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06/23/2022

Impulse purchases down, private-label sales up at Empire

The current inflationary environment is shaping how Canadians are shopping and the products they're purchasing
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SOBEYS Storefront. Sobeys Inc. is the second largest supermarket chain in Canada, with over 1,500 stores across Canada offers groceries, houseware, frozen food, meat, bake
Shutterstock/Prashanth Bala

The last two and a half years, the industry watched COVID reshape consumer shopping habits. Now, inflation is leaving its mark.

During a conference call with analysts Wednesday morning, Empire executives explained how rising food prices are impacting basket size and the products Canadians are shopping for.

In its most recent quarter, Sobeys’ parent saw double-digit rates of inflation on commodities such as eggs, flour and meat, so it makes sense customers are seeking value, said Empire president and CEO Michael Medline.

In fact, according to Statistics Canada, Canadians paid 9.7% more, overall, for groceries in April compared to the same period last year, the largest year-over-year increase since 1981.

“We're cognizant that customers simply won't, and often cannot, accept cost increases at some of the extreme levels we're seeing, while also paying more at the pump and for other essentials,” said Medline.

Customers are shopping across multiple banners, trading down from beef to pork, switching to private label, shopping more promotions and making fewer impulse purchases in response to the inflationary environment, said Medline.

The company has certain “levers” it can pull to deliver great value to its customers, while maintaining high foot traffic across its discount and full-service banners, said Medline. It’s a balancing act, he said, across pricing, promotions and product mix.

Medline said the company is closely monitoring inflation and hopes the worst of it is behind us. (“We neither like nor profit from when inflation is at these high levels,” he said.)

Empire reported a quarterly profit of $178.5 million, up from $171.9 million a year ago, while sales in the 14-week period totalled $7.84 billion, up from $6.92 billion. Same-store sales excluding fuel fell 2.5% compared to the COVID-elevated sales levels last year.

“Our quarter ended better than it started and our teams quickly pivoted to respond to the rapidly changing market conditions,” said Medline. “Our margins were solid, and they are a direct result of good execution of the right strategy, not because of inflation.”