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Wednesday, November 17, 2010

Food prices fall heading into busy holiday season

A price war between Canada’s largest supermarket chains is good news for your holiday shopping list.

Both Metro Inc. and Loblaw Co. reported earnings Wednesday and executives told reporters on separate conference calls that competition is intense and discounts are steep across the board.
Grocers continued to see fresh food deflation last quarter and no price movements in other grocery items.

“Frankly, I expect it to stay like that for a period of time,” said Loblaw President and Deputy Chairman Allan Leighton.
Inflation is often called “a retailer’s best friend” and without it sales suffer.
“I think that there’s got to be a pretty big justification for price increases in a market in a condition that this market is in today.”
Making matters worse, unemployment is still high and consumer confidence is shaky.
“You cannot escape that consumer confidence is not in a good place,” Leighton said.
“Everybody is trying to be pretty aggressive to try and get some volume,” he said, adding flyer promotions are the most popular way to get shoppers through the door.
“We are still in a position where every week a new market low appears for something.”
Leighton said company chains including No Frills, T&T Supermarket and Superstore will stay competitive in order to retain market share while protecting the bottom line.
“We very much are in a balancing act,” he said.
“Although the economic and competitive environments remain challenging, we are confident that we can continue to grow in 2011,” echoed Metro chief executive Eric La Fleche.
Leighton did say food prices could begin to rise in the New Year when annual benchmarks are historically set.
Loblaw and Metro each posted higher quarterly profits though same-store sales fell at both retailers.
Loblaw, Canada’s biggest grocery chain, reported a 13% jump in earnings but said costs related to systems and infrastructure upgrades will pressure margins.

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