Loblawâs Great Canadian Grocery Gouge Loblawâs shareholders are laughing all the way to the bank while Canadians struggle to put food on the table. A recent consumer boycott of the grocery giant has sparked a national debate on food affordability and corporate profits.
Without getting into economics lingo I don't understand, kind of both. They have raised prices beyond merely passing increased costs on to consumers. Wages haven't kept up. So now people are diverting more of their income from other areas of the economy, like hospitality to cover their grocery costs. So by making groceries really expensive, people have to buy more groceries.
Well, if we look at Canada, from RP's link https://centreforfuturework.ca... there's a chart that shows net profit margin went from almost 2% to almost 3.5%. So on a $100 basket of goods, if we apply an overall food inflation rate of 25% from the end of 2019 to end of 2023 (basing that on US food inflation), that basket of goods went up to $125. For the grocery, they were making $2 per basket, and now are making just over $4 at 3.5%, which is about a $1.88 more than they would have if their profit margin was still 2%. So as prices went up $25, the grocers contribution to inflation was just $1.88, or 7%. I think most shoppers would hardly notice that impact.
Food at home inflation is now down to a normal 2% YOY, and falling with the possibility of disinflation in 2024. And one of the biggest reasons prices are coming down is because freight rates have normalized (this had an even bigger impact in apparel, electronics, hard goods markets where product is sourced from Asia). In fact, throughout retail we now have more value pricing (eg, promotions/price cuts). https://chainstoreguide.com/of...
I'm not arguing that food retailers didn't try to improve profits (mainly because the demand was there and they didn't need to cut prices to attract store traffic), but the press headlines about grocers gouging customers are at best misleading.
p.s., of course my profit margin example excludes any positive impact from reduced debt/interest expense, which also benefits net profit margins.
p.s.s., and its not all about higher prices or lack of price cuts that impact a margin, but also that you are able to leverage operating costs which are more fixed.
Without getting into economics lingo I don't understand, kind of both. They have raised prices beyond merely passing increased costs on to consumers. Wages haven't kept up. So now people are diverting more of their income from other areas of the economy, like hospitality to cover their grocery costs. So by making groceries really expensive, people have to buy more groceries.
So this stuff is incredibly complicated. So much so, that people who do this their entire lives can't explain/project everything.
This chart shows wage growth (blue) vs. inflation (black).
Wages have been outpacing inflation for over a year, and inflation the past year isn't unreasonable. The problem is that it's a vicious cycle that keeps spinning. People make a bit more, they buy a bit more, demand remains, and vendors increase prices because they can. The vendor takes the money, gives it to a few people, who buy shit...and it keeps going.
All in all the US economy is doing well. Considering the pandemic...it's been amazing. Inflation is now low. Wages are up. We are not in a recession. Unemployment continues to hold at all-time lows. Food prices are a noticeable pain-point for everyone, but they haven't driven consumers from the marketplace. There are signs that we may have reached the point of consumers changing behaviors. McDonald's is going to offer reduced "meal" prices in June, as sales begin to suffer from the $10+ burger meal (that used to be $5 before the pandemic). Meanwhile at "upscale" restaurants that have aggressively priced through the pandemic, earnings and sales are at all-time highs. Chipotle sales have nearly doubled since 2020, profits are high, and the stock (which is up 4X since 2020) is about to split for the first time. Seems employees are struggling to sell incredibly valuable stock options at the sizes they'd like.
The reality is that over 70% of Americans say they are doing well or fine financially. Ask those same people, and they will tell you that the country is struggling. That's a mathematical impossibility. The sentiment is primarily driven by conservative media. They want everyone to believe that things are terrible...because a large portion of the country believes that a lying, cheating, criminal, non-billpaying scammer can somehow "fix" what isn't broken.
The attachment of the economy to a President is silly... but persistent. If you look at recent history, Democrats build economies that work for the majority of Americans... Republicans take over, remove safeguards, and lower taxes under the failed "trickle down" BS that's been floating since Reagan, the Right takes credit... and things go south.
The real risk to the economy is Trump, not Biden. Neither of them can do much to improve things, but Trump's reactionary tendencies add volatility. The only thing you can be sure is that under Trump the rich will pay less, and the debt will skyrocket. If you're not sure, ask him. He has a great plan that they're going to detail in a few weeks.
I'm not familiar with Australian retailers, but some questions would be: record profits because sales continue to grow, or because they raised their margin (they capture more profit per item sold)? And what profit are we speaking of: gross profit, operating profit, EBITDA, net profit.,,,?
While many retailers did post record profit margins during the pandemic- which was a function of supply and demand, eg the demand was extremely high and supply was limited due to the disruptions and therefore there was no need to discount/markdown product prices - for most retailers, those margins have normalized (an exception being sporting goods), and many are now down below prepandemic levels, especially electronics, apparel and department stores (because demand fell off).
