Food fight hits Walmart
Same-store sales flat as retailer expands grocery space, D3
TORONTO Walmart Canada is feeling the sales pinch from the arrival of Target and a massive expansion of food-selling space in the Canadian marketplace — even as a result of its own efforts.
The retailing giant’s predominantly flat same-store sales performance over the past two years is likely to be more of a byproduct of “the growth of square footage in the marketplace,” than the fierce price competition among grocery retailers or any food price deflation, Shelley Broader, chief executive of Walmart Canada, said Friday.
“We had a record year of expansion last year,” Broader said in between public appearances and a store opening ceremony at a Halifax mall for Walmart’s first grocery superstore in Atlantic Canada.
Advancing into the heartland of rival grocer Sobeys Inc. of Stellarton, N.S., Walmart is renovating and expanding nine outlets in Nova Scotia and New Brunswick this year and adding a full grocery store at each location.
“(Same-store sales) is an important thing to look at, but we are also still on a bricks-and-mortar growth tear in Canada,” Broader said. “Why I talk about operating for less and you are talking about margin is because I have got to continue to operate my business for less, so that I continue to offer these low prices and remain profitable.”
Same-store sales, a key industry figure tallying volume at locations open for more than a year, strips out the sales-bolstering effect of retailers adding new space and stores to an already competitive market.
To prepare for Target, which uses Sobeys as its primary grocery supplier and is in the process of opening 124 Canadian outlets this year, Walmart has been adding a tremendous amount of square footage in this country, particularly in the grocery category.
Walmart Canada is spending close to $500 million this year to upgrade and expand its network. By January, the big-box retailer will have 388 stores, compared with 379 at the end of January 2013, and 333 in mid2012. Of those, 246 will have grocery stores within them, compared with 209 in January of 2013.
“We continue to grow sales and we continue to gain market share on the Canadian food dollars and general merchandise dollars that are being spent in the market,” Broader said.
A report this week from veteran industry analyst Perry Caicco of CIBC World Markets referred to the Canadian grocery industry as a “a zero-sum game.” He projected raw grocery market growth in Canada to be roughly $1.6 billion for 2013, which includes little or no inflation.
“The trouble this year is that square-footage growth will eat up most of the sales growth,” the analyst said, with about 4.3 million square feet of space being added to the sector.