Loblaw, Metro earnings up as food prices start to fall
Two major grocery chains say food prices, especially meat, are coming down from their recent highs as the industry continues to grapple with falling food prices.
“During the quarter, we saw the grocery market shift from an inflationary environment to a deflationary one,” said Galen G. Weston, executive chair and president of Loblaw Companies Ltd., in a conference call with analysts after the company released its thirdquarter earnings.
The “biggest force” behind the shift is the industry cycling through last year’s high inflation, he said.
It’s tough for inflation to climb if the prior year was quite high, noted Loblaw spokesperson Kevin Groh, as was the case during the company’s third quarter last year when food inflation reached nearly four per cent, said.
Weston said that during the high inflationary period, the company noticed shoppers were switching to purchasing less expensive items.
“We’re reducing prices to see if we can draw the customer back in,” he said.
Metro Inc. ended its fourth quarter with lower inflation than when the quarter began, CEO and president Eric R. La Fleche said in a conference call with analysts following the company’s earnings release — but he wouldn’t call it deflation just yet.
There’s little price increase in produce, he said, and meat has come down in price year-overyear.
The average retail price of one kilogram of pork chops, for example, is down from $13.16 in Sept. 2015 to $12.55 this past September, according to Statistics Canada. One kilogram of ground beef, meanwhile, dropped from $12.96 to $12.40 during the same period.
Metro has taken advantage of falling prices to generate some instore inflation, La Fleche said.
“Pricier cuts of meat ... which were less affordable a year ago, are now more affordable,” he said, noting that the company has already seen the amount of beef — including costlier cuts — that customers buy increase.
Metro and Loblaw remain positive about managing a deflationary environment, with both companies reporting increases in profit for their most recently completed quarters.
Metro’s fourth-quarter profit increased by 10 per cent compared with a year ago.
The Montreal-based company said it earned $145 million in the 12 weeks ended Sept. 24. That’s compared with a profit of $131.7 million a year ago. Sales in the quarter totalled nearly $2.93 billion, up from $2.83 billion in the same quarter last year. For its full financial year, Metro said it earned $586.2 million on $12.79 billion in sales. That’s compared with a profit of $519.3 million on $12.22 billion in sales in the previous year.
Loblaw reported an increase in its third-quarter profit compared with a year ago, helped by improved sales and lower restructuring charges.
The corporate parent of the Loblaws grocery chain and Shoppers Drug Mart says it earned $419 million attributable to common shareholders in the quarter. That’s compared with a profit of $166 million in the same quarter last year.