Canada's biggest grocery chain reported higher profits in its latest quarterly update, a win for shareholders that could also increase pressure on big grocers to explain how they're making more money in the midst of an inflation crisis
Loblaw Cos. is a grocery store In the third quarter, the company posted net earnings of $556 million on revenue of $17.4 billion, an increase of 29 percent from the same quarter last year. The profit on an adjusted basis was $653 million, an increase of 22%. The adjusted earnings per share was higher than expected.
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Metro Inc., the third largest Canadian grocery chain that includes IGA, Food Basics and the Jean Coutu pharmacy, reported a 9.4 per cent jump in profits to $219.4 million during the fourth quarter. Metro's quarterly net earnings were down 13 per cent from a year ago.
Higher inflation this quarter led to an increase in sales by Metro.
Consumer advocates, politicians and economists question how the chains increased their profit margins while shoppers faced the worst rise in grocery bills in 33 years.
There is a store in the city.
The photo was taken by Davidkawai.
Statistics Canada's latest Consumer Price Index shows that grocery prices rose by 11 percent in October compared to last year, slightly better than in September.
The accusations have focused on gross margin, a measure of how much profit a grocery chain has left over after subtracting the cost of goods, which provides a clear gauge of whether price increases are out pacing inflation in the supply chain.
Steven Salterio, a Queen's University accounting and auditing expert who has studied the grocery sector, looked at five years' worth of public financial data released by the three largest grocery chains. He found that the gross and operating margins of the three companies had improved in the past year. The margin improved by more than 130 basis points in the period.
Metro said in its earnings update that its gross margins for the fourth quarter and the next fiscal year didn't change from the previous year.
The third quarter margin increased by 10 basis points compared to last year. The increase didn't come from the food aisles. The news release stated that gross margins were flat compared to last year. The growth comes from higher-margin categories, such as cosmetics, in the Shoppers Drugmart chain.
The margin growth is coming from a change in shopping patterns as the swine flu goes away. Shoppers are buying more cosmetics and perfumes now that they are going back to work and social gatherings, and those products have higher profit margins than tomatoes.
They don't break down sales by category so there is no way to confirm that.
Robin Shaban is a former officer at the Competition Bureau and co- founder of the Canadian Anti-Monopoly Project.
Executives from Canada's top grocery chains are expected to be summoned to testify at a parliamentary inquiry into whether corporate greed is driving inflation.
Empire chief executive Michael Medline has said that his public financial statements show that there is no profiteering going on. Empire's profit fell by $1 million in its most recent quarter.
He said in an interview last month that he could see the whole story in the numbers. Without inflation, we'd be doing better.
The price of 1,500 products across the No Name brand were frozen last month in an attempt to get the public's attention. The announcement was dismissed as meaningless by sources in the food manufacturing industry. They argued that freezing prices from October to February is an empty gesture since the timing of the price freeze lines up with an industry-wide freeze on cost increases from suppliers during the holiday season.
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