Loblaw 'surprised' at ability to weather high grocery prices

TORONTO -- Loblaw Companies Ltd. management is surprised at how well the company has been able to weather high food inflation.

See Full Article

Canadian food prices rose four per cent between January 2015 and last month, according to Statistics Canada's consumer price index, driven by a 12.9 per cent increase fresh fruit prices and an 18.2 per cent spike in the price of fresh vegetables.

"So far, the ability to pass through this inflation has surprised us," Galen Weston, Loblaw's president and executive chairman, told analysts Thursday after the company released its latest financial report.

Loblaw has about 900 market, discount and specialty grocery stores under various banners, but Weston said the company hasn't noticed any major changes in consumer behaviour.

There was a spike in the volume of potatoes sold when cauliflower prices soared, he said, but noted some shoppers typically opt for less expensive products when the cost of one item surges past a certain threshold.

In Alberta, where the economy is under the most pressure because of the collapse of oil and gas prices, Loblaw is seeing a "disproportionate momentum" at its No Frills discount stores, Weston said.

Edward Jones analyst Brittany Weissman said it helps Loblaw that all the major grocery chains seem to be increasing prices, rather than just one.

There's a demand for the products that have been most impacted by inflation -- such as fruits, vegetables and meats -- so people have been willing to pay the higher prices, Weissman said.

Still, Loblaw's fourth-quarter profit slipped more than one-third compared with the prior year -- primarily because of costs and accounting items associated with unusual items, rather than performance of its stores.

Overall retail sales were $10.86 billion. That was down from a year earlier when the quarter had an extra reporting week in 2014, but up $241 million or 2.3 per cent from $10.6 billion on a standard 12-week basis.

Loblaw's fourth-quarter net income for common shareholders fell to $128 million, or 31 cents per share.

That's down from $247 million or 60 cents per share reported a year earlier, when the comparable quarter had an extra week. Excluding the extra week, the year-earlier profit would have been $195 million or 47 cents per share.

Loblaw said the lower profit was largely because of special items including the write-down of drug retail assets that are being held for sale as well as costs for switching some grocery stores to more cost-effective labour agreements.

The writedown of drug retail assets shaved $112 million or 20 cents per common share from the earnings, the largest of the special items. The second-largest was $55 million, or 10 cents per share, related to the new labour agreements.

After adjustments, Loblaw earned $363 million -- up 5.5 per cent compared with the fourth quarter of 2014. The adjusted earnings per share were 88 cents in the latest quarter.



Advertisements

Latest Economic News

  • Federal government should scale back spending on water, sewage systems: report

    Economic CTV News
    OTTAWA - A new report from a bipartisan think-tank says the federal government should scale back its spending on water and sewage systems in Canadian cities for each community's financial good. The Ecofiscal Commission report being released today makes the case that the fees homeowners pay for the water running through their taps and down their drains don't cover the full cost of service, leading to gaps in funding that upper levels of government have been trying to fill for years. Source
  • Asian stocks little changed after Wall Street tumble

    Economic CTV News
    BEIJING - Asian stocks were little changed Tuesday as investors watched U.S.-North Korean tensions after a decline in tech shares dragged down Wall Street. KEEPING SCORE: Tokyo's Nikkei 225 lost 0.1 per cent to 20,377.29 points while the Shanghai Composite Index was unchanged at 3,340.53. Source
  • China's richest man Jack Ma says he has 'great chemistry' with Trudeau

    Economic CTV News
    Alibaba founder and China’s richest man Jack Ma says he and Prime Minister Justin Trudeau have now met five times and have “great chemistry.” “See, the PM this morning talked about cutting the red tapes and improving the business environment,” Ma told BNN’s Jon Erlichman Monday after their latest meeting in Toronto. Source
  • Ottawa begins public consultations on dealing with corporate wrongdoing

    Economic CTV News
    MONTREAL -- The federal government kicked off nearly two months of public consultations Monday on revising efforts to address corporate wrongdoing, including the possible introduction of a deferred prosecution agreement regime. Engineering and construction firm SNC-Lavalin (TSX:SNC) has led the charge for deferred prosecution agreements (DPA) found in other countries as a way to resolve criminal fraud charges it faces. Source
  • South Dakotans oppose Canadian company's gold search

    Economic CTV News
    ROCHFORD, S.D. -- Some private landowners are opposing a Canadian company's search for gold in a remote area of South Dakota's Black Hills National Forest. Mineral Mountain Resources has submitted an operating plan to the forest for more than 20 drilling sites on federal land a couple miles south of Rochford. Source
  • Alberta creates advisory team to assist cities bidding for second Amazon HQ

    Economic CTV News
    CALGARY -- The Alberta government is stepping in to help Edmonton and Calgary bid for retail giant Amazon's second headquarters. Premier Rachel Notley says the team will assist the cities to make the best bids while selling the assets the province has to offer. Source
  • Satya Nadella aims to make Microsoft mighty — and mindful

    Economic CTV News
    Satya Nadella, the Microsoft CEO who kept the company relevant as its primary PC software business faded, could write a book about the challenges he faced. And he has ... but it's not a tell-all memoir. Source
  • Donald Trump on jobs of the future LIVE

    Economic CBC News
    Rohingya Muslims fleeing Myanmar describe military's violence and killings 2:50 Rohingya Muslims fleeing Myanmar describe how they faced violence and killings by the Burmese military, prompting thousands of them to flee to neighboring Bangladesh. Source
  • JetBlue latest U.S. airline to back Bombardier in fight with Boeing

    Economic CTV News
    MONTREAL -- JetBlue is the latest U.S. airline to back Bombardier in its trade dispute with Boeing, ahead of the expected imposition of preliminary export duties on shipments to the United States. The airline has urged the U.S. Source
  • Ontario has lost 1,000 planned rental units since new housing rules introduced:report

    Economic CTV News
    TORONTO -- A group representing Ontario's rental-housing providers says at least 1,000 planned rental units have been cancelled or converted to condominiums since the provincial government introduced new rent control rules in the spring. A new report commissioned by the Federation of Rental-Housing Providers of Ontario says the Liberal government's Fair Housing Plan has negatively impacted the province's rental housing supply. Source