Taking a quick look at Coles Group on Yahoo finance, sales have continued to grow the past four years, but operating profit has fallen from a peak in 2021 and so has the margin. Now I dont know if there are 1x items that may skew the data...
Without getting into economics lingo I don't understand, kind of both. They have raised prices beyond merely passing increased costs on to consumers. Wages haven't kept up. So now people are diverting more of their income from other areas of the economy, like hospitality to cover their grocery costs. So by making groceries really expensive, people have to buy more groceries.
most grocers said they did benefit from less promotions during the pandemic...but above doesnt answer the question... stupid is in the name of this thread.
Supermarket executives claim they have not profited from food price inflation, but have merely passed on to consumers the higher costs they pay for their own inputs and products. Economic evidence refutes this claim. The latest industry-wide financial data on food retail (produced by Statistics Canada for the third quarter of 2023) shows that food retail profits have more than doubled since pre-pandemic norms, and profits continue to grow. (...)
The oft-heard claim that the profit margin on grocery retail has not changed, and that higher profits have simply kept up with the overall rise in costs and prices, is not supported by industry-wide data. Measured as a proportion of total revenue in food retail, the net income margin has doubled.
most grocers said they did benefit from less promotions during the pandemic...but above doesnt answer the question... stupid is in the name of this thread.
what's actually driving record profits? Record inflation, record sales, if its net income, what impact did taxes and debt have (lots of companies paid off their debt, which reduces interest expense and benefits bottom line profit...)
Supermarket executives claim they have not profited from food price inflation, but have merely passed on to consumers the higher costs they pay for their own inputs and products. Economic evidence refutes this claim. The latest industry-wide financial data on food retail (produced by Statistics Canada for the third quarter of 2023) shows that food retail profits have more than doubled since pre-pandemic norms, and profits continue to grow. (...)
The oft-heard claim that the profit margin on grocery retail has not changed, and that higher profits have simply kept up with the overall rise in costs and prices, is not supported by industry-wide data. Measured as a proportion of total revenue in food retail, the net income margin has doubled.
Since mid-2021 (when food price inflation accelerated notably), the net income margin on food and beverage retailing has consistently exceeded 3% of total revenues. That compares to an average net income margin of 1.25% of sales over the five years before COVID (2015-2019). There is no sign that food retail margins are narrowing back to those historic norms, despite the downturn in input costs and the partial slowdown in food inflation over the past year.
what's actually driving record profits? Record inflation, record sales, if its net income, what impact did taxes and debt have (lots of companies paid off their debt, which reduces interest expense and benefits bottom line profit...)
That's interesting because the two big chain supermarkets that dominate Australia (Coles and Woolworth = Colesworth) are having record profits, as they cause and benefit from inflation.
I'm not familiar with Australian retailers, but some questions would be: record profits because sales continue to grow, or because they raised their margin (they capture more profit per item sold)? And what profit are we speaking of: gross profit, operating profit, EBITDA, net profit.,,,?
While many retailers did post record profit margins during the pandemic- which was a function of supply and demand, eg the demand was extremely high and supply was limited due to the disruptions and therefore there was no need to discount/markdown product prices - for most retailers, those margins have normalized (an exception being sporting goods), and many are now down below prepandemic levels, especially electronics, apparel and department stores (because demand fell off).
Taking a quick look at Coles Group on Yahoo finance, sales have continued to grow the past four years, but operating profit has fallen from a peak in 2021 and so has the margin. Now I dont know if there are 1x items that may skew the data...
s., if you really want to fight greed, go after the shipping companies...not Kroger and Walmart, whose profit margins are back or below prepandemic levels.
That's interesting because the two big chain supermarkets that dominate Australia (Coles and Woolworth = Colesworth) are having record profits, as they cause and benefit from inflation.
a bit more accurate description of what's going on in the economy:
National Public Radio (NPR) reports on a new study released Tuesday by the Federal Reserve saying that "Americans overwhelmingly say they're 'doing at least OK financially,' but most remain worried about rising prices, and 1 in 6 says they have bills they can't pay."
The story goes on:
"This year's snapshot shows family budgets generally held steady over the last year, but they're not as solid as they were two years ago, when pandemic relief payments helped pad people's bank accounts and inflation was just beginning to take hold.
"The survey, conducted last fall, found that 72% of adults are living comfortably financially or at least doing OK. That's down from 73% in 2022 and 78% in 2021.
"One group that saw a bigger drop in well-being was parents. Just 64% of those with children under 18 said they were doing at least OK â down from 75% in 2021. Child care is a significant expense for many families, often costing at least half as much as their housing. The median monthly cost for child care was $800, or $1,100 for those using more than 20 hours a week.
"About a third of those surveyed said their monthly income had increased during the year, while a slightly higher percentage â 38% â said their monthly expenses had grown."
