Grocery giant braces for hikes,
Grocery giant looking at ways to mitigate its labour expenses
Loblaw Companies Ltd., Canada’s largest grocery and drugstore operator, warned Wednesday that minimum-wage increases in Ontario and Alberta threaten to harm its bottom line and it will have to find ways to cut costs.
The company, which owns Shoppers Drug Mart and grocery chains including Loblaws and No Frills, estimates the wage hikes will mean its labour expenses balloon by about $190 million next year.
“We are flagging a significant set of financial headwinds and the organization is mobilizing all of its resources to see whether or not it can close that gap,” Loblaw chair and CEO Galen Weston Jr. told analysts during a quarterly earnings conference call. “At this point, we don’t know the answer.”
The Ontario government has proposed legislation that would boost the hourly minimum wage, which is currently set to rise with inflation, from $11.40 an hour to $11.60 in October, then to $14 on Jan. 1, and $15 the following year.
The provincial government has said the wage increases are intended to increase people’s purchasing power and stimulate broader economic activity.
“We have a lot of work ahead of us as we’re still assessing the extent to which we can mitigate these headwinds.” GALEN WESTON JR. LOBLAW CHAIR AND CEO
But a number of business groups, including the Ontario Chamber of Commerce and the Canadian Federation of Independent Grocers, have decried the legislation, saying it will result in job cuts. In 2015, Alberta announced plans to hike its minimum wage from $10.20 an hour to $15 an hour by next year.
Weston called the wage increases “the most significant in recent memory,” adding that the company is expediting measures to save money such as increasingly digitizing manual invoice jobs and rolling out more self-checkouts at its Shoppers Drug Mart locations.
“We have a lot of work ahead of us as we’re still assessing the extent to which we can mitigate these headwinds,” Weston said.
Loblaw said another anticipated drag on its finances will be Quebec’s changes to generic drug prices. Last week, the Quebec government reached a five-year deal with the Canadian Generic Pharmaceutical Association that would see the launch of new cost-saving generic prescription medicine and reduced prices.
The agreement will result in lower generic drug prices beginning in the fall and is expected to save the province more than $300 million a year.