How Much Room Does Empire Company Limited Have to Run?

Perhaps one of the most interesting growth stories for 2017 has to be Empire Company Limited (TSX:EMP.A). Since the beginning of the year, shares of Empire have increased nearly 60% on expectations the company will be able to continue its turnaround following a drop of more than 20% since the company’s all-time high posted in 2015 on concerns the company will be less efficient following Empire’s acquisition of Safeway Canada approximately four years ago.

CEO Michael Medline has done a very good job of garnering confidence from the company’s investor base that a continued turnaround in Empire’s operations will propel the company toward profitable growth in the years to come.

With headwinds to the grocery retail sector stemming from e-commerce entrants such as Amazon.com, Inc. (NASDAQ:AMZN) dampening sentiment that grocery retailers will be able to churn out predictable and profitable growth in the long-term, the ability of companies like Empire to become more lean in an attempt to compete seems to be a key message Mr. Medline has driven of late.

This past week, Empire cut 800 jobs at the company’s head office related to its core Sobeys/Safeway business, a move which is expected to streamline the company’s decision making process and reduce overhead costs, and a move which has supplemented strong quarterly results of late, making Empire an interesting play for growth investors despite a valuation multiple which remains rich in comparison to its competitors.

Invest wisely, my friends.