Empire Company reports fourth quarter results - Increases annual dividend



    STELLARTON, NS, June 26 /CNW/ - Empire Company Limited (TSX: EMP.A) today
announced financial results for its fourth quarter and fiscal year ended May
2, 2009. For the fourth quarter, the Company recorded earnings before capital
gains (losses) and other items of $64.4 million ($0.97 per share) as compared
to $73.6 million ($1.12 per share) in the fourth quarter last year, a $9.2
million decrease.
    Full year fiscal 2009 earnings before capital gains (losses) and other
items were $262.9 million ($3.99 per share) as compared to $242.8 million
($3.69 per share) last year, a $20.1 million or 8.3 percent increase.

    Fourth Quarter Highlights

    
    - Revenue of $3.71 billion, up $151.2 million or 4.2 percent.
    - Sobeys Inc. ("Sobeys") same-store sales increased 4.6 percent.
    - Earnings before capital gains (losses) and other items of $64.4 million
      as compared to $73.6 million last year.
    - Earnings per share of $0.97 before capital losses and other items
      versus $1.12 per share last year.
    - Capital losses and other items, net of tax, of $0.8 million versus
      capital losses and other items, net of tax, of $7.1 million last year.
    - Net earnings of $63.6 million ($0.96 per share) as compared to
      $66.5 million ($1.01 per share).
    - Funded debt to total capital of 32.7 percent, down from 39.8 percent at
      the end of the last fiscal year.

    Fiscal 2009 Highlights

    - Revenue of $15.02 billion, up $950.1 million or 6.8 percent.
    - Sobeys' same-store sales increased 5.2 percent.
    - Earnings before capital gains (losses) and other items of $262.9
      million, up $20.1 million or 8.3 percent.
    - Earnings per share of $3.99 before capital gains and other items versus
      $3.69 per share last year.
    - Capital gains and other items, net of tax, of $3.0 million versus
      capital gains and other items, net of tax, of $73.0 million last year.
    - Net earnings of $265.9 million ($4.04 per share) as compared to
      $315.8 million ($4.80 per share).
    

    "Empire's operating earnings and shareholder value continued to
strengthen in fiscal 2009 as we clearly focused on our strengths in food
retailing and real estate," stated Paul Sobey, President and CEO, Empire
Company Limited. "Our consolidated performance in the fourth quarter is
consistent with our expectation, driven largely by continued strong same-store
sales and earnings growth at Sobeys and as we advised last quarter, a decline
in earnings contribution from our residential real estate operation as well as
from our interest in Wajax Income Fund."
    Paul Sobey continued, "Consistent with our growth and confidence in the
strength of our businesses, we are pleased to announce an increase in Empire's
dividend per share, from 70 cents annually to 74 cents annually. This marks
the fourteenth consecutive year of dividend increases."
    "On behalf of Management and our Board, we would like to thank our
employees, franchisees and affiliates for their hard work, dedication and
commitment as their efforts have allowed us to deliver another year of record
operating earnings and improved financial position."

    Dividend Declaration

    The Board of Directors declared a quarterly dividend of 18.5 cents per
share on both the Non-Voting Class A shares and the Class B common shares that
will be payable on July 31, 2009 to shareholders of record on July 15, 2009.
The Board also declared regular dividends on the Company's outstanding
preferred shares. The dividends are eligible dividends as defined for the
purposes of the Income Tax Act (Canada) and applicable provincial legislation
and, therefore, qualify for the favourable tax treatment applicable to such
dividends.

    Revenue

    Consolidated revenue for the fourth quarter equalled $3.71 billion
compared to $3.56 billion last year, an increase of $151.2 million or 4.2
percent. Sobeys' revenue equalled $3.65 billion, an increase of $170.8 million
or 4.9 percent compared to the fourth quarter last year. Sobeys' fourth
quarter same-store sales increased 4.6 percent. Sobeys' sales growth resulted
from increased retail selling square footage from new stores and enlargements,
coupled with the continued implementation of sales and merchandising
initiatives, improved consistency of store level execution and retail food
price inflation.
    Real estate division revenue (net of elimination) in the fourth quarter
was $10.5 million, a decrease of $23.3 million from the $33.8 million recorded
in the fourth quarter last year. Commercial property revenue declined by $6.8
million while residential property revenue decreased by $16.5 million from the
fourth quarter last year. The decline in commercial property revenue was
primarily due to the sale of 61 properties to Crombie REIT in the fourth
quarter of last fiscal year. The decline in residential property revenue was
also expected, reflecting a slowdown in residential lot sales in Western
Canada.
    Investments and other operations recorded revenue of $47.1 million in the
fourth quarter versus $43.4 million in the fourth quarter last year, an
increase of $3.7 million or 8.5 percent.
    For the 52 weeks ended May 2, 2009, consolidated revenue equalled $15.02
billion, an increase of $950.1 million or 6.8 percent compared to fiscal 2008.
Growth in annual Sobeys' sales of $996.7 million and in investments and other
operations' revenue of $8.1 million was partially offset by a $54.7 million
reduction in revenue (net of elimination) from the real estate division. The
decline in real estate division revenue was anticipated and reflects a
slowdown in residential lot sales and the sale of 61 properties to Crombie
REIT as mentioned. Sobeys' sales growth was positively impacted by the
acquisition of Thrifty Foods on September 12, 2007. Adjusting for the impact
of the Thrifty acquisition, Empire and Sobeys' sales growth for fiscal 2009
would have been 5.2 percent and 5.6 percent, respectively.

    CONSOLIDATED FINANCIAL OVERVIEW

    The table below presents a summary of financial performance for the 13
and 52 weeks ended May 2, 2009 compared to the 13 and 52 weeks ended May 3,
2008.

    
    Summary Table of Consolidated Financial Results

                                  13 Weeks Ended          52 Weeks Ended
                             ----------------------- ------------------------
    ($ in millions, except        May 2,      May 3,      May 2,      May 3,
     per share information)        2009        2008        2009        2008
                             ----------- ----------- ----------- ------------
    Segmented revenue
      Food retailing         $  3,651.4  $  3,480.6  $ 14,764.8  $ 13,768.1
                             ----------- ----------- ----------- ------------
      Real estate
        Residential                 8.1        24.6        54.6        85.2
        Sobey Leased
         Properties(1)                -         4.9           -        20.6
        Other Commercial            2.4         4.3        16.4        19.9
        Inter-segment               1.2         9.1         2.9        34.9
                             ----------- ----------- ----------- ------------
                                   11.7        42.9        73.9       160.6
                             ----------- ----------- ----------- ------------
      Investments and other
       operations                  47.1        43.4       179.3       171.2
                             ----------- ----------- ----------- ------------
                                3,710.2     3,566.9    15,018.0    14,099.9
      Elimination                  (1.2)       (9.1)       (2.9)      (34.9)
                             ----------- ----------- ----------- ------------
                             $  3,709.0  $  3,557.8  $ 15,015.1  $ 14,065.0
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
    Segmented operating
     income
      Food retailing         $    102.6  $    104.3  $    401.4  $    359.0
                             ----------- ----------- ----------- ------------
      Real estate
        Residential                 3.8        15.6        33.6        50.7
        Crombie REIT(2)             4.9         3.1        19.8        13.6
        Other Commercial              -         0.3         2.5         5.7
        Sobey Leased
         Properties(1)                -         8.2           -        30.0
                             ----------- ----------- ----------- ------------
                                    8.7        27.2        55.9       100.0
                             ----------- ----------- ----------- ------------
      Investments and other
       operations
        Wajax Income Fund(3)        2.6         5.0        18.5        19.7
        Other investments
         and operations,
         net of corporate
         expenses                  (2.3)       (0.3)       (7.7)       (6.1)
                             ----------- ----------- ----------- ------------
                                    0.3         4.7        10.8        13.6
                             ----------- ----------- ----------- ------------
                             $    111.6  $    136.2  $    468.1  $    472.6
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
    Earnings before capital
     gains (losses) and
     other items             $     64.4  $     73.6  $    262.9  $    242.8
    Capital gains (losses)
     and other items, net
     of tax                        (0.8)       (7.1)        3.0        73.0
                             ----------- ----------- ----------- ------------
    Net earnings             $     63.6  $     66.5  $    265.9  $    315.8
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

    Basic earnings per share
    Operating earnings       $     0.98  $     1.12  $     4.00  $     3.69
    Capital gains (losses)
     and other items, net
     of tax                       (0.01)      (0.11)       0.05        1.11
                             ----------- ----------- ----------- ------------
    Net earnings             $     0.97  $     1.01  $     4.05  $     4.80
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
    Basic weighted average
     number of shares
     outstanding (in
     millions)                     65.9        65.6        65.7        65.6
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

    Diluted earnings per
     share
    Operating earnings       $     0.97  $     1.12  $     3.99  $     3.69
    Capital gains (losses)
     and other items, net
     of tax                       (0.01)      (0.11)       0.05        1.11
                             ----------- ----------- ----------- ------------
    Net earnings             $     0.96  $     1.01  $     4.04  $     4.80
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
    Diluted weighted average
     number of shares
     outstanding (in
     millions)                     66.0        65.7        65.8        65.7
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
    Annualized dividends per
     share                   $     0.70  $     0.66
                             ----------- -----------
                             ----------- -----------

    (1) On April 22, 2008, Sobey Leased Properties sold 61 properties to
        Crombie REIT with the remaining assets of Sobey Leased Properties
        transferred to Sobeys.
    (2) 47.9 percent equity accounted interest in Crombie REIT.
    (3) 27.6 percent equity accounted interest in Wajax Income Fund.
    

    Additional segmented information is contained in note 10 of the unaudited
consolidated financial statements for the fourth quarter of fiscal 2009
included in this release.

    Operating Income

    Consolidated operating income (earnings before capital gains (losses) and
other items, minority interest, interest expense and income tax) in the fourth
quarter was $111.6 million, a decrease of $24.6 million or 18.1 percent from
the $136.2 million recorded in the fourth quarter last year.
    The contributors to the change in consolidated operating income from the
fourth quarter last year were as follows:

    
    (i)   Residential property operating income contribution in the fourth
          quarter was $3.8 million, a decrease of $11.8 million from the
          $15.6 million recorded in the fourth quarter last year as a result
          of lower residential lot sales activity in Western Canada.
    (ii)  Commercial property operating income for the quarter was
          $4.9 million as compared to $11.6 million in the fourth quarter
          last fiscal year, a decline of $6.7 million. This decline is
          primarily attributed to the sale of certain Sobey Leased
          Properties' assets (61 properties) to Crombie REIT on April 22,
          2008 and the transfer of the remaining properties to Sobeys, as
          Sobey Leased Properties accounted for operating income of
          $8.2 million in the fourth quarter last fiscal year. The reduction
          in operating income from Sobey Leased Properties was partially
          offset through increased equity accounted earnings from Empire's
          47.9 percent interest in Crombie REIT which contributed
          $4.9 million to operating income in the fourth quarter versus a
          $3.1 million contribution in the fourth quarter last year.
    (iii) Investments and other operations, net of corporate expenses,
          contributed operating income of $0.3 million in the fourth quarter
          compared to $4.7 million in the fourth quarter last year. Equity
          accounted earnings generated from the Company's 27.6 percent
          interest in Wajax Income Fund ("Wajax") amounted to $2.6 million in
          the fourth quarter versus $5.0 million in the fourth quarter last
          year. Operating income generated from other operations, net of
          corporate expenses, amounted to negative $2.3 million as compared
          to negative $0.3 million in the fourth quarter last year.
    (iv)  Sobeys' operating income contribution to Empire in the fourth
          quarter totalled $102.6 million, a decrease of $1.7 million or
          1.6 percent from the $104.3 million recorded in the fourth quarter
          last year. Included in Sobeys' fourth quarter fiscal 2009 operating
          income contribution to Empire was a $5.4 million increase in
          depreciation and amortization expense, reflecting Sobeys' continued
          capital investment.

    For the full fiscal year, Empire recorded operating income of $468.1
million, a decrease of $4.5 million or 1.0 percent from the prior year.
    The contributors to the change in consolidated operating income from last
fiscal year are as follows:

    (i)   Sobeys' operating income contribution to Empire in fiscal 2009
          totalled $401.4 million, an increase of $42.4 million or
          11.8 percent from the $359.0 million recorded last year. Included
          in Sobeys' fiscal 2009 operating income contribution to Empire was
          a $25.6 million increase in depreciation and amortization expense,
          reflecting Sobeys' continued capital investment.
    (ii)  Residential property operating income contribution in fiscal 2009
          was $33.6 million, a decrease of $17.1 million from the
          $50.7 million recorded last year as a result of lower residential
          lot sales activity in Western Canada.
    (iii) Commercial property operating income in fiscal 2009 was
          $22.3 million as compared to $49.3 million last fiscal year. The
          $27.0 million decline is primarily attributed to the sale of
          certain Sobey Leased Properties' assets (61 properties) to Crombie
          REIT on April 22, 2008, as Sobey Leased Properties accounted for
          operating income of $30.0 million last fiscal year. The reduction
          in operating income from Sobey Leased Properties was partially
          offset through increased equity accounted earnings from Empire's
          47.9 percent interest in Crombie REIT which contributed
          $19.8 million to operating income in fiscal 2009 versus a
          $13.6 million contribution last year.
    (iv)  Investments and other operations, net of corporate expenses,
          contributed operating income of $10.8 million in fiscal 2009
          compared to a $13.6 million contribution last fiscal year. Equity
          accounted earnings generated from the Company's 27.6 percent
          interest in Wajax amounted to $18.5 million versus $19.7 million
          last year. Operating income generated from other investments and
          operations, net of corporate expenses, amounted to negative
          $7.7 million as compared to negative $6.1 million last year.
    

