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Inflation seems to be cooling — except at the grocery store. What’s going on?

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The overall inflation picture is improving for many line items on Canadians’ household budgets — with at least one notable exception.

Fresh data from Statistics Canada released Tuesday shows the price of food continues to soar, even as the headline inflation figure ticked down at the start of 2023.

The agency said food prices were up 10.4 per cent year-over-year in January — up slightly from December — while the rest of the Consumer Price Index (CPI) items decelerated to an annual pace of 5.9 per cent.

Food inflation has outpaced the general inflation rate for 13 months in a row. And while StatCan’s CPI tracks a representative basket of goods to show general trends in Canada, Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, says consumers might find their personal inflation rate is even higher if their diets are made up of the fresh foods and grains that are being hit particularly hard.

“I suspect a lot of people are saying, ‘Well, 10.4 per cent is unbelievable. Well, they’re right. Actually, it’s probably more than that,’” he says.

January’s grocery store prices were higher for meat (up 7.3 per cent), bakery products (up 15.5 per cent), dairy (up 12.4 per cent) and fresh vegetables (up 14.7 per cent).

There were some aisles of relief, however: lettuce, specifically, saw a 5.8 per cent price drop last month, as did oranges (down 1.8 per cent), pasta (down 0.5 per cent) and breakfast cereals (down 2.9 per cent). Fish — be it canned, fresh or frozen — also saw some modest price drops.

 

Why is food inflation still so high?

Statistics Canada pointed to a few global factors driving up food prices. When it comes to chicken, which saw costs rise 9.0 per cent year-over-year in January, the agency pointed to avian flu outbreaks, strong seasonal demand and continued supply chain issues as fuelling the price hikes.

Charlebois says nearly a year after the war in Ukraine began, the conflict is still stymying access to grains and other inputs from the region. Lingering supply chain constraints are making it more expensive to source and ship ingredients, driving up costs for producers, processors and retailers alike, he says.

“All of these things are just creating more sticker shock moments at the grocery store.”

But with production disruptions easing, Royal Bank of Canada Economist Nathan Janzen said food inflation should start to slow. He said the bank’s latest forecast shows it dipping below three per cent by the end of 2023.

“We are expecting growth in those prices to plateau and … and we are starting to see some signs of that,” he told The Canadian Press.

“Year-over-year price growth in grocery prices is still extremely high, but it’s been kind of flattish since last fall. What we’re seeing is probably still, at least in part, the impact of those earlier global supply chain disruptions, transportation disruptions, as well as spikes in agricultural commodity prices earlier last year and those shocks have unwound to an extent.”

Janzen cautioned that Canadians shouldn’t expect to pay less for their groceries in the near future.

“It’s easier for prices to go up than down,” he said. “We’re not expecting prices to decline, just to grow at a slower rate.”

Charlebois agrees that Canadians hoping for a break this month or next might be disappointed. A Feb. 1 hike to farm gate prices on dairy in Canada means these costs will likely continue to rise in future CPI reports, for example.

Canadians are in for a “rough winter,” Charlebois says, though he anticipates food inflation will return to more typical levels in the spring and summer months.

 

Calls grow for more grocer competition, transparency

A House of Commons committee studying inflation last week summoned the CEOs of Canada’s big three grocers — Empire Co. Ltd., Metro Inc. and Loblaw Co. Ltd. — to answer questions on the causes of food inflation.

Executives from all three companies have testified at past committee meetings focused on the rising cost of food — but not their CEOs.

“Those at the heads of these companies, where the buck stops, should at least have to answer questions around why their profits are so high and why their prices are so high,” NDP Leader Jagmeet Singh said last week. “And why are they profiting off the backs of Canadians?”

In response to online criticism from consumers, Loblaw acknowledged recently that it has become the “face of food inflation,” but also claimed it makes less than $4 of profit on every $100 grocery bill.

If these CEOs do appear, Charlebois says the committee ought to focus its questioning on breaking down sales in their stores more clearly than they do in their financial statements. Currently, it’s difficult to break out whether revenue growth comes from food sales or cosmetics, clothing and pharmacy divisions, he notes.

“The information that we get is very sketchy and unclear,” Charlebois says. “I would actually try to dig as deep as possible into the data with CEOs in the room, or else it’s just a waste of time.”

Regardless of the CEOs’ answers on the causes of food inflation, Charlebois says Canadian consumers would benefit from more competition in the form of discount grocers such as Aldi and Lidl elsewhere in the world.

While Canadian grocers’ profit margins have stayed largely consistent through the current inflationary period, those margins are roughly double what’s reported from their U.S. grocery counterparts, Charlebois notes.

A Senate of Canada report delving into inflation released last week highlighted the need to increase competition in Canada in an effort to limit price pressures in the long term.

“We need more competition. We need a discount grocer in Canada,“ Charlebois says. “We need a market disruptor.”

— with files from The Canadian Press

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Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

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TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

The Canadian Press. All rights reserved.

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Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

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VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

The Canadian Press. All rights reserved.

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Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

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MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

The Canadian Press. All rights reserved.

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