Weak Loonie Forcing Loblaw to Pass on Higher Costs

May 6, 2015 Updated: May 6, 2015

TORONTO—Customers shopping for groceries should prepare to pay more as stores pass on the rising costs of the weak Canadian dollar, Loblaw Companies president Galen Weston Jr. said Wednesday, May 6.

In a corporate earnings call, Weston said international suppliers are putting pressure on the company to raise prices to offset the fall in the Canadian dollar, which has lost more than a tenth of its value against the greenback since July 2014.

Loblaw stores have already implemented higher prices for some groceries beyond the usual cost fluctuations in fresh food, Weston said, including preserved and frozen foods, as well as non-perishable items.

The price hikes are being introduced cautiously in Loblaw stores and the company is monitoring how customers react as many of the increases come in areas where consumers are most sensitive about price, he added.

Loblaw reported a big jump in its first-quarter profits on May 6 as it benefited from major strategic moves, including the purchase of Shoppers Drug Mart.

Canada’s largest grocery company said its net income was up 21.7 percent from the same time last year, rising to $146 million, and its adjusted net income was up 96.7 percent to $301 million.

Weston said that despite the price increases, the company’s proportion of discounted and full-price sales hasn’t changed significantly.

“Our strategies appear to be working,” he said. “We don’t feel we need to ramp up our promotional intensity.”

Loblaw’s overall revenue for the quarter ending March 22 was $10.05 billion, up $2.76 billion or 37.8 percent from the same time last year.

Most of the higher revenue came from Shoppers Drug Mart, the country’s largest pharmacy retailer.

“Many acquisitions can create distractions for companies,” Weston said. “With the acquisition of Shoppers Drug Mart, in many ways I believe we have become more focused.”

Loblaw said its quarterly dividend will go up by 2 percent to 25 cents per common share, starting in July.