    Interest Expense

    Interest expense in the fourth quarter amounted to $18.8 million, a
decrease of $8.7 million or 31.6 percent from the $27.5 million recorded in
the same quarter last year. For the 52 weeks ended May 2, 2009, interest
expense amounted to $80.6 million, a decrease of $25.2 million or 23.8 percent
from the prior year.
    The decline in interest expense reflects lower funded debt levels which
are principally related to: (i) cash proceeds of $373.5 million received on
the sale of certain Sobey Leased Properties' assets in the fourth quarter last
fiscal year; (ii) free cash flow generation by Sobeys which served to reduce
its funded debt; and (iii) lower average interest rates on unhedged floating
rate indebtedness. The proceeds from the $135 million equity issuance which
closed April 24, 2009 also served to reduce funded debt, however, this had
only a modest impact on lowering interest expense as the equity issue closed
approximately one week prior to the end of the fiscal year.
    Consolidated funded debt was $1,302.9 million at the end of fiscal 2009
compared to $1,573.5 million at the end of fiscal 2008, a $270.6 million or
17.2 percent decrease.

    Income Taxes

    The effective income tax rate for the fourth quarter was 29.7 percent
versus 31.1 percent in the fourth quarter last year. The effective income tax
rate for fiscal 2009 was 30.0 percent versus 30.3 percent last year.

    Earnings before Capital Gains (Losses) and Other Items

    For the 13 weeks ended May 2, 2009, Empire recorded earnings before
capital gains (losses) and other items of $64.4 million ($0.97 per share)
versus $73.6 million ($1.12 per share) last year, a $9.2 million or 12.5
percent decrease. The decline in earnings before capital gains (losses) and
other items is the result of a $24.6 million reduction in operating income,
partially offset by an $8.7 million reduction in interest expense, a decrease
in income taxes of $6.2 million and a decrease in minority interest of $0.5
million.
    For the 52 weeks ended May 2, 2009, earnings before capital gains
(losses) and other items amounted to $262.9 million ($3.99 per share) compared
to $242.8 million ($3.69 per share) in the prior fiscal year. The $20.1
million or 8.3 percent increase is the result of a $25.2 million reduction in
interest expense, and a $4.5 million decline in minority interest, partially
offset by a $4.5 million decline in operating income and an increase in income
taxes of $5.1 million.
    The table below presents Empire's segmented earnings before capital gains
(losses) by division for the 13 and 52 weeks ended May 2, 2009 as compared to
the 13 and 52 weeks ended May 3, 2008.


    
    -------------------------------------------------------------------------
                                  13 Weeks Ended          Year over Year
                             ----------------------- ------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Food retailing(1)        $     61.3  $     57.5  $      3.8         6.6%
    Real estate                     5.7        16.8       (11.1)      (66.1%)
    Investments & other
     operations                    (2.6)       (0.7)       (1.9)     (271.4%)
    -------------------------------------------------------------------------
    Consolidated             $     64.4  $     73.6  $     (9.2)      (12.5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                  52 Weeks Ended          Year over Year
                             ----------------------- ------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Food retailing(1)        $    229.1  $    191.7  $     37.4        19.5%
    Real estate                    36.7        58.9       (22.2)      (37.7%)
    Investments & other
     operations                    (2.9)       (7.8)        4.9        62.8%
    -------------------------------------------------------------------------
    Consolidated             $    262.9  $    242.8  $     20.1         8.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Adjusted for the impact of the amortization and depreciation of
        various items related to the privatization of Sobeys in June 2007.
    

    Capital Gains (Losses) and Other Items

    The Company reported capital losses and other items, net of tax, of $0.8
million in the fourth quarter as compared to capital losses and other items,
net of tax, of $7.1 million in the fourth quarter last year.
    For the full year, the Company recorded capital gains and other items,
net of tax, of $3.0 million as compared to $73.0 million last year. The
capital gains and other items, net of tax, last fiscal year were primarily the
result of selling the liquid investment portfolio in the first quarter, with
the net proceeds used to assist in the funding of the privatization of Sobeys.

    Net Earnings

    Consolidated net earnings in the fourth quarter equalled $63.6 million
($0.96 per share) as compared to $66.5 million ($1.01 per share) last year, a
decrease of $2.9 million or 4.4 percent. Net earnings for the 52 weeks ended
May 2, 2009 totalled $265.9 million ($4.04 per share) as compared to $315.8
million ($4.80 per share) recorded last year, a decrease of $49.9 million or
15.8 percent.

    Outlook

    Commenting on Empire's outlook, Paul Sobey stated, "Specific to our food
retailing business, we remain confident that the consistent execution of
Sobeys' food-focused strategy positions the Company well and provides the
tools and flexibility to adapt to changing economic and competitive
conditions."
    "With respect to our investments, specifically Wajax and Genstar
Development Partnership, as we disclosed in our third quarter news release, we
expect lower comparative results. Wajax management advised that they believe
their earnings will be lower in calendar 2009 and accordingly reduced monthly
distributions to $0.20 per unit. Specific to Genstar, consistent with what we
communicated in our third quarter, we continue to trend substantially lower.
Both Wajax and Genstar in our view continue to be well capitalized and, with
very capable management teams, are favourably positioned to capitalize on new
profitable growth opportunities."

    QUARTERLY RESULTS OF OPERATIONS

    The following table is a summary of selected consolidated financial
information derived from the Company's unaudited interim period consolidated
financial statements for each of the eight most recently completed quarters.

    
    -------------------------------------------------------------------------
                                                Fiscal 2009
                             ------------------------------------------------
                                     Q4          Q3          Q2          Q1
                              (13 weeks)  (13 weeks)  (13 weeks)  (13 weeks)
    ($ in millions, except        May 2     Jan. 31      Nov. 1      Aug. 2
     per share information)        2009        2009        2008        2008
    -------------------------------------------------------------------------
    Revenue                  $  3,709.0  $  3,800.0  $  3,727.9  $  3,778.2
    -------------------------------------------------------------------------
    Operating income              111.6       115.6       113.4       127.5
    -------------------------------------------------------------------------
    Operating earnings             64.4        65.0        63.2        70.3
    Capital gains (losses)
     and other items, net
     of tax                        (0.8)       (3.5)        2.5         4.8
    -------------------------------------------------------------------------
    Net earnings             $     63.6  $     61.5  $     65.7  $     75.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per share information,
     diluted
    Operating earnings       $     0.97  $     0.99  $     0.96  $     1.07
    Capital gains (losses)
     and other items, net
     of tax                       (0.01)      (0.05)       0.04        0.07
    -------------------------------------------------------------------------
    Net earnings             $     0.96  $     0.94  $     1.00  $     1.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average
     number of shares
     outstanding (in
     millions)                     66.0        65.7        65.7        65.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                              Fiscal 2008
                             ------------------------------------------------
                                     Q4          Q3          Q2          Q1
                              (13 weeks)  (13 weeks)  (13 weeks)  (13 weeks)
    ($ in millions, except        May 3,     Feb. 2,     Nov. 3,     Aug. 4,
     per share information)        2008        2008        2007        2007
    -------------------------------------------------------------------------
    Revenue                  $  3,557.8  $  3,503.0  $  3,484.8  $  3,519.4
    -------------------------------------------------------------------------
    Operating income              136.2        90.7       118.2       127.5
    -------------------------------------------------------------------------
    Operating earnings             73.6        48.9        59.9        60.4
    Capital gains (losses)
     and other items, net
     of tax                        (7.1)       (0.3)       (1.5)       81.9
    -------------------------------------------------------------------------
    Net earnings             $     66.5  $     48.6  $     58.4  $    142.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per share information,
     diluted
    Operating earnings       $     1.12  $     0.74  $     0.91  $     0.92
    Capital gains (losses)
     and other items, net
     of tax                       (0.11)          -       (0.02)       1.24
    -------------------------------------------------------------------------
    Net earnings             $     1.01  $     0.74  $     0.89  $     2.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average
     number of shares
     outstanding (in
     millions)                     65.7        65.7        65.7        65.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Consolidated sales and operating earnings growth have been influenced by
the Company's investing activities, the competitive environment, the economic
environment, general industry trends and by other risk factors as outlined in
the fiscal 2008 annual MD&A, as contained on pages 27 - 68 of the Company's
2008 Annual Report.

    OPERATING PERFORMANCE BY DIVISION

    FOOD RETAILING

    Sobeys, Empire's wholly-owned food division, conducts business through
more than 1,300 retail grocery stores (corporately owned and franchised) which
operate in every province across Canada under retail banners that include
Sobeys, IGA, IGA extra, Foodland, Price Chopper and Thrifty Foods, as well as
Lawtons Drug Stores.
    The table below presents Sobeys' contribution to Empire's consolidated
sales, operating income and net earnings:

    
    -------------------------------------------------------------------------
                                  13 Weeks Ended          Year over Year
                             ----------------------- ------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Sales                    $  3,651.4  $  3,480.6  $    170.8         4.9%
    Operating income(1)           102.6       104.3        (1.7)       (1.6%)
    Net earnings(1)                61.3        54.3         7.0        12.9%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                  52 Weeks Ended          Year over Year
                             ----------------------- ------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Sales                    $ 14,764.8  $ 13,768.1  $    996.7         7.2%
    Operating income(1)           401.4       359.0        42.4        11.8%
    Net earnings(1)               226.0       186.6        39.4        21.1%
    -------------------------------------------------------------------------
    (1) Adjusted for the impact of the amortization and depreciation of
        various items related to the privatization of Sobeys in June 2007.
    

    Sales

    Sobeys' consolidated sales for the fourth quarter of fiscal 2009 were
$3.65 billion compared to $3.48 billion in the same quarter last year, an
increase of $170.8 million or 4.9 percent. During the fourth quarter of fiscal
2009, Sobeys' same-store sales (sales from stores in the same locations in
both reporting periods) increased by 4.6 percent.
    For the 52 weeks ended May 2, 2009, Sobeys' consolidated sales were
$14.76 billion compared to $13.77 billion in the prior fiscal year, an
increase of $996.7 million or 7.2 percent. During fiscal 2009, Sobeys'
same-store sales increase by 5.2 percent.
    Sobeys' retail sales growth for both the fourth quarter and full fiscal
year was the direct result of increased retail selling square footage from new
stores and enlargements, coupled with the continued implementation of sales
and merchandising initiatives, improved consistency of store level execution
and retail food price inflation. In addition to the items listed above,
Sobeys' full fiscal year sales growth was positively impacted by the
acquisition of Thrifty Foods on September 12, 2007. Adjusting for the impact
of the Thrifty acquisition, Sobeys' fiscal 2009 sales growth would have been
5.6 percent.

    Operating Income

    Sobeys reported operating income of $103.4 million during the fourth
quarter of fiscal 2009, a $3.1 million or 2.9 percent decrease from the fourth
quarter last year. Operating income margin in the fourth quarter equalled 2.83
percent compared to 3.06 percent in the fourth quarter last year.
    After adjusting for the impact of the amortization and depreciation of
various items related to the privatization, Sobeys' operating income
contribution to Empire in the fourth quarter of fiscal 2009 was $102.6 million
(fourth quarter of fiscal 2008 - $104.3 million). Sobeys' operating income
margin in the fourth quarter after adjusting for the above items equalled 2.81
percent compared to 3.00 percent in the fourth quarter last year.

    Net Earnings

    Sobeys recorded fourth quarter fiscal 2009 net earnings of $61.8 million,
an increase of $6.0 million or 10.8 percent compared to the $55.8 million
recorded in the fourth quarter last year. Net earnings for fiscal 2009 were
$229.2 million, an increase of $32.8 million or 16.7 percent compared to the
$196.4 million recorded in fiscal 2008.
    Adjusting for the impact of the depreciation and amortization related to
the privatization and the related tax impact, Sobeys contributed net earnings
of $61.3 million to Empire for the fourth quarter of fiscal 2009, an increase
of $7.0 million or 12.9 percent over the $54.3 million recorded in the fourth
quarter last year. In fiscal 2009, Sobeys contributed net earnings of $226.0
million to Empire, an increase of $39.4 million or 21.1 percent over the
$186.6 million recorded in the prior fiscal year.

