Empire: Sobeys parent says cyber attack cost $25 million

Sobeys parent Empire Co. Ltd. shared new details about a cyberattack that shut down its pharmacy services and other in-store functions last month.

A security breach in early November prevented customers from filling their prescriptions for four days, while other in-store features such as self-checkout machines, gift card usage and loyalty point redemption were shut down for about a week.

The cybersecurity incident is expected to cost $25 million after insurance is restored, Empire said Thursday.

But the company, which owns pharmacy chain Lawtons Drugs, declined to disclose the total cost of the disruption.

“We won’t be giving total numbers,” Matt Reindel, Empire and Sobeys’ chief financial officer, said on a conference call with analysts to discuss the company’s latest financial results.

“We estimate the net impact on net income to be $25 million. This estimate includes certain business losses, such as shrinkage and additional workforce, and then direct costs, such as IT professional fees and legal fees.”

It’s unclear if any personal information was stolen during the breach, or if Sobeys paid any kind of ransom.

Michael Medline, president and chief executive of Empire and Sobeys, said the company took immediate action after discovering the “intrusion” into its network.

“We immediately began isolating sources and shutting down certain systems to prevent further spread and protect our operations and data,” he said on a conference call.

“This has ensured that we are able to operate our stores with little to no disruption and luckily our supply chain has not been disrupted either. However this incident and our precautionary measures did cause some temporary issues.”

While customer-facing services have been fully restored for some time, the company said it will continue to bring information and management systems back online in stages.

Empire said its internal security team was still investigating the incident with the assistance of a leading cyber defense firm.

If the investigation finds that data has been deleted from its systems, Empire said it would “take all necessary steps with privacy regulators and affected individuals”.

Empire reported earnings of $189.9 million, or 73 cents a share, in its most recent quarter, up from $175.4 million, or 66 cents a share, a year earlier.

Sales for the company’s second quarter of fiscal 2023 totaled $7.64 billion, up from $7.32 billion a year earlier.

Same-store sales rose 3.9 percent, while same-store sales excluding fuel sales rose 3.1 percent.

The company’s food retail business — which operates chains including Sobeys, Safeway, FreshCo, Farm Boy and Foodland — posted a net income of $158 million in the quarter, down from a profit of $159.3 million a year earlier.

Meanwhile, Empire announced plans to sell 56 gas stations in Western Canada to Canadian Mobility Services Ltd., a subsidiary of Shell Canada, for about $100 million in cash.

“In reviewing our portfolio, we determined that our fuel business in the West — which has no meaningful convenience store business — was not core to our offering,” Medline said.

“This sale allows us to realize the value of these assets while continuing to benefit from the traffic these sites generate. Shell has been a great partner and through their investment in these sites we hope to see their business And our nearby corporate earnings increase grocery stores.”

The Canadian Press report was first published on December 15, 2022.

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