MONTREAL—Ontario’s third-largest grocery chain will accelerate its study of automation as it looks to cut costs to offset the provincial government’s plan to raise the minimum wage next year, the CEO of Metro Inc. said on Aug. 15.
Eric La Fleche said the industry is under the gun because there is little time to adjust to cost increases, especially when intensifying competition is straining margins.
Metro estimates an increase in the Ontario minimum wage to $14 per hour from the current rate of $11.40 will cost it about $45 million to $50 million on an annualized basis in 2018. The impact excludes any pressure to subsequently increase other salaries.
“It’s the pace that makes it a pretty big challenge, but we’re confident that we'll find some offsets on our own,” La Fleche said during a conference call about its third-quarter results.
The chain said it hasn’t calculated the full impact when the minimum wage rises to $15 an hour in January 2019.
“As a team we will strive to mitigate this impact as much as we possibly can through productivity and cost reduction initiatives, but the size and pace of these increases pose a significant challenge,” La Fleche told analysts.
“Over time if structural costs increase, it could have an inflationary impact.”
The Montreal-based chain said it “will spare no effort” to manage the labour costs, but declined to specify whether the changes will have any impact on the number of employees. It has piloted the use of electronic tags on stores shelves and has considered automating its distribution centres.
La Fleche’s comments follow similar warnings by other retailers and a coalition representing a broad range of business groups.
Rival Loblaw Companies Ltd., which owns Shoppers Drug Mart and grocery chains including Loblaws and No Frills, has said it is mobilizing all its resources to offset the $190-million hit next year from higher minimum wages in Ontario and Alberta.