    REAL ESTATE

    Empire's real estate operations are focused on: (i) the development of
food-anchored shopping plazas; (ii) ownership of retail and office properties
through a 47.9 percent ownership interest in Crombie REIT; and (iii)
residential land development through its ownership interest in Genstar.
    Commercial real estate operations are conducted through ECL Properties
and its wholly-owned subsidiary, ECL Developments, while residential land
development is primarily conducted through Genstar, which operates principally
in Ontario and Western Canada.
    The table below presents revenue, operating income, net earnings and
funds from operations for the real estate division's commercial operations and
residential operations:

    
    -------------------------------------------------------------------------
                                             13 Weeks Ended
                             ------------------------------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Revenue
      Residential            $      8.1  $     24.6  $    (16.5)      (67.1%)
      Sobey Leased
       Properties(1)                  -         4.9        (4.9)     (100.0%)
      Other Commercial              2.4         4.3        (1.9)      (44.2%)
      Inter-segment                 1.2         9.1        (7.9)      (86.8%)
    -------------------------------------------------------------------------
                                   11.7        42.9       (31.2)      (72.7%)
    -------------------------------------------------------------------------
      Elimination                  (1.2)       (9.1)        7.9       (86.8%)
    -------------------------------------------------------------------------
                             $     10.5  $     33.8  $    (23.3)      (68.9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating income
      Residential            $      3.8  $     15.6  $    (11.8)      (75.6%)
      Sobey Leased
       Properties(1)                  -         8.2        (8.2)     (100.0%)
      Crombie REIT(2)               4.9         3.1         1.8        58.1%
      Other Commercial                -         0.3        (0.3)     (100.0%)
    -------------------------------------------------------------------------
                             $      8.7  $     27.2  $    (18.5)      (68.0%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings
      Residential            $      2.6  $     11.4  $     (8.8)      (77.2%)
      Commercial                    2.4         1.4        (1.0)      (71.4%)
    -------------------------------------------------------------------------
                             $      5.0  $     12.8  $     (7.8)      (60.9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funds from operations(3)
      Residential            $      2.7  $     11.4  $     (8.7)      (76.3%)
      Commercial                    2.7         5.7        (3.0)      (52.6%)
    -------------------------------------------------------------------------
                             $      5.4  $     17.1  $    (11.7)      (68.4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             52 Weeks Ended
                             ------------------------------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Revenue
      Residential            $     54.6  $     85.2  $    (30.6)      (35.9%)
      Sobey Leased
       Properties(1)                  -        20.6       (20.6)     (100.0%)
      Other Commercial             16.4        19.9        (3.5)      (17.6%)
      Inter-segment                 2.9        34.9       (32.0)      (91.7%)
    -------------------------------------------------------------------------
                                   73.9       160.6       (86.7)      (54.0%)
    -------------------------------------------------------------------------
      Elimination                  (2.9)      (34.9)       32.0       (91.7%)
    -------------------------------------------------------------------------
                             $     71.0  $    125.7  $    (54.7)      (43.5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating income
      Residential            $     33.6  $     50.7  $    (17.1)      (33.7%)
      Sobey Leased
       Properties(1)                  -        30.0       (30.0)     (100.0%)
      Crombie REIT(2)              19.8        13.6         6.2        45.6%
      Other Commercial              2.5         5.7        (3.2)      (56.1%)
    -------------------------------------------------------------------------
                             $     55.9  $    100.0  $    (44.1)      (44.1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings
      Residential            $     23.2  $     34.7  $    (11.5)      (33.1%)
      Commercial                   19.4        20.1        (0.7)       (3.5%)
    -------------------------------------------------------------------------
                             $     42.6  $     54.8  $    (12.2)      (22.3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funds from operations(3)
      Residential            $     23.2  $     35.3  $    (12.1)      (34.3%)
      Commercial                   15.3        29.0       (13.7)      (47.2%)
    -------------------------------------------------------------------------
                             $     38.5  $     64.3  $    (25.8)      (40.1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) On April 22, 2008, Sobey Leased Properties sold 61 properties to
        Crombie REIT with the remaining assets of Sobey Leased Properties
        transferred to Sobeys.
    (2) Equity accounted earnings in 47.9 percent owned Crombie REIT.
    (3) Operating earnings plus depreciation and amortization.
    

    Revenue

    Real estate division revenue (net of elimination) in the fourth quarter
was $10.5 million, a decrease of $23.3 million from the $33.8 million recorded
in the fourth quarter last year. Commercial property revenue declined by $6.8
million while residential property revenue decreased by $16.5 million from the
fourth quarter last year. The decline in commercial property revenue in the
fourth quarter was due to the sale of 61 properties to Crombie REIT in the
fourth quarter of last fiscal year ($4.9 million impact). The decline in
residential property revenue was also expected, largely reflecting a slowdown
in residential lot sales in Western Canada.
    Real estate division revenue (net of elimination) for fiscal 2009 was
$71.0 million, a decrease of $54.7 million from the $125.7 million recorded
last fiscal year. Commercial property revenue declined by $24.1 million while
residential property revenue decreased by $30.6 million. The decline in
commercial property revenue during fiscal 2009 was primarily due to the sale
of 61 properties to Crombie REIT in the fourth quarter of last fiscal year
($20.6 million impact). The decline in residential property revenue was also
expected, largely reflecting a slowdown in residential lot sales in Western
Canada.

    Operating Income

    Fourth quarter real estate division operating income was $8.7 million
versus $27.2 million in the same quarter last year. The $18.5 million decline
in real estate division operating income was largely the result of an $11.8
million reduction in residential property operations income as a result of
lower lot sales activity in Western Canada. Commercial property operating
income declined by $6.7 million due in part to an $8.2 million decrease in
operating income from Sobey Leased Properties. The decrease in Sobey Leased
Properties' operating income is attributed to the sale of 61 properties to
Crombie REIT in the fourth quarter last year with the remaining Sobey Leased
Properties' assets transferred to Sobeys. Commercial property operating income
benefited from a $1.8 million increase in equity accounted earnings from
Crombie REIT as a result of the effect of purchasing the 61 properties from
Sobey Leased Properties in the fourth quarter of Empire's last fiscal year.
    For the 52 weeks ended May 2, 2009, real estate division operating income
was $55.9 million versus $100.0 million last year. The $44.1 million decline
in real estate division operating income was largely as a result of a $30.0
million decrease in operating income contribution from Sobey Leased
Properties. The decrease in Sobey Leased Properties' operating income was
attributed to the sale of 61 properties to Crombie REIT in the fourth quarter
last year with the remaining Sobey Leased Properties' assets transferred to
Sobeys. Other commercial property operating income declined by $3.2 million
largely as a result of the sale of certain properties and higher general and
administrative expenses. Residential property operating income declined by
$17.1 million as a result of lower residential lot sales activity in Western
Canada, as mentioned. Equity accounted earnings from Crombie REIT increased
$6.2 million largely a result of their purchase of the 61 Sobey Leased
Properties' assets in the fourth quarter of Empire's last fiscal year.

    Net Earnings

    Real estate division net earnings contribution to Empire in the fourth
quarter amounted to $5.0 million compared to $12.8 million last year. The
earnings decline of $7.8 million reflects the $18.5 million decrease in
operating income, partially offset by a $3.1 million reduction in interest
expense, a decrease in income taxes of $4.3 million and a reduction in net
capital losses of $3.3 million.
    In fiscal 2009, real estate division net earnings contribution to Empire
was $42.6 million compared to $54.8 million last year, a $12.2 million
decrease. The earnings decline largely reflects the $44.1 million decrease in
operating income, partially offset by a $10.0 million increase in net capital
gains/losses, a $12.6 million reduction in interest expense and a decrease in
income taxes of $9.3 million.

    Funds from Operations

    Funds from operations in the fourth quarter of $5.4 million decreased
$11.7 million compared to funds from operations in the fourth quarter of last
fiscal year of $17.1 million, primarily as a result of the decline in
operating earnings.
    Funds from operations in fiscal 2009 of $38.5 million decreased $25.8
million compared to funds from operations last year of $64.3 million,
primarily as a result of the decline in operating earnings.

    INVESTMENTS AND OTHER OPERATIONS

    The third component of Empire is its investments and other operations,
consisting primarily of a 27.6 percent ownership interest in Wajax,
wholly-owned Empire Theatres (the second largest movie exhibitor in Canada)
and Kepec Resources Limited ("Kepec"), a party to a joint venture with APL Oil
and Gas Limited which has ownership interests in various oil and gas
properties in Alberta.

    Investment Value

    At the end of the fourth quarter, Empire's total investments, excluding
its investment in Genstar U.S. investments and in Crombie REIT, carried a
market value of $72.4 million on a cost base of $32.1 million, resulting in an
unrealized pre-tax gain of $40.3 million.

    Portfolio Composition

    At May 2, 2009, Empire's investment portfolio (including equity accounted
investments in Crombie REIT and Genstar U.S.) consisted of:

    
    -------------------------------------------------------------------------
                                                   May 2, 2009
                                    -----------------------------------------
                                       Market       Carrying     Unrealized
    (in millions)                       Value          Value           Gain
    -------------------------------------------------------------------------
    Investment in Wajax             $    71.3      $    31.0      $    40.3
    Investment in Crombie REIT          175.6          (19.7)         195.3
    Investment in Genstar U.S.(1)         7.5            7.5              -
    Other investments                     1.1            1.1              -
    -------------------------------------------------------------------------
                                    $   255.5      $    19.9      $   235.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                   May 3, 2008
                                    -----------------------------------------
                                       Market       Carrying     Unrealized
    (in millions)                       Value          Value           Gain
    -------------------------------------------------------------------------
    Investment in Wajax             $   153.4      $    31.6      $   121.8
    Investment in Crombie REIT          275.9            9.5          266.4
    Investment in Genstar U.S.(1)         0.3            0.3              -
    Other investments                     1.6            1.6              -
    -------------------------------------------------------------------------
                                    $   431.2      $    43.0      $   388.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                   May 5, 2007
                                    -----------------------------------------
                                       Market       Carrying     Unrealized
    (in millions)                       Value          Value           Gain
    -------------------------------------------------------------------------
    Investment in Wajax             $   154.6      $    32.2      $   122.4
    Investment in Crombie REIT          278.1          109.3          168.8
    Investment in Genstar U.S.(1)         1.3            1.3              -
    Other investments                   286.6          189.7           96.9
    -------------------------------------------------------------------------
                                    $   720.6      $   332.5      $   388.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Assumes market value equals book value.
    

    The table below presents investments and other operation's financial
highlights for the 13 and 52 weeks ended May 2, 2009 compared to the same
periods last year:

    
    -------------------------------------------------------------------------
                                               13 Weeks Ended
                             ------------------------------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Revenue                  $     47.1  $     43.4  $      3.7         8.5%
    -------------------------------------------------------------------------
    Operating income
      Wajax                         2.6         5.0        (2.4)      (48.0%)
      Other operations, net
       of corporate expenses       (2.3)       (0.3)       (2.0)     (666.7%)
    -------------------------------------------------------------------------
    Total operating income          0.3         4.7        (4.4)      (93.6%)
    -------------------------------------------------------------------------
    Operating earnings            (2.6)        (0.7)       (1.9)     (271.4%)
    Capital gains (losses) and
     other items, net of tax      (0.1)         0.1        (0.2)     (200.0%)
    -------------------------------------------------------------------------
    Net earnings             $    (2.7)  $     (0.6) $     (2.1)     (350.0%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                               52 Weeks Ended
                             ------------------------------------------------
                                  May 2,      May 3,         ($)         (%)
    ($ in millions)                2009        2008      Change      Change
    -------------------------------------------------------------------------
    Revenue                  $    179.3  $    171.2  $      8.1         4.7%
    -------------------------------------------------------------------------
    Operating income
      Wajax                        18.5        19.7        (1.2)       (6.1%)
      Other operations, net
       of corporate expenses       (7.7)       (6.1)       (1.6)      (26.2%)
    -------------------------------------------------------------------------
    Total operating income         10.8        13.6        (2.8)      (20.6%)
    -------------------------------------------------------------------------
    Operating earnings             (2.9)       (7.8)        4.9        62.8%
    Capital gains (losses) and
     other items, net of tax        0.2        82.2       (82.0)      (99.8%)
    -------------------------------------------------------------------------
    Net earnings             $     (2.7) $     74.4  $    (77.1)     (103.6%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenue

    Investments and other operations' revenue, primarily generated by Empire
Theatres, equalled $47.1 million in the fourth quarter ended May 2, 2009
versus $43.4 million in the fourth quarter last fiscal year, an increase of
$3.7 million or 8.5 percent. Revenue for the 52 weeks ended May 2, 2009
equalled $179.3 million versus $171.2 million last year, an increase of $8.1
million or 4.7 percent.

    Operating Income

    Investments and other operations' operating income, net of corporate
expenses, was $0.3 million in the fourth quarter ended May 2, 2009 compared to
$4.7 million in the fourth quarter last fiscal year.  Equity accounted
earnings generated from the Company's 27.6 percent interest in Wajax amounted
to $2.6 million in the fourth quarter versus $5.0 million last year. 
Operating income generated from other operations, net of corporate expenses,
was negative $2.3 million compared to negative $0.3 million in the fourth
quarter last year.
    Investments and other operations' operating income, net of corporate
expenses, was $10.8 million for the 52 weeks ended May 2, 2009 compared to
$13.6 million last fiscal year. Equity accounted earnings generated from the
Company's 27.6 percent interest in Wajax amounted to $18.5 million during
fiscal 2009 versus $19.7 million last year. Operating income generated from
other operations, net of corporate expenses, was negative $7.7 million
compared to negative $6.1 million last fiscal year.

    Operating Earnings

    Investments and other operations' operating earnings, net of corporate
expenses, equalled negative $2.6 million in the fourth quarter of fiscal 2009
compared to negative $0.7 million in the same quarter last year, a decrease of
$1.9 million. The decline was largely due to lower equity earnings from Wajax.
Corporate expenses, including depreciation, amounted to $2.6 million in the
fourth quarter, an increase of $0.3 million from the same quarter last year.
    Investments and other operations' operating earnings, net of corporate
expenses, equalled negative $2.9 million in fiscal 2009 compared to negative
$7.8 million last year, an increase of $4.9 million. This improvement was
largely from lower interest expense due to the reduced funded debt outstanding
in fiscal 2009 compared to last year, along with lower interest rates on
floating rate debt. Corporate expenses, including depreciation, amounted to
$12.0 million in fiscal 2009, an increase of $1.2 million from last year.

    Net Earnings

    Investments and other operations, net of corporate expenses, contributed
a loss of $2.7 million to Empire's consolidated fourth quarter fiscal 2009 net
earnings. This compares to a $0.6 million net loss in the fourth quarter last
year.
    For the 52 weeks ended May 2, 2009, investments and other operations, net
of corporate expenses, contributed a loss of $2.7 million to Empire's
consolidated net earnings as compared to earnings of $74.4 million last year.
Included in net earnings for fiscal 2009 were $0.2 million realized capital
gains and other items, net of tax, as compared to $82.2 million in the same
period last year. Capital gains last fiscal year were primarily related to the
sale of the liquid investment portfolio in the first quarter.

