Canada’s biggest grocery chain is freezing prices on all its No Name products for the next three months.
Loblaw Companies Ltd. — which operates such grocery stores as Loblaws, Zehrs, No Frills and Real Canadian Superstore — says it has locked in prices of the popular house brand, which includes more than 1,500 grocery items, until Jan. 31, 2023.
In a letter shared with some of its customers on Monday, Loblaw chairman and president Galen G. Weston says the price of an average basket of groceries is up about 10 per cent this year, with such items as apples, soup and chips up even more.
Weston said much of this is “maddeningly” out of the company’s control as food suppliers pass on higher costs to Loblaw.
The chain has pushed back against some increases where it can, he said, but suppliers are contending with the same cost increases faced by consumers — with higher prices for everything from raw materials to energy and transportation.
“None of these explanations offer much comfort when you’re worried about your family’s budget and uncertain about how much you’ll need each month to pay for food,” Weston said in a letter to members of the company’s loyalty program, PC Optimum.
Last year, a fight over higher prices briefly saw the company suspend the sale of Frito-Lay products at its stores, before the two sides came to an agreement.
Grocery chains have come under fire for being seen to be making excessive profits at a time when consumers are stretched thin due to rising inflation.
A few years ago, grocery chains including Loblaw, Sobeys, Metro and others took a reputational hit with shoppers when they were found by Canada’s competition watchdog to have been colluding to fix the price of bread and other baked goods for years.
Federal NDP Leader Jagmeet Singh has made grocery store profits a rallying call, noting that the major Canadian chains have taken in $2.3 billion in profit so far this year.
$2.3 billion<br><br>That’s how much grocery corporations have made so far in 2022. <br><br>On Monday, I’m forcing a vote in Parliament to investigate price-gouging and lower your food prices. <br><br>Help us pressure Justin Trudeau and Pierre Poilievre to do the same.<a href=”https://t.co/4n10mrhPkH”>https://t.co/4n10mrhPkH</a>
Loblaw’s profits have indeed risen of late, with the company revealing net earnings of $387 million in its most recently completed quarter. That’s up by $12 million from this time last year and by $121 million from the same period in 2019, before the COVID-19 pandemic.
It’s a similar trend at Empire Co., the owner of Sobeys, which posted net earnings of $187 million in its most recently completed quarter. That was down slightly from $188 million in the same period a year earlier but up from $120 million in the same period pre-pandemic.
Jim Stanford, an economist and director of the research institute Centre for Future Work, said while many Canadian corporations have tried to paint themselves as the victims of inflation, their financial results show that they are in fact contributing to it.
“Corporate profits have soared right alongside consumer prices, and it isn’t a coincidence,” he told CBC News in an interview on Monday. “The evidence is clear that corporations are doing much more than passing on higher costs.”
As a percentage of Canada’s entire GDP, he noted that corporate profits hit an all-time high of almost 20 per cent in the second quarter of this year. While other sectors — notably the energy sector — have seen profits increase at a faster rate, Stanford said, grocers are clearly coming out ahead.
“We should see this as a PR gesture from a company that knows it’s in the eye right now,” he said of Loblaw’s decision to freeze No Name prices.
Others say it’s unfair to suggest that grocery chains in particular have been gouging consumers. Trevor Tombe, an economist at the University of Calgary, recently crunched the numbers on corporate profits and said he didn’t find much evidence of undue profiteering in that sector specifically.
“The profit levels are up because of volumes, not because of price markup increases,” he said in an interview.
“The higher profits that we’re seeing are largely driven by high commodity prices and high energy, oil and gas prices in particular. So that’s causing both inflation to increase and profits to increase.”
Marion Chan, a principal with TrendSpotter consultancy, says the move makes sense for Loblaw as it’s an opportunity to gain customers on items for which pricing tends to matter more than branding.
“They’re very willing to make the trade-offs and go to a known name product or a or a private label product as it may be to save some money,” she said in an interview. “There’s a wide range of reasons why people are brand loyal but [they] hit a cap at a certain point where they say, no, I just can’t spend.”
Similar moves in other countries
The decision by Loblaw to freeze prices of the private label brand with its distinctive yellow-and-black packaging follows similar announcements by grocers in other countries.
In August, French supermarket chain Carrefour announced plans to freeze prices on about 100 of its house-brand products until Nov. 30.
