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Walmart and Costco in Canada not making food inflation worse, experts say

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TORONTO –

Experts say the Canadian presence of American retail giants such as Walmart and Costco isn’t likely to blame for rising grocery prices.

That’s despite Canadian grocery chain executives having pushed for MPs to question those retailers as part of their study on food inflation.

University of Toronto economist Ambarish Chandra called ongoing hearings before a parliamentary committee studying the issue, “performative,” saying all retailers seek to maximize profits despite their stated efforts to minimize price hikes.

“It’s easy to call on the foreign companies and make them explain why they’re fleecing hardworking Canadians,” said Chandra.

“It’s not as though American grocers are taking advantage of Canadians and Canadian grocers aren’t. The grocers are going to charge what they can get away with, what the market will bear.”

His remarks come as Canadian grocers and consumersare under pressure as food prices continue to skyrocket despite overall inflation easing in recent months.

Grocery prices were up 10.6 per cent in February compared with a year ago, while overall inflation was 5.2 per cent. The grocery inflation rate was down from an 11.4 per cent year-over-year increase in January.

Walmart Canada president and chief executive Gonzalo Gebara told the parliamentary committee Monday that his company is not trying to profit from food inflation.Instead, he insisted it is striving to maintain a price gap between its products and those sold by its competitors.

Walmart Canada’s gross profit rate for its food business and its total operating profit in dollars declined last year, he added.

Gebara’s testimony followed a highly-anticipated, March 8 committee meeting in which the heads of Metro Inc. and Empire Co., two of Canada’s three biggest grocery chains, questioned why MPs had not called on American retail giants to answer questions for their research into food inflation.

The committee then unanimously agreed to invite the leaders of Walmart and Costco’s Canadian arms to speak.

Pierre Riel, Costco’s senior vice-president and country manager for Canada, is scheduled to appear before the committee on April 17. A Costco spokesperson did not respond to a request for comment on Riel’s upcoming appearance.

Canadian grocers including Loblaw chairman and president Galen Weston told the committee earlier this month that food inflation is not being caused by profit-mongering, insisting their margins on food have remained low.

But Chandra said that framing is merely “window dressing.”

“We’ve seen, frankly, bad behaviour from these grocers over the years, whether it’s price fixing or other sorts of scandalous issues, like co-ordinating on reducing pay for cashiers during the pandemic — all of these things stemmed from the fact that we just don’t have enough competition,” he said.

“We should look into encouraging competition, and one way to do that is to actually have more foreign grocers in the country. So, the presence of Walmart is actually good for Canada in the long run, not bad for it.”

Simon Somogyi, an agribusiness researcher at the University of Guelph, added that Walmart and Costco are larger companies than Canadian grocers, which gives them the ability to source products in greater volumes, ultimately allowing them to sell at lower prices.

“Their inclusion in our retail landscape is important and allows consumers to have a choice of where they want to put their money,” he said.”Typically, their motto is ‘come to us because we sell in bulk, at a typically lower price than our competitors.”‘

He said “any competition that can come into the marketplace is welcomed” in order to help keep costs down.

Factors such as high costs for delivery, packing and labour, along with historically high commodity prices, are still contributing to rising grocery bills, but experts have said they expect food price increases to normalize by the end of 2023.

If the ongoing committee hearings yielded increased transparency surrounding the mechanisms that lead to increased costs for suppliers, Somogyi said it would benefit the public.

“The hearings that we’ve been seeing are really about, from a consumer perspective, why are prices going up? I’d sort of hoped in some ways for far more discussion on how supplier prices are set,” he said.

“The two are linked, but a lot of the theatrics that we’ve seen in this hearing haven’t really got to the bottom of that.”

 

This report by The Canadian Press was first published March 29, 2023.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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