Metro will trim costs due to min. wage hike
Metro profit of more than $500M a year could decrease by 8 per cent
MONTREAL — Ontario’s thirdlargest grocery chain will accelerate its study of automation as it looks to cut costs to offset the provincial government’s plan to raise the minimum wage next year, the CEO of Metro Inc. said Tuesday.
Eric La Fleche said the industry is under the gun because there is little time to adjust to cost increases, especially when intensifying competition is straining margins.
Metro estimates an increase in the Ontario minimum wage to $14 per hour from the current rate of $11.40 will cost it about $45 million to $50 million on an annualized basis in 2018. The impact excludes any pressure to subsequently increase other salaries. Metro’s profit for the 16 weeks ended July 1 rose 3.7 per cent to $183 million or 78 cents per share.
“It’s the pace that makes it a pretty big challenge but we’re confident that we’ll find some offsets on our own,” La Fleche said during a conference call about its third-quarter results.
The chain, whose store banners include Metro and Food Basics, said it hasn’t calculated the full impact when the minimum wage rises to $15 an hour in January 2019.
The higher labour costs would account for about eight per cent of the $586 million in net earnings last year and more than a third of the $127 million paid out in dividends.
It’s just the latest cost pressure facing business after enduring several years of increased energy charges.
“As a team we will strive to mitigate this impact as much as we possibly can through productivity and cost reduction initiatives, but the size and pace of these increases pose a significant challenge,” La Fleche told analysts.
The Montreal-based chain said it “will spare no effort” to manage the labour costs but declined to specify whether the changes will have any impact on the number of employees. It has piloted the use of electronic tags on stores shelves and has considered automating its distribution centres.
La Fleche’s comments follow similar warnings by other retailers and a coalition representing a broad range of business groups.
Rival Loblaw Companies Ltd., which owns Shoppers Drug Mart and grocery chains including Loblaws and No Frills, has said it is mobilizing all its resources to offset the $190-million hit next year from higher minimum wages in Ontario and Alberta.
Discount retailer Dollarama Inc. said it won’t rule out raising prices if labour costs continue to climb. An economic analysis commissioned by the Keep Ontario Working Coalition found that 185,000 jobs could be at risk as Ontario businesses stand to take a $23-billion hit within two years of the implementation of Bill 148.