A Sobeys grocery store is seen in Halifax, in a file photo.Andrew Vaughan/The Canadian Press
Sobeys’ parent company has reported significant sales growth at its grocery stores, as restaurants have shut their doors and Canadians stay at home to contain the spread of COVID-19.
Empire Co. Ltd. reported on Wednesday that same-store sales – an important retail industry metric that measures sales at stores open more than a year – grew by 37 per cent in the four weeks starting March 8, and 24 per cent in the two weeks before Easter, compared with the same times last year. The company owns grocery banners including Sobeys, Safeway, FreshCo and IGA. Those are significant numbers in a sector where such growth is usually counted in the low single digits. In Empire’s most recent quarter ended Feb. 1, for example, that growth was just 0.8 per cent compared with the year before.
The sales numbers do not include fuel sales, which have decreased 40 per cent since March 1, the company reported.
Consumer response to the pandemic has increased demand across the grocery sector. Just how much will become clear in the coming weeks, as Metro Inc. releases its quarterly earnings next Wednesday and Loblaw Cos. Ltd. reports the week after. Both will show results for the first three months of the year, including major changes in food-buying patterns in March. Empire’s update on Wednesday comes ahead of its next earnings release, which is not due until June.
“This boggles the mind,” chief executive Michael Medline said in an interview on Wednesday, adding that the pace of growth is putting unprecedented strain on the industry. “To see our supplier partners – and our supply chain, and our logistics and transportation, and our stores – handle this, is wondrous. Because we’re just not built to handle this kind of volume.”
In a report released on Tuesday, Bank of Montreal retail analyst Peter Sklar estimated that overall grocery spending in Canada rose 35 per cent in March, and that store traffic was up 25 per cent. Shoppers stocked up on essential goods, and have been cooking more meals at home than usual. According to Empire, the higher sales began on Feb. 28, and accelerated starting on March 8. Growth slowed somewhat starting around March 22, but sales still remained significantly higher than the same period last year.
Research firm Nielsen reported that as of March 28, sales of consumer packaged goods have grown by $2.7-billion in Canada since the beginning of the year – outpacing the growth for all of 2019 in just three months. Neilsen estimates more than 80 per cent of that growth is due to COVID-19. Items that have seen the highest growth include thermometers, household gloves, cleaners and bleaches, hand sanitizers and liquid soap. Items that have decreased in sales include insect repellents, sun care, insoles and cosmetics.
And people have been buying more online. Empire also announced on Wednesday that it has moved up the launch of its e-commerce grocery service, Voilà. It will begin testing delivery in the Greater Toronto Area the week after next. The company’s existing e-commerce services, through IGA in Quebec and Thrifty in British Columbia, have seen significant increases in orders.
“Whenever this crisis ends, we believe there will be a permanent upshift in Canadians who have tried, and now embrace, grocery shopping online,” Mr. Medline said. “We’re also looking at how to accelerate our e-commerce efforts across the country.”
Initially, as people prepared for new physical-distancing guidelines encouraging them to stay home, demand at Empire’s grocery stores was dominated by shelf-stable products. More recently, the mix of product purchases has included more fresh food, but demand remains high for cleaning products, canned goods and baking products.
Since the beginning of the pandemic, grocers have attempted to reassure Canadians that food supply chains are secure, even as some shelves were cleared out at many stores and long lines caused consumers to worry.
“If someone had said to me, ‘You’re going to see a 37-per-cent increase over a four-week period,’ I’m not sure I would have said we could have handled it,” Mr. Medline said, adding that the company has worked with suppliers to bring goods to its stores more efficiently and increase the volumes moving through the system.
“We’re adjusting all of our processes," he said. "Almost every spot in our supply chain is being impacted, to keep up with these volumes. Right now, it’s moving better than at any time since Feb. 28.”
Mr. Medline also repeated an assertion that it is working to keep food prices relatively stable, even as costs have increased.
“While the grocers have pledged that there will not be any imminent price hikes, with consumers clearly prioritizing safety and convenience over other factors, we believe promotions have eased,” Mr. Sklar wrote in the research note on Tuesday, noting that Walmart Canada – one of the largest chains in the discount grocery sector – had suspended its flyers from March 26 to April 8. He estimated short-term grocery inflation of 3 per cent to 4 per cent, driven by fewer promotions and by shoppers who are less focused on shopping around for the best prices. “Over the longer term, we believe inflation will remain elevated as the grocers will eventually have to pass through the many COVID-19-related costs to the consumer."
Mr. Medline said Empire has kept its flyers going, but added it has been difficult to secure the quantities the stores would normally have on promotion.
Like other grocers, Empire has increased employees’ pay, and invested in protective gear for employees, such as installing plexiglass shields at checkouts. Empire has also temporarily hired more than 8,000 people over the past six weeks. Empire estimates these added expenses have increased costs by an estimated $80-million to $90-million in its current quarter.
With construction on hold, real estate projects such as building new Farm Boy and FreshCo stores, have been put on hold. That has decreased the company’s capital spending by an estimated $25-million to $50-million in the quarter.
Empire had intended to announce its next three-year strategy in May, but will delay that planning announcement.
Long-term planning is difficult both because it is not clear how long it will be until the economy starts to return to normal, but also because there may be a lag in how soon people feel safe enough to resume some old habits.
“We do believe there will be some shifts that will be permanent. … We’re seeing people eating at home more than they have in, I don’t know, a century?” Mr. Medline said. “We haven’t had so many bakers in this country in a long, long time. … I do think people will want to go sporting events again, and restaurants and pubs, and things like that. But there will be some changes. We’re trying to forecast what sort of demands our customers are going to have, and what they’re going to need in the future.”
With unemployment skyrocketing during the coronavirus pandemic, personal finance columnist Rob Carrick offers some tips on how to deal with creditors and make a bare-bones budget.
The Globe and Mail
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