In June, Lidl’s U.S. arm introduced a summer price-cutting campaign to ease the inflationary burden on customers. The company said it dropped prices on more than 100 items in its stores across nine East Coast states until August.
“We’ve seen grocers voluntarily freezing prices across the G7 for a while now,” said Sylvain Charlebois, professor of food distribution and food policy at Dalhousie University in Halifax. “It should have happened a long time ago in Canada.”
Still, freezing No Name prices will offer much-needed relief to Canadians, he said, adding it will also help to repair some of the image issues facing Canada’s big grocers, Charlebois said.
“This is also a PR strategy…. A lot of Canadians are blaming grocers for what’s going on with food inflation,” he said. “Some of it is deserved … but much of that criticism is unfair because food prices can rise for a variety of reasons beyond a grocer’s control.”
Mike von Massow, an associate professor in the food, agricultural and resource economics department at the University of Guelph, said it’s no accident that Loblaw has decided to cap price hikes on the brand that it owns, because it has the power to control all parts of the supply chain.
“They control the brand, they can control much more of the margin of that product — and they may well have locked in the prices and mitigated a good bit of their risk going forward,” he said in an interview. “Are they going to lose substantial amounts of money on this, on this commitment? Probably not.”
While the company’s move has a lot to do with public relations, von Massow said, it is likely going to help people who need it most, because it’s targeting staple items where there are very few ways of avoiding price increases. “There is a real chance that costs will continue to go up over the coming months, and this gives people some certainty now,” he said.
CIBC profit falls 18% on higher costs, loan-loss provisions; hikes dividend – The Globe and Mail
Canadian Imperial Bank of Commerce CM-T reported an 18-per-cent drop in fiscal fourth-quarter profit and raised its dividend as the bank was hit by higher expenses and loan loss provisions.
The Toronto-based bank is the fourth major lender to report earnings for the quarter that ended Oct. 31, and the second to fall short of analysts’ profits estimate, along with National Bank of Canada. Royal Bank of Canada and Bank of Nova Scotia both reported earnings that were ahead of expectations.
CIBC earned $1.19-billion, or $1.26 per share, in the fourth quarter. That compared with $1.44-billion, or $1.54 per share, a year earlier.
The bank’s results included several special charges, including a $91-million increase in legal provisions, a $37-million charge from consolidating its real estate portfolio, and $12-million of costs related to the bank’s acquisition of the credit card portfolio of retailer Costco in Canada.
Adjusted to exclude those items, CIBC said it earned $1.39 per share. That was far shy of analysts’ estimate of $1.72 per share, according to Refinitiv.
CIBC raised its quarterly dividend by two cents to 85 cents per share.
For the full fiscal year, CIBC’s profit fell 3 per cent to $6.2-billion.
In the fourth quarter, CIBC took $436-million of provisions for credit losses – the money banks set aside in case loans go bad. That was a significant increase from a year earlier, with $305-million of that total attributed to the bank’s personal and small business banking operations in Canada.
Some of the increase in provisions came from changes to the bank’s economic forecasts, which are more pessimistic. But CIBC also said it had higher write-offs and impaired balances in its retail portfolio.
Profit from Canadian personal and small business banking fell 21 per cent year over year to $471-million. Higher costs were a major factor, including expenses related to the Costco card portfolio acquisition, as well as higher employee compensation. Loan and deposit balances were up 10 per cent, but profit margins on loans fell five basis points from the previous quarter. (100 basis points equal one percentage point).
“CIBC had a big miss in the quarter and, while some of it related to higher provisions on performing loans, the bank’s domestic net interest margin contraction was disappointing,” said John Aiken, an analyst at Barclays Capital Inc., in a note to clients.
In the bank’s U.S. commercial banking and wealth management division, profit fell 37 per cent from a year ago, mainly driven by higher provisions for loan losses. Impaired loan balances were higher in the real estate and construction sector, as well as in oil and gas.
Profit from Canadian commercial banking and wealth was up modestly to $469-million, and capital markets profit was relatively unchanged year over year at $378-million.
DoorDash laying off 1,250 people, about 6% of its workforce – CBC News
DoorDash Inc. said on Wednesday it was cutting about 1,250 jobs, or six per cent of its total workforce, as the food-delivery company looks to keep a lid on costs to cope with a slowdown in demand.
DoorDash went on a hiring spree to cater to a flood of orders from people stuck at home during the height of the pandemic, but a sudden drop in demand from inflation-wary customers has left the company grappling with ballooning costs.