    CONSOLIDATED FINANCIAL CONDITION

    The Company's financial condition has improved since the start of the
fiscal year as evidenced by the capital structure and key financial condition
measures in the table below.

    
    -------------------------------------------------------------------------
    ($ in millions, except per share    May 2,         May 3,         May 5,
      and ratio calculations)            2009           2008           2007
    -------------------------------------------------------------------------
    Shareholders' equity            $ 2,683.5      $ 2,382.3      $ 2,131.1
    Book value per share            $   39.14      $   36.14      $   32.31
    Bank indebtedness               $    45.9      $    92.6      $    30.1
    Long-term debt, including
     current portion(1)             $ 1,257.0      $ 1,480.9      $   881.9
    Funded debt to total capital         32.7%          39.8%          30.0%
    Net funded debt to capital(2)        28.5%          36.7%          22.5%
    Funded debt to EBITDA(3)             1.64x          2.02x          1.30x
    EBITDA to interest expense(3)        9.84x          7.35x         11.65x
    Total assets                    $ 5,898.0      $ 5,732.9      $ 5,241.5
    -------------------------------------------------------------------------
    (1) Includes liabilities related to assets held for sale.
    (2) Net funded debt to total capital reduces funded debt by cash and
        cash equivalents.
    (3) Calculation uses trailing 12-month EBITDA and interest expense.
    

    Consolidated funded debt declined $270.6 million to $1,302.9 million at
the end of fiscal 2009 as compared to $1,573.5 million at the end of fiscal
2008. The ratio of funded debt to total capital improved to 32.7 percent from
39.8 percent at the end of fiscal 2008.

    Liquidity and Capital Resources

    The Company maintains the following sources of liquidity: (i) cash and
cash equivalents on hand; (ii) unutilized bank credit facilities; and (iii)
cash generated from operating activities. The Company anticipates that these
sources of liquidity will be sufficient to meet expected cash outflows over
the next year.
    At May 2, 2009, consolidated cash and cash equivalents were $231.6
million versus $191.4 million at the prior fiscal year-end on May 3, 2008.
    At the end of the fourth quarter of fiscal 2009, on a non-consolidated
basis, Empire maintained an authorized bank line for operating, general and
corporate purposes of $650 million, of which approximately $248 million or 38
percent was utilized. Empire's non-consolidated credit facility of $650
million matures on June 8, 2010.
    It is Empire's intention to renew or replace this credit facility prior
to its maturity. However, given the current credit environment, the terms of
the renewed or replacement credit facility may not be as favorable as those of
the in-place facility.
    On a consolidated basis, Empire's authorized bank credit facilities
exceeded borrowings by approximately $930 million at May 2, 2009 versus $691
million at May 3, 2008.
    Given the recent developments in the financial markets, the Company's
access to new avenues of credit, both short-term and long-term, may be limited
for the foreseeable future. The Company anticipates that the above mentioned
in-place sources of liquidity will adequately meet its short-term and
long-term financial requirements. The Company mitigates potential liquidity
risk by ensuring its various sources of funds are diversified by term to
maturity and source of credit.
    The table below highlights major cash flow components for the 13 and 52
weeks ended May 2, 2009 compared to the 13 and 52 weeks ended May 3, 2008.

    
    Major Cash Flow Components
    -------------------------------------------------------------------------
                                    13 Weeks Ended         52 Weeks Ended
                               ----------------------- ----------------------
                                  May 2,      May 3,      May 2,      May 3,
    ($ in millions)                2009        2008        2009        2008
    -------------------------------------------------------------------------
    Earnings for common
     shareholders            $     63.6  $     66.5  $    265.8  $    315.5
    Items not affecting cash       94.7       105.7       346.1       360.1
    -------------------------------------------------------------------------
                                  158.3       172.2       611.9       675.6
    Net change in non-cash
     working capital               42.1        93.0        46.3       (45.7)
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                   200.4       265.2       658.2       629.9
    Cash flows (used in) from
     investing activities        (135.1)      210.7      (404.1)   (1,353.9)
    Cash flows (used in) from
     financing activities         (58.0)     (407.6)     (213.9)      620.5
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents             $      7.3  $     68.3  $     40.2  $   (103.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating Activities

    Fourth quarter cash flows from operating activities equalled $200.4
million compared to $265.2 million in the comparable period last year. The
decrease of $64.8 million is due to a decline in the net change in non-cash
working capital of $50.9 million, a decline in the items not affecting cash of
$11.0 million and a decline in net earnings available for common shareholders
of $2.9 million.
    In fiscal 2009, cash flows from operating activities equalled $658.2
million compared to $629.9 million last year. The increase of $28.3 million is
attributed to an increase in the net change in non-cash working capital of
$92.0 million, partially offset by a decrease in net earnings available for
common shareholders of $49.7 million and a decrease in items not affecting
cash of $14.0 million.

    Investing Activities

    Cash used in investing activities of $135.1 million in the fourth quarter
compares to cash flows generated from investing activities of $210.7 million
in the fourth quarter last fiscal year. The change in cash from investing
activities of $345.8 million was largely the result of proceeds of $373.5
million from the sale of 61 properties to Crombie REIT in the fourth quarter
last year, an increase in cash used in business acquisitions of $21.3 million
and an increase in loans and other receivables of $15.5 million, partially
offset by a decline in the cash used for investments of $57.9 million and a
decrease in the purchase of property and equipment of $22.9 million.
    For the 52 weeks ended May 2, 2009, cash used in investing activities of
$404.1 million was $949.8 million lower than last fiscal year. The decrease in
cash used in investing activities was largely the result of the privatization
of Sobeys in the first quarter of last fiscal year for $1,065.7 million, the
decrease in cash used for business acquisitions by $221.8 million (primarily
the acquisition of Thrifty Foods in the second quarter of last year for $243.4
million), the decrease of $119.7 million in property and equipment purchases,
a decrease in cash invested in other assets by $54.9 million and an increase
in proceeds on disposal of property and equipment by $25.8 million, partially
offset by proceeds of $373.5 million from the sale of 61 properties to Crombie
REIT in the fourth quarter last fiscal year, the decrease in cash from
investments of $135.5 million and a decrease in cash from loans and other
receivables of $29.1 million.
    Consolidated purchases of property and equipment totalled $126.6 million
in the fourth quarter of fiscal 2009 compared to $149.5 million in the fourth
quarter last year. Consolidated purchases of property and equipment totalled
$431.0 million in fiscal 2009 compared to $550.7 million in the same period
last year. The decline in both the current quarter and the fiscal year is
largely associated with fewer stores opened, acquired or expanded relative to
the prior year.
    The table below outlines the number of stores Sobeys invested in during
the fourth quarter of fiscal 2009 compared to the same quarter of fiscal 2008,
as well as for the 52 weeks ended May 2, 2009 compared to the 52 weeks ended
May 3, 2008.

    
    Sobeys' Corporate and Franchised Store
    Construction Activity
    -------------------------------------------------------------------------
                                    13 Weeks Ended          52 Weeks Ended
                               ----------------------- ----------------------
                                  May 2,      May 3,      May 2,      May 3,
    Number of Stores               2009        2008        2009        2008
    -------------------------------------------------------------------------
    Opened/Acquired/Relocated        13          15          47          66
    Expanded                          3          10          11          31
    Rebannered/Redeveloped            2           9          16          60
    Closed                           20          17          52          67
    -------------------------------------------------------------------------

    The following table shows Sobeys' square footage changes for the 13 and 52
weeks ended May 2, 2009 by type:

    Sobeys' Square Footage Changes
    (in thousands)
    -------------------------------------------------------------------------
                                                          May 2,      May 2,
                                                           2009        2009
                                                             vs.         vs.
                                                        Jan. 31,      May 3,
    Square Feet                                            2009        2008
    -------------------------------------------------------------------------
    Opened                                                  221         773
    Relocated                                                16          82
    Acquired                                                  -          33
    Expanded                                                 41         103
    Closed                                                 (199)       (733)
    -------------------------------------------------------------------------
    Net change                                               79         258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At May 2, 2009, Sobeys' square footage totalled 27.5 million square feet,
a 1.1 percent increase over the 27.2 million square feet operated at the end
of the fourth quarter last year.

    Financing Activities

    Financing activities during the fourth quarter of fiscal 2009 used $58.0
million of cash compared to $407.6 million of cash used in the same quarter
last year. The reduction of $349.6 million in cash flows used in financing
activities is primarily the result of: (i) a decrease in repayment of
long-term debt of $246.4 million; (ii) the issuance of Non-Voting Class A
shares in the fourth quarter of fiscal 2009 for net proceeds of $129.1
million; and (iii) an increase in bank indebtedness of $7.4 million compared
to a $35.0 million increase in the fourth quarter last year.
    Financing activities for the 52 weeks ended May 2, 2009 used $213.9
million of cash compared to $620.5 million of cash generated from financing
activities in the same period last year. The variance of $834.4 million in
cash flows from financing activities in the 52 weeks ended May 2, 2009 when
compared to the same period last year is primarily the result of: (i) a
decrease in long-term debt issuance of $1,033.0 million; and (ii) a decrease
in bank indebtedness of $46.7 million during the fiscal year-to-date compared
to an increase in bank indebtedness of $60.9 million in the same period last
year; partially offset by (i) a decrease in repayment of long-term debt of
$199.8 million; and (ii) the issuance of Non-Voting Class A shares in the
fourth quarter of fiscal 2009 for net proceeds of $129.1 million.

    Accounting Policy Changes

    The accounting policy changes are explained in note 1 to the unaudited
consolidated financial statements included in this release.

    Additional Information

    Additional information about the Company has been filed electronically
with various securities regulators in Canada through the System for Electronic
Document Analysis and Retrieval (SEDAR) and is available online at
www.sedar.com.

    Subsequent Events

    On June 12, 2009, Sobeys repaid, although did not cancel, the $75.0
million credit facility which matures on November 8, 2010.
    On June 25, 2009, Crombie REIT closed a bought-deal public offering of
Units at a price of $7.80 per unit. In satisfaction of its pre-emptive right
with respect to the public offering, the Company subscribed for approximately
$30.0 million of Class B Units (which are convertible on a one for one basis
into Units of Crombie REIT). The investment in Class B Units will marginally
reduce the Company's interest in Crombie REIT from 47.9 percent to 47.5
percent.

    Definition of Non-GAAP Measures

    Certain measures included in this news release do not have a standardized
meaning under Canadian Generally Accepted Accounting Principles ("GAAP") and,
therefore, may not be comparable to similarly titled measures presented by
other publicly traded companies. The Company includes these measures because
it believes certain investors use these measures as a means of assessing
Empire's financial performance. Empire's definition of the non-GAAP terms are
as follows: (i) operating earnings is net earnings before capital gains
(losses) and other items, net of tax; (ii) operating income or earnings before
interest and taxes ("EBIT") is calculated as operating earnings before
minority interest, interest expense and income taxes; (iii) earnings before
interest, taxes, depreciation and amortization ("EBITDA") is calculated as
EBIT plus depreciation and amortization; (iv) funded debt is all
interest-bearing debt which includes bank loans, bankers' acceptances,
long-term debt and debt related to assets held for sale; (v) total capital is
calculated as funded debt plus equity; (vi) funds from operations are
calculated as operating earnings plus depreciation and amortization; and (vii)
same-store sales are sales from stores in the same location in both reporting
periods.

    Forward-Looking Statements

    This news release contains forward-looking statements which reflect
management's expectations regarding the Company's objectives, plans, goals,
strategies, future growth, financial condition, results of operations, cash
flows, performance, business prospects and opportunities. All statements other
than statements of historical facts included in this news release, including
statements regarding the Company's objectives, plans, goals, strategies,
future growth, financial condition, results of operations, cash flows,
performance, business prospects and opportunities, may constitute
forward-looking information. Forward-looking information and statements are
identified by words or phrases such as "anticipates", "expects", "believes",
"estimates", "intends", "could", "may", "plans", "predicts", "projects",
"will", "would", "foresees", "remain confident that" and other similar
expressions or the negative of these terms. These statements are based on
Empire's management's reasonable assumptions and beliefs in light of the
information currently available to them. The forward-looking information
contained in this news release is presented for the purpose of assisting the
Company's security holders in understanding its financial position and results
of operation as at and for the periods ended on the dates presented and the
Company's strategic priorities and objectives and may not be appropriate for
other purposes. By its very nature, forward-looking information requires the
Company to make assumptions and is subject to inherent risks and
uncertainties, which give rise to the possibility that the Company's
predictions, forecasts, expectations or conclusions will not prove to be
accurate, that the Company's assumptions may not be correct and that the
Company's objectives, strategic goals and priorities will not be achieved.
Although the Company believes that the predictions, forecasts, expectations or
conclusions reflected in the forward-looking information are reasonable, it
can give no assurance that such matters will prove to have been correct. Such
forward-looking information is not fact but only reflections of management's
estimates and expectations. These forward-looking statements are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements. These factors include but are not limited to:
changes in general industry, market and economic conditions, competition from
existing and new competitors, energy prices, supply issues, inventory
management, changes in demand due to seasonality of the business, interest
rates, changes in laws and regulations, operating efficiencies and cost saving
initiatives. In addition, these uncertainties and risks are discussed in the
Company's materials filed with the Canadian securities regulatory authorities
from time to time, including the Risk Management section of the annual
Management Discussion and Analysis included in the Company's Annual Report.
    Empire cautions that the list of important factors is not exhaustive and
other factors could also adversely affect our results. Readers are urged to
consider the risks, uncertainties and assumptions carefully in evaluating the
forward-looking information and are cautioned not to place undue reliance on
such forward-looking information. Forward-looking statements may not take into
account the effect on the Company's business of transactions occurring after
such statements have been made. For example, dispositions, acquisitions, asset
write-downs or other changes announced or occurring after such statements are
made may not be reflected in forward-looking statements. The forward-looking
information in this news release reflects the Company's expectations as of
June 26, 2009, and is subject to change after this date. The Company does not
undertake to update any forward-looking statements that may be made from time
to time by or on behalf of the Company other than as required by applicable
securities laws.

