BRAMPTON, ON - Loblaw has announced intentions to cut its prices in what seems to be an attempt to combat both competition in the retail sector and inflation in Canadian food pricing.
Following the announcement of lower-than-expected supermarket division sales in its Q1 2016 financial report, Loblaw’s Executive Chairman, Galen G. Weston, told investors that the company is trying to find the perfect balance of increasing markdowns to entice more customers, while avoiding too much damage to its bottom line. In its first quarter, Loblaw backed off too much from discounting “while our competitors ramped up significantly,” which “hit us harder than we anticipated,” he explained.
Loblaw has been seeing a stronger shift of consumer dollars towards discount formats, responding with what Weston calls a “measured” approach to lowering prices rather than outright slashing them.
“Our view is that that intensity is going to continue to increase,” he said, according to The Globe and Mail. “We see inflation slowing down as the Canadian dollar continues to increase. We see consumer prices coming down in certain markets and in certain categories.”
Peter Sklar, a retail analyst at BMO Nesbitt Burns, told The Globe and Mail that grocery prices will rise about 2 to 3 percent in 2016, compared with last year’s 4 percent jump.
Other grocery players in the region like Sobeys Inc. and Walmart Canada have made moves to drop prices with Metro Inc. CEO Eric La Flèche, saying last month that pricing in certain categories has been “quite aggressive. … It’s very competitive out there.” Last fall, Metro’s Quebec stores reduced prices, and earlier sharpened pricing at its Food Basics discount banner.
Highlights from Loblaw’s Q1 2016 financial report include:
- Sales at stores open a year or more rose 2.6 percent (excluding gasoline sales), compared with a 4 percent gain a year ago
- Non-pharmacy same-store sales at Shoppers Drug Mart rose 8.2 percent
- Profit rose to $193-million, or 47 cents a share, from $146-million, or 35 cents, a year earlier
- Sales grew to $10.4-billion from $10-billion
- Adjusted profit was $338-million, up $37-million or 12 percent
- Common share dividend will rise to 26 cents a quarter, payable July 1, up 4 per cent from 25 cents
Loblaw’s stock stayed mostly stagnant following the announcement, but fell a little over 1 percent.
As the Canadian grocery prices continue to fluctuate, AndNowUKnow will bring you all the details.
