NDP leader Jagmeet Singh is criticizing Canada’s major supermarket chains for making record profits amid skyrocketing inflation, which he calls “speculation.”
Speaking to Global News Radio 640 host Greg Brady on Tuesday, Singh accused corporate grocers of “cheating” Canadians with marked-up food prices while reporting higher profits, which he says don’t add up. .
“If you are raising prices to offset higher costs, they would have the same level of profit,” he said. “But we are seeing a significant increase in their earnings.
“This shows that they are just ripping off Canadians in this difficult time.”
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On Wednesday, Singh called for an “excess profits tax” on major supermarket chains and oil and gas companies, expanding the Liberals’ plan to place a higher tax of 18 percent on bank profits in excess of billion dollars.
The NDP says the revenue raised from its proposed tax would help increase Canada’s annual GST tax credit and child benefit by $500 each per year.
“Why do rich companies earn more and families have to suffer, and why do governments allow that to happen?” she asked.
“The government’s aim is to level that out, to ensure that companies aren’t exploiting or exploiting a tough time.”
A look at the latest earnings reports from the three major supermarket chains (Loblaw, Empire Co. and Metro) show that sales and profits have risen, which CEOs have attributed to higher food inflation and the “cost and margin discipline”.
Loblaw saw net profit rise nearly 40% compared to last year in its most recent quarter, to $437 million, while sales increased just 3.3% to $12.26 billion for a profit margin of 3. .56%, compared to 2.68% in 2021.
The grocery and drug retailer said last week it will now pay shareholders a quarterly dividend of 40.5 cents per share, up from 36.5 cents per share.
A Loblaw spokesman attributed the profit increase to higher-margin sales, such as cosmetics purchased at Shoppers Drug Mart locations, adding that grocery sales are increasingly being driven by discount store-brands as consumers try to reduce their spending.
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Empire, which owns Sobeys, Safeway and FreshCo, among other brands, reported a quarterly profit in March of $203.4 million, up 15.4% from $176.3 million a year earlier. Its profit margin compared to sales, which rose just 5.1 percent, fell from 2.51 percent last year to 2.75 percent.
That profit amounted to 77 cents per diluted share, which Chairman and CEO Michael Medline called “the highest in living memory” on an earnings call in March. He praised the company’s ability to keep operating costs down amid “rough waters” that have disrupted supply chains, including fuel costs and flooding in British Columbia last fall.
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As for Metro, it reported a second-quarter profit of $198.1 million, up 5.3 percent from $188.1 million a year earlier, as sales rose 1.9 percent. The Montreal-based grocery and drug retailer’s profit margin stands at 4.63 percent, up slightly from 4.49 percent last year.
Metro Chairman and CEO Eric La Fleche said in January that the company was actually using its higher profit margin to absorb some of food producers’ higher costs to keep prices stable on the shelves.
Both Empire and Metro declined to comment on Singh’s comments when contacted by Global News.
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Those profit margins have increased significantly since before the pandemic.
In 2019, Empire’s profit margin was only 1.17%, while Loblaw’s was 1.86% and Metro’s was 3.28%.
In Empire’s case, that marks a 135 percent increase over the course of the pandemic. Loblaw’s profit margin has soared 91 percent and Metro’s soared 41 percent.
However, James Brander, an economics professor at the University of British Columbia’s Sauder School of Business, said the increases are likely to fall short of speculation, which would suggest the higher gains are due to illegal or nefarious practices. .
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“I wouldn’t see this as speculation and I wouldn’t see it as unusual, and I certainly wouldn’t think it requires government intervention,” he said.
“Companies are in business for profit and they’re focused on growth, so that’s what they’re trying to do.”
Brander said he also would not support Singh’s idea of an “excess profits tax” on supermarket chains, arguing that it would reduce incentives to keep costs down and retain staff.
“We want food producers to be investing more in food production,” he explained. “And we’ll do that by getting grocery stores to promise to spend more on that food. You don’t get that by capping your earnings.”
In a statement, a spokesman for the office of Deputy Prime Minister and Finance Minister Chrystia Freeland said the government remains focused on “building a fairer and more inclusive economy,” including ensuring Canadians and the wealthiest businesses pay your fair share in taxes.
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What does this mean for grocery prices?
In December, Dalhousie University’s Canada Food Price Report predicted that Canadians would spend five to seven percent more on groceries in 2022.
That was before record inflation and the war in Ukraine pushed prices even higher. Statistics Canada reported last month that grocery store prices rose 8.7 percent year-on-year in March, the fastest annual rate since 2009, helped by the biggest annual rise in dairy and egg prices. since February 1983.
Four-fifths of respondents to a Leger survey released in March said they had started or planned to buy cheaper items at the grocery store to save on food bills and were cutting back on food waste.
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While Metro said food prices inflated just under 5 percent, compared with 3.5 percent in the most recent quarter, Loblaw said its consumer price index rose 7.5 percent. percent after reaching just 0.9 percent the previous year.
Both companies have noted that sales of their discount private label brands have risen as customers seek to cut back on spending.
Empire’s Medline said the company is focused on its supplier relationships to ensure competitive prices for customers as inflation continues to drive up the cost of goods. He also noted that higher fuel costs are starting to have an impact on shipping costs as well.
— with Canadian Press archives
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