    Conference Call Invitation

    The Company will hold an analyst call on Friday, June 26, 2009 beginning
at 2:30 p.m. Eastern Time during which senior management will discuss the
Company's financial results for the fourth quarter of fiscal 2009 ended May 2,
2009. To join this conference call dial 1-800-732-9307 outside of the Toronto
area or 416-644-3416 from within the Toronto area. You may also listen to a
live audiocast of the conference call by visiting the Company's website
located at www.empireco.ca. Replay will be available by dialling
1-877-289-8525 or 416-640-1917 and entering passcode 21308661, followed by the
number sign, until midnight July 3, 2009, or on the Company's website for 90
days after the meeting.

    Fiscal 2009 Annual Report

    The Company's audited consolidated financial statements for the year
ended May 2, 2009 will be available on or before July 31, 2009. Management's
Discussion and Analysis for the year ended May 2, 2009, including further
discussion and analysis of fourth quarter and annual items that affected
results of operations, financial position and cash flows, will also be
available on or before July 31, 2009. Both documents will be contained in the
Company's Fiscal 2009 Annual Report and will be available in the Investor
Relations section of the Company's website at www.empireco.ca, or on the
Canadian Securities Administrators' website at www.sedar.com.

    About Empire

    Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered
in Stellarton, Nova Scotia. Empire's core businesses include food retailing
and related real estate. With over $15 billion in annual revenue and
approximately $5.9 billion in assets, Empire employs approximately 45,000
people directly and through its subsidiaries.


    
                           EMPIRE COMPANY LIMITED
                           ----------------------
                         CONSOLIDATED BALANCE SHEETS
                         ---------------------------
                                (in millions)


                                                          May 2       May 3
                                                           2009        2008
                                                      Unaudited     Audited
                                                     ----------- ------------
    ASSETS
    Current
      Cash and cash equivalents                      $    231.6  $    191.4
      Receivables                                         318.7       291.1
      Loans and other receivables                          55.8        69.9
      Income taxes receivable                               4.9           -
      Inventories                                         842.8       820.2
      Prepaid expenses                                     70.8        62.0
                                                     ----------- ------------
                                                        1,524.6     1,434.6
    Investments (realizable value $1.1;
     2008 $1.6)                                             1.1         1.6
    Investments, at equity (realizable
     value $254.4; 2008 $429.6) (Note 3)                   18.8        41.4
    Loans and other receivables                            75.3        56.3
    Other assets (Note 4)                                 151.4       175.5
    Property and equipment                              2,601.5     2,457.3
    Assets held for sale                                    8.5        60.3
    Intangibles                                           345.4       346.8
    Goodwill                                            1,171.4     1,159.1
                                                     ----------- ------------
                                                     $  5,898.0  $  5,732.9
                                                     ----------- ------------
                                                     ----------- ------------
    LIABILITIES
    Current
      Bank indebtedness                              $    45.9   $     92.6
      Accounts payable and accrued liabilities         1,487.1      1,348.4
      Income taxes payable                                   -         15.5
      Future income taxes                                 42.7         32.9
      Long-term debt due within one year                 133.0         60.4
      Liabilities relating to assets held for sale           -          6.4
                                                     ----------- ------------
                                                       1,708.7      1,556.2
    Long-term debt                                     1,124.0      1,414.1
    Employee future benefits obligation (Note 12)        118.4        110.7
    Future income taxes                                   89.5        125.5
    Other long-term liabilities                          135.0        106.5
    Minority interest                                     38.9         37.6
                                                     ----------- ------------
                                                       3,214.5      3,350.6
                                                     ----------- ------------
    SHAREHOLDERS' EQUITY

    Capital stock (Note 5)                               324.5        195.7
    Contributed surplus                                    1.7          0.5
    Retained earnings                                  2,405.8      2,207.6
    Accumulated other comprehensive loss                 (48.5)       (21.5)
                                                     ----------- ------------
                                                       2,683.5      2,382.3
                                                     ----------- ------------
                                                     $ 5,898.0   $  5,732.9
                                                     ----------- ------------
                                                     ----------- ------------
    Guarantee and contingent liabilities (Note 14)
    Subsequent events (Note 17)

    See accompanying notes to the unaudited interim period consolidated
    financial statements.



                           EMPIRE COMPANY LIMITED
                           ----------------------
                 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                 --------------------------------------------
                                 YEARS ENDED
                                 -----------
                           (Unaudited, in millions)


                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Balance, beginning of year as previously
     reported                                        $  2,207.6  $  1,939.6

    Adjustment due to implementation of new
     accounting standard (Note 1)                         (21.5)          -
    Adjustment due to change in accounting policy             -        (4.3)
                                                     ----------- ------------
    Balance, beginning of year as restated              2,186.1     1,935.3

    Net earnings                                          265.9       315.8

    Dividends
      Preferred shares                                     (0.1)       (0.3)
      Common shares                                       (46.1)      (43.2)
                                                     ----------- ------------
    Balance, end of year                             $  2,405.8  $  2,207.6
                                                     ----------- ------------
                                                     ----------- ------------



                           EMPIRE COMPANY LIMITED
                           ----------------------
       CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
       ---------------------------------------------------------------
                                 YEARS ENDED
                                 -----------
                           (Unaudited, in millions)

                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Balance, beginning of year                       $    (21.5) $     (0.6)

    Transition adjustment as of May 6, 2007                   -        77.2
                                                     ----------- ------------
    Adjusted balance, beginning of year                   (21.5)       76.6

    Acquired comprehensive loss from purchase of
       minority interest in Sobeys Inc.                       -        (0.6)

    Other comprehensive loss for the year                 (27.0)      (97.5)
                                                     ----------- ------------
    Balance, end of year                             $    (48.5) $    (21.5)
                                                     ----------- ------------
                                                     ----------- ------------

    See accompanying notes to the unaudited interim period consolidated
    financial statements.



                           EMPIRE COMPANY LIMITED
                           ----------------------
                     CONSOLIDATED STATEMENTS OF EARNINGS
                     -----------------------------------
                                PERIODS ENDED
                                -------------
             (Unaudited, in millions, except per share amounts)


                                  May 2       May 3       May 2       May 3
                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- -----------
    Revenue                  $  3,709.0  $  3,557.8  $ 15,015.1  $ 14,065.0
    Operating expenses
      Cost of sales, selling
       and administrative
       expenses                 3,522.6     3,352.5    14,261.1    13,322.3
      Depreciation and
       amortization                82.5        77.2       324.8       304.6
                             ----------- ----------- ----------- -----------
                                  103.9       128.1       429.2       438.1
    Investment income
     (Note 7)                       7.7         8.1        38.9        34.5
                             ----------- ----------- ----------- -----------
    Operating income              111.6       136.2       468.1       472.6
                             ----------- ----------- ----------- -----------
    Interest expense
      Long-term debt               17.2        26.4        75.9       100.6
      Short-term debt               1.6         1.1         4.7         5.2
                             ----------- ----------- ----------- -----------
                                   18.8        27.5        80.6       105.8
                             ----------- ----------- ----------- -----------
                                   92.8       108.7       387.5       366.8
    Capital gains (losses)
     and other items (Note 8)      (1.1)      (10.6)        2.8        87.7
                             ----------- ----------- ----------- -----------
    Earnings before income
     taxes and minority
     interest                      91.7        98.1       390.3       454.5
                             ----------- ----------- ----------- -----------
    Income taxes
      Current                      28.8        21.3       129.6       120.8
      Future                       (1.5)        9.0       (13.5)        5.1
                             ----------- ----------- ----------- -----------
                                   27.3        30.3       116.1       125.9
                             ----------- ----------- ----------- -----------
    Earnings before minority
     interest                      64.4        67.8       274.2       328.6
    Minority interest               0.8         1.3         8.3        12.8
                             ----------- ----------- ----------- -----------
    Net earnings             $     63.6  $     66.5  $    265.9  $    315.8
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------
    Earnings per share
     (Note 2)
       Basic                 $     0.97  $     1.01  $     4.05  $     4.80
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------
       Diluted               $     0.96  $     1.01  $     4.04  $     4.80
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------
    Weighted average number
     of common shares
     outstanding, in millions
       Basic                       65.9        65.6        65.7        65.6
       Diluted                     66.0        65.7        65.8        65.7

    See accompanying notes to the unaudited interim period consolidated
    financial statements.



                           EMPIRE COMPANY LIMITED
                           ----------------------
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
               -----------------------------------------------
                                PERIODS ENDED
                                -------------
                           (Unaudited, in millions)


                                  May 2       May 3       May 2       May 3
                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- -----------
    Net earnings             $     63.6  $     66.5  $    265.9  $    315.8
                             ----------- ----------- ----------- -----------
    Other comprehensive
     income, net of income
     taxes
      Reclassification of
       gains on
       available-for-sale
       financial assets to
       earnings                       -           -           -       (78.7)
      Unrealized losses on
       available-for-sale
       financial assets            (0.1)          -        (0.4)          -
      Unrealized losses on
       derivatives designated
        as cash flow hedges        (3.9)        1.2       (16.2)      (14.0)
      Reclassification of
       loss on derivative
       instruments
       designated as cash
       flow hedges to
       earnings                     1.5        (0.6)        3.5        (0.6)
      Share of comprehensive
       loss of entities
       accounted using the
       equity method               (0.2)       (2.8)      (14.1)       (4.6)
      Foreign currency
       translation adjustment       0.2           -         0.2         0.4
                             ----------- ----------- ----------- -----------
                                   (2.5)       (2.2)      (27.0)      (97.5)
                             ----------- ----------- ----------- -----------
    Comprehensive income     $     61.1  $     64.3  $    238.9  $    218.3
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------

    See accompanying notes to the unaudited interim period consolidated
    financial statements.



                           EMPIRE COMPANY LIMITED
                           ----------------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                    -------------------------------------
                                PERIODS ENDED
                                -------------
                           (Unaudited, in millions)


                                  May 2       May 3       May 2       May 3
                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- -----------
    Operating Activities
      Net earnings           $     63.6  $     66.5  $    265.9  $    315.8
      Items not affecting
       cash (Note 9)               94.7       105.7       346.1       360.1
      Preferred dividends             -           -        (0.1)       (0.3)
                             ----------- ----------- ----------- -----------
                                  158.3       172.2       611.9       675.6
      Net change in non-cash
       working capital             42.1        93.0        46.3       (45.7)
                             ----------- ----------- ----------- -----------
    Cash flows from operating
     activities                   200.4       265.2       658.2       629.9
                             ----------- ----------- ----------- -----------
    Investing Activities
      Net decrease (increase)
       in investments               2.9       (55.0)       (1.9)      133.6
      Purchase of shares
       in subsidiary,
       Sobeys Inc.                    -           -           -    (1,065.7)
      Proceeds from sale
       of property to
       Crombie REIT                   -       373.5           -       373.5
      Purchase of property
       and equipment             (126.6)     (149.5)     (431.0)     (550.7)
      Proceeds on disposal
       of property and
       equipment                  13.2         21.6        78.0        52.2
      Loans and other
       receivables               (13.9)         1.6        (4.9)       24.2
      (Increase) decrease
       in other assets            (2.5)         5.4        (2.9)      (57.8)
      Business acquisitions
       (Note 13)                  (8.2)        13.1       (41.4)     (263.2)
                             ----------- ----------- ----------- -----------
    Cash flows (used in) from
     investing activities       (135.1)       210.7      (404.1)   (1,353.9)
                             ----------- ----------- ----------- -----------
    Financing Activities
      Increase (decrease) in
       bank indebtedness           7.4         35.0       (46.7)       60.9
      Issue of long-term debt     15.9         20.6        66.8     1,099.8
      Repayment of long-term
       debt                     (199.5)      (445.9)     (307.7)     (507.5)
      Minority interest            0.6         (6.3)       (7.0)       11.1
      Repurchase of preferred
       shares                        -         (0.1)       (2.3)       (1.0)
      Issue of Non-Voting
       Class A shares
       (Note 5)                  129.1            -       129.1         0.4
      Common dividends           (11.5)       (10.9)      (46.1)      (43.2)
                             ----------- ----------- ----------- -----------
    Cash flows (used in) from
     financing activities        (58.0)      (407.6)     (213.9)      620.5
                             ----------- ----------- ----------- -----------
    Increase (decrease) in
     cash and cash
     equivalents                   7.3         68.3        40.2      (103.5)
    Cash and cash
     equivalents, beginning
     of period                   224.3        123.1       191.4       294.9
                             ----------- ----------- ----------- -----------
    Cash and cash
     equivalents, end of
     period                  $   231.6   $    191.4  $    231.6  $    191.4
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------

    See accompanying notes to the unaudited interim period consolidated
    financial statements.



                           EMPIRE COMPANY LIMITED
                           ----------------------
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               ----------------------------------------------
                                 MAY 2, 2009
                                 -----------
      (Unaudited, in millions, except per share amounts and key ratios)


    1. Summary of Significant Accounting Policies

    The unaudited interim period consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting principles
("GAAP") and include the accounts of Empire Company Limited (the "Company"),
all subsidiary companies, including 100% owned Sobeys Inc. ("Sobeys") and its
subsidiaries and variable interest entities ("VIEs") which the Company is
required to consolidate.

