while buying back stock (about 2 million shares for $95 million to date) and widening its most defensible niche, pharmacy.
What to watch
Two under-developed businesses carry the optionality. First, asset monetisation as a service: Constantine Pefanis described monetising the supply chain via “freight as a service, backhauling, inbound freight partnerships” — Constantine Pefanis, Chief Financial Officer · 2026-09-10, and Pierre flagged the same for retail media — both high-margin, capital-light revenue streams that are additive to the equation without new stores. Second, e-commerce "2.0," which management expects to accelerate under the new CTO. The risk all of this rides on is the consumer: same-store sales of 1.2% is thin air to grow into, and fuel price volatility remains the swing factor the company repeatedly cites. Empire is not a tariff story and not an AI-infrastructure story; it is a disciplined operator quietly compounding margins while the macro stays difficult. For now, the tape is voting with the cost line.