And:
"Although inflation is lower now than it was a year ago and less than half what it was in 2022, two-thirds of Americans say rising prices have made their financial situation worse, including 19% who say they're much worse off. About 1 in 3 people said inflation had little effect on their family finances.
"Unsurprisingly, lower-income households reported more financial hardships, such as an inability to pay their bills every month or skipping meals or medical care. Overall, 48% of those polled said they had money left over after paying expenses, while 17% said they had unpaid bills in the previous month."
Think of this as the bifurcation of the American economy. At one end, there are folks who are having trouble paying their bills (like they always do). And at the other, there are people who are making more money than ever, at least in part because the stock market is at record highs. (Also C-level executives who are making tens of millions of dollars in wages even as they try to figure out how to reduce labor expenses elsewhere in their organizations. But that's a different commentary.)
Neither extreme represents the typical American experience - most people are doing okay, though struggling with their monthly bills, cutting corners where they can, taking on some more credit card debt than they would like, and facing a future that feels increasingly uncertain (for a wide variety of reasons - also a different commentary).
And then you have the politics...why is inflation so high...biden spending, ceo pay, trump tax cuts, blah, blah, blah...
A better question is: why was inflation so low for over three decades? Mostly because of globalization, some of which was good, but much of which also leaned heavily on paying below livable wages to Chinese and other far east laborers (why else would it be more "efficient" to ship all those trinkets half way around the world). If we want to continue to unwind globalization, bring manufacturing back home, support the little guy...then the inflation story is only beginning.
s., if you really want to fight greed, go after the shipping companies...not Kroger and Walmart, whose profit margins are back or below prepandemic levels.
This is from the WSJ newsletter I get every morning....
Half of the executives in a Wall Street Journal analysis made at least $15.7 million, a record for median CEO pay in the annual survey, with several making more than $50 million. Median pay for the same companies a year earlier was about $14.5 million. Most of the executives received year-over-year raises of at least 9%âone in four got 25% or moreâand most companies recorded annual shareholder returns of at least 13%, the Journal found in an analysis of data on more than 400 companies from MyLogIQ, a provider of public-company data and analysis.
Biden and Co. should be all over this and tightly attach inflation to greed (even if a lot of this is equity-based... voters don't understand the elements of a $50M payday). Trump cut taxes for these folks, and they are paying less on the crazy salaries they make while charging you more for everything.
I appreciate "it's the economy, stupid"... but neither of these guys has much influence over it. Democrats need to start spinning the way Republicans do. Facts don't matter...play to the emotions. Get people pissed off that groceries are expensive, while the CEO of the grocery store is making more money than ever.
I appreciate "it's the economy, stupid"... but neither of these guys has much influence over it. Democrats need to start spinning the way Republicans do. Facts don't matter...play to the emotions. Get people pissed off that groceries are expensive, while the CEO of the grocery store is making more money than ever.
This is from the WSJ newsletter I get every morning....
Half of the executives in a Wall Street Journal analysis made at least $15.7 million, a record for median CEO pay in the annual survey, with several making more than $50 million. Median pay for the same companies a year earlier was about $14.5 million. Most of the executives received year-over-year raises of at least 9%âone in four got 25% or moreâand most companies recorded annual shareholder returns of at least 13%, the Journal found in an analysis of data on more than 400 companies from MyLogIQ, a provider of public-company data and analysis.
Biden and Co. should be all over this and tightly attach inflation to greed (even if a lot of this is equity-based... voters don't understand the elements of a $50M payday). Trump cut taxes for these folks, and they are paying less on the crazy salaries they make while charging you more for everything.
I appreciate "it's the economy, stupid"... but neither of these guys has much influence over it. Democrats need to start spinning the way Republicans do. Facts don't matter...play to the emotions. Get people pissed off that groceries are expensive, while the CEO of the grocery store is making more money than ever.
Seems like they are picking on grocery, particularly center store (Pepsi)m which admittedly has been a problem...but most of these products aren't "essential."
Pepsi also got into a feud with french operator Carrefour, which temporarily dropped their prices because of the price hikes.
The FTC also released results of a recent study on grocers, concluded the obvious: grocery margins went up when demand grew to a point where they no longer needed to be promotional and larger companies have scale advantages. The latter issue has little to do with the pandemic, and a host of other issues besides price.
Grocery retail margins did go up during the pandemic, 1-2%, but they have since normalized to prepandemic levels.
Seems like they are picking on grocery, particularly center store (Pepsi)m which admittedly has been a problem...but most of these products aren't "essential."
Pepsi also got into a feud with french operator Carrefour, which temporarily dropped their prices because of the price hikes.
The FTC also released results of a recent study on grocers, concluded the obvious: grocery margins went up when demand grew to a point where they no longer needed to be promotional and larger companies have scale advantages. The latter issue has little to do with the pandemic, and a host of other issues besides price.
Grocery retail margins did go up during the pandemic, 1-2%, but they have since normalized to prepandemic levels.