    Interim consolidated financial statements

    These interim consolidated financial statements do not include all of the 
disclosures included in the Company's annual consolidated financial
statements. Accordingly, these interim consolidated financial statements
should be read in conjunction with the consolidated financial statements for
the year ended May 3, 2008, as set out in the 2008 Annual Report.

    Generally accepted accounting principles

    The accounting standards and policies used in the preparation of these
interim consolidated financial statements conform with those used in the
Company's 2008 annual consolidated financial statements except as noted below:

    Adopted during fiscal 2009

      Inventories

            In June 2007, the Canadian Institute of Chartered Accountants
      ("CICA") issued Section 3031 of the CICA Handbook, "Inventories", which
      has replaced existing Section 3030 with the same title. The new section
      establishes that inventories should be measured at the lower of cost
      and net realizable value, with guidance on the determination of cost,
      including allocation of overheads and other costs incurred in bringing
      the inventories to their present location and condition. Costs such as
      storage costs are specifically excluded from the cost of inventories
      and are expensed in the period incurred. The standard also requires
      the use of either first-in, first-out or weighted average cost formula
      to measure the cost of inventories of similar nature and use.
      Techniques, such as the retail method, used to measure the cost of
      inventory may be used if the results approximate cost. This standard
      was effective for interim and annual financial statements relating to
      fiscal years beginning on or after January 1, 2008. The Company
      applied the standard to the opening  inventory  for  the fiscal year
      beginning May 4, 2008 and adjusted retained earnings by the difference
      in the measurement of cost in opening inventory of a similar nature and
      use (prior periods were not restated).
            Following adoption of Section 3031, warehouse inventories are
      valued at the lower of cost and net realizable value with cost being
      determined on a weighted average cost basis. Retail inventories are
      valued at the lower of cost and net realizable value. Cost is
      determined using a weighted average cost using either the standard cost
      method or a retail method. The retail method uses the anticipated
      selling price less normal profit margins, on a weighted average cost
      basis. Real estate inventory of residential properties is valued at the
      lower of cost and net realizable value.
            The cost of inventories is comprised of directly attributable
      costs and includes the purchase price plus other costs incurred in
      bringing the inventories to their present location and condition, such
      as freight. The cost is reduced by the value of rebates and allowances
      received from vendors. The Company estimates net realizable value as
      the amount that inventories are expected to be sold, taking into
      consideration fluctuations of retail price due to seasonality less
      estimated costs necessary to make the sale. Inventories are written
      down to net realizable value when the cost of inventories is estimated
      to not be recoverable due to obsolescence, damage or declining selling
      prices. When circumstances that previously caused inventories to be
      written down below cost no longer exist or when there is clear evidence
      of an increase in retail selling price, the amount of the write-down
      previously recorded is reversed. Costs that do not contribute to
      bringing inventories to their present location and condition, such as
      storage and administrative overheads, are specifically excluded from
      the cost of inventories and are expensed in the period incurred.
            The initial impact of measuring inventories under the new
      standard is a decrease to the carrying amount of opening inventories as
      at May 4, 2008 of $27.9 and a decrease in income taxes payable of $6.4.
      Opening retained earnings has been adjusted by $21.5, equal to the
      change in opening inventories net of tax.
            The cost of inventory recognized as an expense during the fourth
      quarter and year-to-date of fiscal 2009 was $2,740.7 and $11,232.5
      respectively. The cost of inventories recognized as an expense during
      the fourth quarter and year-to-date of fiscal 2009 includes $11.4 and
      $45.5 respectively for the write-down of inventories below cost to net
      realizable value. There were no reversals of inventories written down
      previously.

      Capital disclosures

            In October 2006, the CICA issued Section 1535, "Capital
      Disclosures". This section establishes standards for disclosing
      information about an entity's capital and how it is managed. The
      standard is effective for interim and annual financial statements
      relating to fiscal years beginning on or after October 1, 2007 and is
      applicable for the Company's first quarter of fiscal 2009 (see Note 6).
      The adoption of Section 1535 did not have an impact on the Company's
      financial results or position.

      Financial instruments - disclosure and financial instruments -
      presentation

            Section 3862, "Financial Instruments - Disclosure", and Section
      3863, "Financial Instruments - Presentation", replace Section 3861,
      "Financial Instruments - Disclosure and Presentation". These standards
      are effective for interim and annual financial statements relating to
      fiscal years beginning on or after October 1, 2007 and are applicable
      for the Company's first quarter of fiscal 2009 (see Note 11). Section
      3862 requires increased disclosures regarding the risks associated with
      financial instruments such as credit risk, liquidity risk and market
      risk and the techniques used to identify, monitor and manage these
      risks. In accordance with the transitional provision of Section 3862,
      comparative information about the nature and extent of risks arising
      from financial instruments is not required in the year of adoption.
      Section 3863 carries forward standards for presentation of financial
      instruments and non-financial derivatives and provides additional
      guidance for the classification of financial instruments between
      liabilities and equity and has no significant impact on the Company's
      financial statements.

      Financial instruments - recognition and measurement

            In January 2009, the CICA issued Emerging Issue Committee
      Abstract 173 ("EIC 173"), "Credit Risk and the Fair Value of Financial
      Assets and Financial Liabilities". EIC 173 requires that a company take
      into account its own credit risk and the credit risk of its
      counterparty in determining the fair value of financial assets and
      financial liabilities. This Abstract must be applied retrospectively
      without restatement of prior periods to all financial assets and
      liabilities measured at fair value in interim and annual financial
      statements for periods ending on or after January 20, 2009. The
      adoption of EIC 173 did not have a material impact on the Company's
      financial results, position or disclosures.

    Future changes in accounting policies

      Goodwill and intangible assets

            In February 2008, the CICA issued Section 3064, "Goodwill and
      Intangible Assets", which replaced existing Section 3062, "Goodwill and
      Other Intangible Assets", and Section 3450, "Research and Development".
      The new standard provides guidance on the recognition, measurement,
      presentation and disclosure of goodwill and intangible assets. This
      standard is effective for interim and annual financial statements
      relating to fiscal years beginning on or after October 1, 2008 and is
      applicable for the Company's first quarter of fiscal 2010. The Company
      is currently evaluating the impact of this new standard.

      Business combinations, consolidated financial statements and
      non-controlling interests

            In January 2009, the CICA issued three new accounting standards
      which are based on the International Accounting Standards Board's
      International Financial Reporting Standard 3, "Business Combinations".
      Section 1582, "Business Combinations", which replaces Section 1581 with
      the same title, aims to improve the relevance, reliability and
      comparability of the information provided in financial statements about
      business combinations. This Section is to be applied prospectively to
      business combinations for which the acquisition date is on or after
      January 1, 2011 and assets and liabilities that arose from business
      combinations that preceded the adoption of this standard should not be
      adjusted upon adoption. Section 1601, "Consolidated Financial
      Statements", and Section 1602, "Non-controlling Interests", replace
      Section 1600, "Consolidated Financial Statements", and establish
      standards for the preparation of consolidated financial statements and
      for accounting for a non-controlling interest in a subsidiary in
      consolidated financial statements subsequent to a business
      combination. These standards apply to interim and annual consolidated
      financial statements beginning on or after January 1, 2011. Earlier
      adoption of all three standards is permitted as of the beginning of a
      fiscal year, however if an entity chooses to early adopt all three
      standards must be adopted concurrently. The Company is currently
      evaluating the impact of these new standards.

    2. Earnings Per Share

    Earnings applicable to common shares is comprised of the following:

                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- -----------
    Operating earnings       $     64.4  $     73.6  $    262.9  $    242.8
    Capital gains (losses)
     and other items, net of
     income taxes of $(0.3);
     $(3.5); $(0.2); $14.7         (0.8)       (7.1)        3.0        73.0
                             ----------- ----------- ----------- -----------
    Net earnings                   63.6        66.5       265.9       315.8
    Preferred share dividends         -           -        (0.1)       (0.3)
                             ----------- ----------- ----------- -----------
    Earnings applicable to
     common shares           $     63.6  $     66.5  $    265.8  $    315.5
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------

    Earnings per share is comprised of the following:

    Operating earnings       $     0.98  $     1.12  $     4.00  $     3.69
    Net capital gains
     (losses) and other
     items                        (0.01)      (0.11)       0.05        1.11
                             ----------- ----------- ----------- -----------
    Basic earnings per
     share                   $     0.97  $     1.01  $     4.05  $     4.80
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------

    Operating earnings       $     0.97  $     1.12  $     3.99  $     3.69
    Net capital gains
     (losses) and other
     items                        (0.01)      (0.11)       0.05        1.11
                             ----------- ----------- ----------- -----------
    Diluted earnings per
     share                   $     0.96  $     1.01  $     4.04  $     4.80
                             ----------- ----------- ----------- -----------
                             ----------- ----------- ----------- -----------

    3. Investments, at Equity
                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Wajax Income Fund (27.6% interest)               $     31.0  $     31.6
    Crombie REIT (47.9% interest)                         (19.7)        9.5
    U.S. residential real estate
     partnerships                                           7.5         0.3
                                                     ----------- ------------
                                                     $     18.8  $     41.4
                                                     ----------- ------------
                                                     ----------- ------------

    The Company's carrying value of its investment in Wajax Income Fund is as
    follows:

                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
      Balance, beginning of year                     $     31.6  $     32.2
      Equity earnings                                      18.5        19.7
      Share of comprehensive loss                          (0.5)       (0.2)
      Distributions received                              (18.6)      (20.1)
                                                     ----------- ------------
      Balance, end of year                           $     31.0  $     31.6
                                                     ----------- ------------
                                                     ----------- ------------

    The Company's carrying value of its investment in Crombie REIT is as
    follows:

                                                          May 2       May 3
                                                           2009        2008
                                                      ----------- -----------
      Balance, beginning of year                      $     9.5   $   109.3
      Equity earnings                                      19.8        13.6
      Share of comprehensive loss                         (20.8)       (6.8)
      Distributions received                              (21.8)      (17.0)
      Interest received in Crombie REIT                       -        55.0
      Deferral of gains on sale of property                (6.4)     (144.6)
                                                      ----------- -----------
      Balance, end of year                            $   (19.7)  $     9.5
                                                      ----------- -----------
                                                      ----------- -----------


    4. Other Assets

    Asset-backed commercial paper

    Included in other assets is $30.0 (2008 - $30.0) of third-party
asset-backed commercial paper ("ABCP") against which the Company has taken a
pre-tax impairment provision in the amount of $12.2 (2008 - $7.5). On January
21, 2009, the Company derecognized the existing available-for-sale assets and
received restructured ABCP MAV II notes: A1 - $7.8, A2 - $17.5, B - $3.2, C -
$0.9 and $0.6 of tracking notes (the "restructured notes") as designated in
the Montreal Accord as well as accrued interest. The A1 and A2 notes received
an A rating from the Dominion Bond Rating Service. The remaining notes have
not yet been rated. The restructured notes are floating rate notes with
expected payouts in January 2017. Accrued interest owed from August 2007 to
the restructuring date is expected in two payments; the first was received on
January 23, 2009 for $1.0 and a second interest payment for the remainder is
expected to be received at a future date. The Company has classed these notes
as held for trading and as a result will be fair valued at each reporting
period. The Company updated its analysis of the fair value of the restructured
notes, including factors such as estimated cash flow scenarios and risk
adjusted discount rates, and an additional pre-tax provision, net of interest
received, of $3.7 was recorded in the third quarter of fiscal 2009. The total
charge for impairment is approximately 41 percent (2008 - 25 percent) of the
original value of the ABCP.
    Discount rates vary depending upon the credit rating of the restructured
long-term floating rate notes. Discount rates have been estimated using 
Government of Canada benchmark rates plus expected spreads for similarly rated
instruments with similar maturities and structure. The Company has performed a
sensitivity analysis on estimated discount rates used in the fair value
analysis and determined that a change of one percent would result in a pre-tax
change in the fair value of these investments of approximately $1.3 (2008 -
$2.0).
    Continuing uncertainties regarding the value of assets which underlie the
ABCP, the amount and timing of cash flows and the outcome of the restructuring
process could give rise to a further material change in the alue of the
Company's investment in ABCP which could impact the Company's future earnings.
The Company believes it has sufficient credit facilities to satisfy its
financial obligations as they come due and does not expect there will be a
material adverse impact on its business as a result of this current
third-party ABCP liquidity issue.

    5. Capital Stock

    On April 24, 2009, the Company closed a bought-deal public offering of
Non-Voting Class A shares at a price of $49.75 per share. The underwriters
elected to exercise their over-allotment option in full resulting in a total
of 2,713,000 shares being issued for net proceeds of $129.1. The proceeds were
used to repay bank loans and long-term debt.

