EMP.A: Model update: Fine-tuning Q4/26E assumptions ahead of results

Research evidence excerpt

EMP.A: Model update: Fine-tuning Q4/26E assumptions ahead of results

Empire Company Limited

Target/Upside/Downside Scenarios Investment summary

In the current environment of high food and shelterEmpire Company Limited

cost (+28% since pre-COVID) and eroding macro backdrop,

65 125 Weeks 23JAN24 - 12JUN26 EMP's overwhelmingly full service network is a relative

60 disadvantage, in our view. Against the backdrop of eroding

TARGETTARGET 55.0055.00

55 disposable income, cash-crunched consumers are trading

50 CURRENTCURRENT 49.3349.33 down to discount banners and channels. Although the gap

40 between traffic to discount and full service is moderating, EMP

35 remains at a relative disadvantage to peers.

25 Our view on earnings is relatively cautious given

8m sustained investments/expenses, competitive intensity, and

6m

4m 2m consumer/economic uncertainty. Although EMP is doing a

2024 2025 2026

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J good job of driving gross margin gains, and losses related

EMP/A CN Rel. S&P/TSX COMP IDX MA 40 weeks to Voilà are moderating with the deferral of the 4th CFC,

Source: Bloomberg and RBC Capital Markets estimates for Target implementation of ERP upgrade could result in incremental

Valuation expenses as we move through our forecast period.

Our price target is based on a sum-of-the-parts valuation

Over time, FreshCo conversions are helping to addressmethodology and supports our Sector Perform rating.

EMP’s structural disadvantage in the discount space.Applying 7.5x multiple to TTM Q2/F28E (October 2027)

From an industry perspective, although Sobeys enjoys aadjusted EBITDA from food retail, taking the value of Crombie

solid position in the traditional food retail segment inREIT at a price target of $18.00 and applying a 20% holding