“We were not as rigorous as we should have been in managing our team growth … That’s on me. As a result, operating expenses grew quickly,” chief executive Tony Xu said in a memo to employees that was posted on the company’s website.
“Given how quickly we hired, our operating expenses — if left unabated — would continue to outgrow our revenue.”
DoorDash has about 20,000 employees worldwide, and “some of the affected employees are based in Canada,” the company told CBC News in a statement, without elaborating.
The company joins a growing list of technology firms, including Amazon, Facebook-owner Meta, Twitter, Shopify and others that have laid off thousands of employees in recent weeks as they brace for a potential economic downturn.
British food delivery company Deliveroo said in late October that sales growth would be at the lower end of its previous forecast. In September, Winnipeg-based food delivery app SkipTheDishes laid off 350 workers.
Earlier this month, DoorDash reported a bigger-than-expected quarterly net loss of $295 million US, raising questions about the growth prospect of delivery firms as economies reopen. The company’s shares have lost two thirds of their value this year.
“Greater emphasis on its cost structure is a welcoming sign, especially given the potential for consumer spending to deteriorate faster than expected,” said Angelo Zino, analyst at CFRA Research.
'I didn't ever try to commit fraud on anyone,' FTX founder Sam Bankman-Fried says – CBC News
The man at the centre of collapsed cryptocurrency exchange FTX made his first public appearance since the saga began, telling a New York audience on Wednesday that it was never his intention to commit fraud.
Sam Bankman-Fried, the 30-year-old founder of FTX, appeared at the New York Times’ Dealbook Summit on Wednesday, for an interview with journalist Andrew Ross Sorkin about what happened to cause his cryptocurrency firm to collapse into bankruptcy earlier this month.
The firm, once worth more than $32 billion US, entered bankruptcy protection on Nov. 11 after a whirlwind series of days that saw it go from trying to solve a liquidity crunch by merging with a rival, to having that deal fall apart and succumbing to a run on the bank as traders pulled out $6 billion in funds within three days.
Filings show the company owes almost $10 billion to various creditors, and at least $1 billion worth of customer deposits are missing.
Among numerous allegations, customer deposits at FTX appear to have been used as capital and collateral for loans for an investment firm called Alameda affiliated with him — an allegation that amounts to fraud, and one that he pushed back against strongly.
“I didn’t ever try to commit fraud on anyone,” he told Sorkin, “I didn’t knowingly co-mingle funds.”
While he acknowledged mistakes were made, Bankman-Fried rejected repeated attempts to characterize what happened at his cryptocurrency firm as being in any way malicious or illegal.
“I am deeply sorry about what happened,” he said. “I was excited about the prospects of FTX a month ago, I saw it as a thriving, growing business.”
Bankman-Fried has seen his personal net worth evaporate in the debacle, from more than $26 billion a year ago to “close to nothing” today — and he insisted that he doesn’t have any of the money that has vanished.
“I don’t have any hidden funds here. Everything I have, I am disclosing,” he said.
“I’m down to one working credit card … [and] hundreds of dollars or something like that, in a bank account.”
He says, to his knowledge, there are enough funds at FTX to give users their money. But his hands are tied since he no longer has a formal role at the company since it entered bankruptcy proceedings.
“I believe that withdrawals could be opened up today and everyone could be made whole,” he said.
John Jay Ray III, the restructuring expert who has been handling FTX’s bankruptcy proceedings has said in legal filings that Bankman-Fried appears to have treated the company as his “personal fiefdom” and has called the fiasco a “complete failure of corporate controls.”
Bankman-Fried has been active on Twitter since the debacle first started, but his appearance on Wednesday marks his first public appearance since the saga began.
There was speculation he was going to appear in person, but ultimately he appeared via video link from the Bahamas, where he lives.
Sorkin asked Bankman-Fried if he did not appear in person because he is worried about being within the reach of U.S. agencies including the Department of Justice and the Securities and Exchange Commission, both of which are probing what happened at FTX.
Bankman-Fried appeared to side-step that question, remarking instead that, to his knowledge, he can still legally enter the U.S.
“I’ve seen a lot of the hearings that have been happening [and] would not be surprised if some time I am out there talking about what happened,” he said, adding that he “does not personally think” he has any criminal liability to worry about.
That being said, he said his legal team is “very much not” supportive of his decision to appear at the summit and speak publicly about what happened at FTX. His lawyers advice was “to recede into a hole,” he joked.
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