    6. Capital Management

    The Company's objectives when managing capital are: i) to ensure
sufficient liquidity to support its financial obligations and execute its
operating and strategic plans; ii) to minimize the cost of capital while
taking into consideration current and future industry, market and economic
risks and conditions; iii) to maintain an optimal capital structure that
provides necessary financial flexibility while also ensuring compliance with
any financial covenants; and iv) to maintain an investment grade credit rating
with each rating agency that assesses the credit worthiness of the Company. No
changes were made to these objectives in the current period.
    The Company monitors and makes adjustments to its capital structure, when 
necessary, in light of changes in economic conditions, the objectives of its
shareholders, the cash requirements of the business and the condition of
capital markets.
    The Company considers its total capitalization to include all interest
bearing debt, including bank loans, bankers' acceptances, long-term debt
(including the current portion thereof) and shareholders' equity, net of cash.
The calculation is set out in the following table:


                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Bank indebtedness                                $     45.9  $     92.6
    Long-term debt due within one year                    133.0        60.4
    Liabilities relating to assets
     held for sale                                            -         6.4
    Long-term debt                                      1,124.0     1,414.1
                                                     ----------- ------------
    Funded debt                                         1,302.9     1,573.5
    Less: cash and cash equivalents                      (231.6)     (191.4)
                                                     ----------- ------------
    Net funded debt                                     1,071.3     1,382.1
    Shareholders' equity                                2,683.5     2,382.3
                                                     ----------- ------------
    Capital under management                         $  3,754.8  $  3,764.4
                                                     ----------- ------------
                                                     ----------- ------------


    Although the Company does not include operating leases in its definition
of capital, the Company does give consideration to its obligations under
operating leases when assessing its total capitalization.
    The primary investments undertaken by the Company include additions to the
selling square footage of its store network via the construction of new,
relocated and expanded stores, including related leasehold improvements and
features and the purchase of land bank sites for future store construction.
The Company makes capital investments in information technology and its
distribution capabilities to support an expanding store network. In addition,
the Company makes capital expenditures in support of its real estate and other
operations. The Company largely relies on its cash flow from operations to
fund its capital investment program and dividend distributions to its
shareholders. This cash flow is supplemented, when necessary, through the
borrowing of additional debt or the issuance of additional capital stock.
    Management monitors certain key ratios to effectively manage capital:

                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Funded debt to total capital(1)                        32.7%       39.8%
    Funded debt to EBITDA(2)                               1.64x       2.02x
    EBITDA to interest expense                             9.84x       7.35x

    (1) Total capital is funded debt plus shareholders' equity.
    (2) EBITDA and interest expense are comprised of EBITDA and interest
        expense for each of the 52 week periods then ended. EBITDA (operating
        income plus depreciation and amortization) is a non-GAAP financial
        measure. Non-GAAP financial measures do not have standardized
        meanings prescribed by GAAP and therefore may not be comparable to
        similar measures presented by other reporting issuers.

    As part of existing debt agreements, two financial covenants are monitored
and communicated, as required by the terms of credit agreements, on a
quarterly basis by management to ensure compliance with the agreements. The
covenants are: i) adjusted total debt/EBITDA - calculated as funded debt plus
letters of credit, guarantees and commitments divided by EBITDA (for previous
52 weeks); and ii) debt service coverage ratio - calculated as EBITDA divided
by interest expense plus repayments of long-term debt (all amounts are based
on previous 52 weeks).
    The Company was in compliance with these covenants during the period.

    7. Investment Income
                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Dividend and interest
     income                  $      0.1  $      0.1  $      0.5  $      1.2
    Share of earnings of
     entities accounted
     using the equity
     method                         7.6         8.0        38.4        33.3
                             ----------- ----------- ----------- ------------
                             $      7.7  $      8.1  $     38.9  $     34.5
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------


    8. Capital Gains (Losses) and Other Items

                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Gain on sale of
     investments             $        -  $        -  $        -  $    100.9
    Gain on sale of
     property                      (0.8)          -         7.5         0.9
    Other items                    (0.3)       (0.1)       (1.0)       (0.6)
    Change in fair
     value of Canadian
     third-party
     asset-backed
     commercial paper
     (Note 4)                         -        (4.5)       (3.7)       (7.5)
    Reduction of book
     value of real estate
     assets                           -        (6.0)          -        (6.0)
                             ----------- ----------- ----------- ------------
                             $     (1.1) $    (10.6) $      2.8  $     87.7
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------


    9. Supplementary Cash Flow Information

                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
      a) Items not
          affecting cash
      Depreciation and
       amortization          $     82.5  $     77.2  $    324.8  $    304.6
      Future income taxes          (1.5)        9.0       (13.5)        5.1
      Loss (gain)
       on disposal of
       assets                       1.7        (0.8)       (5.1)        1.3
      Amortization of
       other assets                 0.8         0.3         3.2         5.1
      Provision on
       asset-backed
       commercial paper               -         4.5         3.7         7.5
      Equity in earnings
       of other entities,
       net of dividends
       received                     2.4         0.8         2.4         4.7
      Minority interest             0.8         1.3         8.3        12.8
      Stock-based
       compensation                 0.6         0.3         1.2         2.5
      Long-term lease
       obligation                   4.2         7.9         7.1        11.9
      Employee future
       benefits obligation          2.4         1.1         7.7         4.8
      Rationalization
       costs (Note 16)              0.8        (1.9)        6.3        (6.2)
      Reduction of book
       value of real
       estate assets                  -         6.0           -         6.0
                             ----------- ----------- ----------- ------------
                             $     94.7  $    105.7  $    346.1  $    360.1
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

      b) Other cash flow
          information
      Net interest paid      $     33.2  $     26.7  $     80.5  $    103.9
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------
      Net income taxes paid  $     24.1  $     54.3  $    117.2  $    157.5
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------


    10. Segmented Information

                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Segmented revenue
    Food retailing           $  3,651.4  $  3,480.6  $ 14,764.8  $ 13,768.1
                             ----------- ----------- ----------- ------------
    Real estate
      Sobey Leased
       Properties Limited             -         4.9           -        20.6
      Other Commercial              2.4         4.3        16.4        19.9
      Inter-segment                 1.2         9.1         2.9        34.9
      Residential                   8.1        24.6        54.6        85.2
                             ----------- ----------- ----------- ------------
                                   11.7        42.9        73.9       160.6
                             ----------- ----------- ----------- ------------
    Investment and other
     operations                    47.1        43.4       179.3       171.2
                             ----------- ----------- ----------- ------------
                                3,710.2     3,566.9    15,018.0    14,099.9
    Elimination                    (1.2)       (9.1)       (2.9)      (34.9)
                             ----------- ----------- ----------- ------------
                             $  3,709.0  $  3,557.8  $ 15,015.1  $ 14,065.0
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Segmented operating
     income
    Food retailing           $    102.6  $    104.3  $    401.4  $     359.0
    Real estate
      Sobey Leased
       Properties Limited             -         8.2           -         30.0
      Crombie REIT                  4.9         3.1        19.8         13.6
      Other Commercial                -         0.3         2.5          5.7
      Residential                   3.8        15.6        33.6         50.7
    Investment and other
     operations
      Wajax Income Fund             2.6         5.0        18.5         19.7
      Other operations,
       net of corporate
       expenses                    (2.3)       (0.3)       (7.7)        (6.1)
                             ----------- ----------- ----------- ------------
                             $    111.6  $    136.2  $    468.1  $     472.6
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------


                                                          May 2       May 3
                                                           2009        2008
                                                     ----------- ------------
    Identifiable assets
    Food retailing                                   $  4,279.0  $  4,052.7
    Goodwill                                            1,130.6     1,119.0
                                                     ----------- ------------
                                                        5,409.6     5,171.7
    Real estate                                           223.1       282.0
    Investment and other operations
     (including goodwill of $40.8;
     May 3, 2008 $40.1)                                   265.3       279.2
                                                     ----------- ------------
                                                     $  5,898.0  $  5,732.9
                                                     ----------- ------------
                                                     ----------- ------------


                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Depreciation and
     amortization
    Food retailing           $     77.6  $     72.2  $    301.8  $    276.2
    Real estate                    (0.3)        0.3         1.8         5.4
    Investment and other
     operations                     5.2         4.7        21.2        23.0
                             ----------- ----------- ----------- ------------
                             $     82.5  $     77.2  $    324.8  $    304.6
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------


                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Capital expenditures
    Food retailing           $    112.5  $    142.7  $    382.7  $    481.2
    Real estate                    11.2         3.0        36.9        47.3
    Investment and other
     operations                     2.9         3.8        11.4        22.2
                             ----------- ----------- ----------- ------------
                             $    126.6  $    149.5  $    431.0  $    550.7
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

    11. Financial Instruments

    Credit risk

    Credit risk is the risk of an unexpected loss if a customer or
counterparty to a financial instrument fails to meet its contractual 
obligations. The Company's financial instruments that are exposed to
concentrations of credit risk are primarily ABCP (Note 4), accounts
receivable, loans and other receivables, derivative contracts and guarantees.
    The Company's maximum exposure to credit risk corresponds to the carrying
amount for all loans and receivables, the fair market value of derivative
contracts represented on the balance sheet and guarantee contracts for
franchise affiliates.
    The Company mitigates credit risk associated with its trade accounts
receivable, loans and other receivables through established credit approvals,
limits and a regular monitoring process. The Company generally considers the
credit quality of its financial assets that are neither past due or impaired
to be solid. The Company regularly monitors collection performance and pledged
security for all of its accounts receivable, loans and other receivables to
ensure adequate payments are being received and adequate security is
available. Pledged security can vary by agreement, but generally includes
inventory, fixed assets including land and/or building, as well as personal
guarantees. Credit risk is further mitigated due to the large number of
customers and their dispersion across geographic areas. The Company only
enters into derivative contracts with Canadian chartered banks to minimize
credit risk.
    Receivables are substantially comprised of balances due from independent
accounts, franchisee or affiliate locations as well as rebates and allowances
from vendors. The due date of these amounts can vary by agreement but in
general balances over 30 days are considered past due.
    The aging of the receivables is as follows:


                                                                May 2, 2009
    -------------------------------------------------------------------------
    0-30 days                                                    $    248.9
    31-90 days                                                         32.5
    Greater than 90 days                                               68.5
    -------------------------------------------------------------------------
    Total receivables before allowance for doubtful accounts          349.9
    Less: allowance for doubtful accounts                             (31.2)
    -------------------------------------------------------------------------
    Receivables                                                  $    318.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest earned on past due accounts is recorded as a reduction to cost of
sales, selling and administrative expense in the statement of earnings. Loans
and other receivables are all current as of May 2, 2009.
    Allowance for doubtful accounts is reviewed at each balance sheet date. An
allowance is taken on accounts receivable from independent accounts, as well
as accounts receivable, loans and other receivables from franchise or
affiliate locations and is recorded as a reduction to its respective
receivable account on the balance sheet. The Company updates its estimate of
allowance for doubtful accounts based on past due balances from independent
accounts and based on an evaluation of recoverability net of security assigned
for franchise or affiliate locations. Current and long-term accounts
receivable, loans and other receivables are reviewed on a regular basis and
are written-off when collection is considered unlikely. The change in
allowance for doubtful accounts is recorded as cost of sales, selling and
administrative expenses in the statement of earnings and is presented as
follows:

                                                       13 weeks    52 weeks
                                                          Ended       Ended
                                                          May 2,      May 2,
                                                           2009        2009
    -------------------------------------------------------------------------
    Allowance, beginning of period                   $     37.8  $     28.7
    Provision for losses                                    0.5        11.6
    Recoveries                                             (2.0)       (2.4)
    Write-off's                                            (5.1)       (6.7)
    -------------------------------------------------------------------------
    Allowance, end of period                         $     31.2  $     31.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Liquidity risk

    Liquidity risk is the risk that the Company may not have cash available to
satisfy financial liabilities as they come due. The Company actively   
maintains a committed credit facility to ensure that it has sufficient
available funds to meet current and foreseeable future financial requirements
at a reasonable cost.
    The Company monitors capital markets and the related conditions. Market
conditions allowing, the Company will access debt capital markets for various
long-term debt maturities and as other liabilities come due or as assessed to
be appropriate in order to minimize risk and optimize pricing.
    The following table summarizes the carrying amount and the contractual
maturities of both the interest and principal portion of significant financial
liabilities on an undiscounted basis as at May 2, 2009:


                                   2010        2011        2012        2013
                             ------------------------------------------------
    Accounts payable         $  1,487.1  $        -  $        -  $        -
    Bank indebtedness              45.9           -           -           -
    Interest rate swaps
     payable(1)                    20.7        13.6        11.0         2.6
    Long-term debt                205.3       372.7        82.8       261.8
                             ------------------------------------------------

                                               2014  Thereafter       Total
                                        -------------------------------------
    Accounts payable                     $        -  $        -  $  1,487.1
    Bank indebtedness                             -           -        45.9
    Interest rate swaps
     payable(1)                                   -           -        47.9
    Long-term debt                             62.5     1,044.3     2,029.4
                                        -------------------------------------
    (1) Represents the payable fixed interest (will be partially offset by
        the floating interest received).


    Fair value of financial instruments

    The fair value of a financial instrument is the estimated amount that the
Company would receive or pay to settle the financial assets and financial
liabilities as at the reporting date.
    The book value of cash and cash equivalents, receivables, loans and other
receivables, and accounts payable and accrued liabilities approximate air
values at the balance sheet date.
    The fair value of the variable rate long-term debt is assumed to
approximate its carrying amount. The fair value of other long-term liabilities
has been estimated by discounting future cash flows at a rate offered for debt
of similar maturities and credit quality.
    The following table summarizes the classification of the Company's
financial instruments, as well as their carrying amounts and fair values:


                                           Held for
                               Held for     Trading                   Loans
                                Trading    (Designa-  Available   and Recei-
    May 2, 2009               (Required)        ted)   for Sale      vables
    -------------------------------------------------------------------------
    Financial Assets
      Cash and cash
       equivalents           $        -  $    231.6  $        -  $        -
      Receivables                     -           -           -       318.7
      Loans and
       other
       receivables                    -           -           -       131.1
      Investments                     -           -         1.1           -
      Other assets(1)               1.7        21.4           -           -
    -------------------------------------------------------------------------
    Total financial assets   $      1.7  $    253.0  $      1.1  $    449.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Liabilities
      Bank indebtedness      $        -  $        -  $        -  $        -
      Accounts payable and
       accrued liabilities            -           -           -           -
      Long-term debt                  -           -           -           -
      Other long-term
       liabilities(2)              39.8           -           -           -
    -------------------------------------------------------------------------
    Total financial
     liabilities             $     39.8  $        -  $        -  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                              Other       Total
                                          Financial    Carrying        Fair
    May 2, 2009                         Liabilities      Amount       Value
    -------------------------------------------------------------------------
    Financial Assets
      Cash and cash
       equivalents                        $       -  $    231.6  $    231.6
      Receivables                                 -       318.7       318.7
      Loans and
       other
       receivables                                -       131.1       131.1
      Investments                                 -         1.1         1.1
      Other assets(1)                             -        23.1        23.1
    -------------------------------------------------------------------------
    Total financial assets               $        -  $    705.6  $    705.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Liabilities
      Bank indebtedness                  $     45.9  $     45.9  $     45.9
      Accounts payable and
       accrued liabilities                  1,487.1     1,487.1     1,487.1
      Long-term debt                        1,257.0     1,257.0     1,168.8
      Other long-term
       liabilities(2)                             -        39.8        39.8
    -------------------------------------------------------------------------
    Total financial
     liabilities                         $  2,790.0  $  2,829.8  $  2,741.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The total carrying value of financial assets included in other assets
        is $23.1.
    (2) Only the derivative liability portion is presented here.


                                           Held for
                               Held for     Trading                   Loans
                                Trading    (Designa-  Available   and Recei-
    May 3, 2008               (Required)        ted)   for Sale      vables
    -------------------------------------------------------------------------
    Financial Assets
      Cash and cash
       equivalents           $        -  $    191.4  $        -  $        -
      Receivables                     -           -           -       291.1
      Loans and other
       receivables                    -           -           -       126.2
      Investments                     -           -         1.6           -
      Other assets(1)               2.3        26.4           -           -
    -------------------------------------------------------------------------
    Total financial assets   $      2.3  $    217.8  $      1.6  $    417.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Liabilities
      Bank indebtedness      $        -  $        -  $        -  $        -
      Accounts payable and
       accrued liabilities            -           -           -           -
      Long-term debt                  -           -           -           -
      Other long-term
       liabilities(2)              21.7           -           -           -
    -------------------------------------------------------------------------
    Total financial
     liabilities             $     21.7  $        -  $        -  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                              Other       Total
                                          Financial    Carrying        Fair
    May 3, 2008                         Liabilities      Amount       Value
    -------------------------------------------------------------------------
    Financial Assets
      Cash and cash
       equivalents                       $        -  $    191.4  $    191.4
      Receivables                                 -       291.1       291.1
      Loans and other
       receivables                                -       126.2       126.2
      Investments                                 -         1.6         1.6
      Other assets(1)                             -        28.7        28.7
    -------------------------------------------------------------------------
    Total financial assets               $        -  $    639.0  $    639.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Liabilities
      Bank indebtedness                  $     92.6  $     92.6  $     92.6
      Accounts payable and
       accrued liabilities                  1,348.4     1,348.4     1,348.4
      Long-term debt                        1,480.9     1,480.9     1,415.0
      Other long-term
       liabilities(2)                             -        21.7        21.7
    -------------------------------------------------------------------------
    Total financial
     liabilities                         $  2,921.9  $  2,943.6  $  2,877.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The total carrying value of financial assets included in other assets
        is $28.7.
    (2) Only the derivative liability portion is presented here.

    Derivative financial instruments

    Derivative financial instruments are recorded on the consolidated balance
sheet at fair value unless the derivative instrument is a contract to buy or
sell a non-financial item in accordance with the Company's expected purchase,
sale or usage requirements, referred to as a "normal purchase or normal sale".
Changes in the fair values of derivative financial instruments are recognized
in earnings unless it qualifies and is designated as an effective cash flow
hedge or a normal purchase or normal sale. Normal purchases and normal sales
are exempt from the application of the standard and are accounted for as
executory contracts. Changes in fair value of a derivative financial
instrument designated as a cash flow hedge are recorded in other assets and
liabilities with the effective portion recorded in accumulated other
comprehensive income.

    Interest rate risk

    Interest rate risk is the potential for financial loss arising from
changes in interest rates. Financial instruments that potentially subject the
Company to interest rate risk include financial liabilities with floating
interest rates. The majority of the Company's long-term debt is at a fixed
interest rate or hedged with interest rate swaps. Bank indebtedness and
approximately 20 percent of the Company's long-term debt is exposed to
interest rate risk due to floating rates.
    Net earnings is sensitive to the impact of a change in interest rates on
the average balance of interest bearing financial liabilities during the
period. For the year ending May 2, 2009, the Company's average floating- rate
indebtedness was $772.2 of which $420.0 has been hedged with interest rate
swaps. Accordingly, a difference of 0.25 percent in the applicable interest
rate would impact net earnings by $0.6 and other comprehensive income by $1.5.

    Foreign currency exchange risk

    The Company conducts the vast majority of its business in Canadian
dollars. The Company's foreign currency exchange risk principally relates to
purchases made in U.S. dollars. In addition, the Company also uses forward
contracts to fix the exchange rate on some of its expected requirements for
Euros and U.S. dollars. Amounts received or paid related to instruments used
to hedge foreign exchange, including any gains and losses, are recognized in
the cost of purchases. The Company estimates that a 10 percent increase
(decrease) in applicable foreign currency exchange rates would impact net
earnings by $6.1 and other comprehensive income by $1.6.

    Commodity price risk

    Commodity price risk is the risk that the fair value of certain financial
instruments or the Company's future cash flows will fluctuate as a result of
changes in the market price of commodities. The Company has attempted to
mitigate commodity price risk to electricity prices through the use of
financial derivative swap contracts while closely monitoring other commodity
prices to determine the appropriate course of action. The Company estimates
that a 10 percent increase (decrease) in applicable commodity prices would
impact other comprehensive income by $0.6.

    12. Employee Future Benefits

    During the Company's fourth quarter and year-to-date of fiscal 2009, the
net employee future benefit expense was $6.6 and $31.8 respectively (2008 -
$7.1 and $24.5). The expense included costs for the Company's defined
contribution pension plans, defined benefit pension plans, post- retirement
benefit plans and post-employment benefit plans.

    13. Business Acquisitions

    Sobeys acquires franchisee and non-franchisee stores and prescription
files. The results of these acquisitions have been included in the
consolidated financial results of the Company, and were accounted for through
the use of the purchase method. As illustrated in the table below, the
acquisition of certain franchise and non-franchisee stores resulted in the
acquisition of intangible assets. The method of amortization of limited life
intangibles is on a straight-line basis over its estimated useful life.


                                   2009        2008        2009        2008
                              (13 weeks)  (13 weeks)  (52 weeks)  (52 weeks)
                             ----------- ----------- ----------- ------------
    Franchisees
    -----------
    Inventory                $      3.2  $      1.0  $      8.7  $      6.6
    Property and equipment          3.5         0.4         5.9         5.1
    Intangibles                     4.6         3.2         7.6         5.9
    Goodwill                          -         0.7        14.3         1.2
    Other assets
     (liabilities)                  0.4        (1.7)        0.9        (1.5)
                             ----------- ----------- ----------- ------------
    Cash consideration             11.7         3.6        37.4        17.3

    Prescription files
    ------------------
    Intangibles                       -          -          3.2         2.5
                             ----------- ----------- ----------- ------------
    Net assets acquired            11.7         3.6         40.6       19.8
    Less promissory
     note issued                   (3.5)          -         (3.5)         -
                             ----------- ----------- ----------- ------------
    Cash consideration       $      8.2  $      3.6  $      37.1 $     19.8
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- ------------

    During the third quarter, ETL Canada Holdings Limited (a subsidiary of the
Company) acquired all of the outstanding shares of an incorporated joint
venture already co-owned by the Company for cash consideration of $4.3. The
acquisition was accounted for using the purchase method with net identifiable
assets recorded at $3.6 (including intangible assets of $0.2) and goodwill at
$0.7.
    Included in the 52 weeks ended fiscal 2008 was an acquisition cost of
$243.4 related to Thrifty Foods.

    14. Guarantee and Contingent Liabilities

    Guarantee

    During the third quarter of fiscal 2009, Sobeys entered into an additional
credit enhancement contract in the form of a standby letter of credit for
certain independent franchisees for the purchase and installation of
equipment. Under the terms of the contract, should a franchisee affiliate be
unable to fulfill their lease obligation or other remedy, Sobeys would be
required to fund the greater of $4.0 or 10.0 percent of the authorized
outstanding obligation annually. Under the terms of the agreement, Sobeys is
required to obtain a letter of credit in the amount of the outstanding
guarantee, to be revisited each calendar year. This credit enhancement allows
Sobeys to provide favorable financing terms to certain independent
franchisees. The contract terms have been reviewed and Sobeys determined that
there were no material implications with respect to the consolidation of
VIE's. As at May 2, 2009 the amount of the guarantee was $4.0.

    Contingencies

    In the ordinary course of business, the Company is subject to ongoing
audits by tax authorities. While the Company believes that its tax filing
positions are appropriate and supportable, from time to time certain matters
are reviewed and challenged by the tax authorities.
    The Company and a subsidiary had been reassessed in respect to the tax
treatment of gains realized on the sale of shares in Hannaford Bros. Co.
("Hannaford") in fiscal 2001. The Company had appealed the reassessments in
respect of the sale of Hannaford shares. Subsequent to May 2, 2009, the
Company and Canada Revenue Agency concluded negotiations and jointly requested
a court order which, if approved, would result in a reduction of income tax
expense of approximately $17.0 in the first quarter of fiscal 2010.
    There are various claims and litigation, which the Company is involved
with, arising out of the ordinary course of business operations. The Company's
management does not consider the exposure to such litigation to be material,
although this cannot be predicted with certainty.

    15. Stock-Based Compensation

    Deferred share units

    Members of the Board of Directors may elect to receive all or any portion
of their fees in deferred share units ("DSUs") in lieu of cash. The number of
DSUs received is determined by the market value of the Company's Non-Voting
Class A shares on each director's fee payment date. Additional DSUs are
received as dividend equivalents. DSUs cannot be redeemed for cash until the
holder is no longer a director of the Company. The redemption value of a DSU
equals the market value of an Empire Company Limited Non-Voting Class A share
at the time of the redemption. On an ongoing basis, the Company values the DSU
obligation at the current market value of a corresponding number of Non-Voting
Class A shares and records any increase in the DSU obligation as an operating
expense. At May 2, 2009, there were 84,195 (May 3, 2008 - 64,877) DSUs
outstanding. During the fourth quarter and year-to-date of fiscal 2009, the
compensation expense was $0.1 and $1.8 respectively (2008 - $nil and $0.5).

    Stock option plan

    During fiscal 2009, the Company granted an additional 189,967 options
under the stock option plan for employees of the Company whereby options are
granted to purchase Non-Voting Class A Shares. These options allow holders to
purchase Non-Voting Class A Shares at $40.26 per share and expire in July
2016. The options vest over four years with 50 percent of the options vesting
only if certain financial targets are attained in a given fiscal year. These
options have been treated as stock-based compensation.
    The compensation cost relating to fiscal 2009 was determined to be $1.2
(2008 - $0.2) with amortization of the cost over the vesting period. The total
increase in contributed surplus in relation to the stock option compensation
cost was $1.2. The compensation cost was calculated using the Black-Scholes
model with the following assumptions:

         Expected life                                               8 years
         Risk-free interest rate                                       3.50%
         Expected volatility                                           20.1%
         Dividend yield                                                1.75%

    Phantom performance option plan

    In June 2007, the Board of Directors approved a phantom performance option
plan for eligible employees of Sobeys. Under the plan, units are granted at
the discretion of the Board based on a notional equity value of Sobeys tied to
a specified formula. Upon implementation, the units had a three-year vesting
period with 33.3 percent of the units vesting each year. Subsequent issuances
have a four-year vesting period with 25 percent of the units vesting each
year. As the notional fair value of Sobeys changes, the employees are entitled
to the incremental increase in the notional equity value over a five-year
period. The Company recognizes a compensation expense equal to the change in
notional value over the original grant value on a straight-line basis over the
vesting period. After the vesting period, any change in incremental notional
equity value is recognized as a compensation expense immediately. This is
recorded as an accrued liability until settlement and is remeasured at each
interim and annual reporting period of the Company. At May 2, 2009, 1,069,413
(May 3, 2008 - 518,579) units were outstanding and for the fourth quarter and
year-to-date of fiscal 2009 the Company recognized $3.0 and $6.1 respectively
(2008 - $0.1 and $0.1) of compensation expense associated with this plan.

    16. Business Rationalization Costs

    During the fourth quarter and year-to-date of fiscal 2009, severance costs
of $1.6 and $10.7 have been incurred and recognized respectively (2008 -
$(0.5) and $(1.8)). The costs associated with the organizational change are
recorded as incurred as cost of sales, selling and administrative expenses in
the statement of earnings. The liability at May 2, 2009 is $12.2 (May 3, 2008
- $5.9). Costs incurred as of May 2, 2009 were $27.7.

    17. Subsequent Events

    On June 12, 2009, Sobeys repaid, although did not cancel, the $75.0 credit
facility which matures due on November 8, 2010.
    On June 25, 2009, Crombie REIT closed a bought-deal public offering of
Units at a price of $7.80 per unit. In satisfaction of its pre-emptive right
with respect to the public offering, the Company subscribed for approximately
$30.0 of Class B Units (which are convertible on a one for one basis into
Units of Crombie REIT). The investment in Class B Units will marginally reduce
the Company's interest in Crombie REIT from 47.9% to 47.5%.

    18. Comparative Figures

    Comparative figures have been reclassified, where necessary, to reflect
the current period's presentation.
    




For further information:

For further information: Paul V. Beesley, Executive Vice President and
Chief Financial Officer, (902) 755-4440


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