Inflation Boosts Sobeys' Sales

STELLARTON, Nova Scotia Price inflation is slowly returning to Canada, but so too is price competition. Officials of Sobeys here last week said that modest inflation and new stores and expansions helped the retailer post a 3.3% sales gain and a 3.6% increase in net earnings contribution during the fiscal first quarter, which ended Aug. 6. Sobeys' results were reported along financial results from

STELLARTON, Nova Scotia — Price inflation is slowly returning to Canada, but so too is price competition.

Officials of Sobeys here last week said that modest inflation and new stores and expansions helped the retailer post a 3.3% sales gain and a 3.6% increase in net earnings contribution during the fiscal first quarter, which ended Aug. 6. Sobeys' results were reported along financial results from its parent company, Empire Cos.

Sobeys earned $82.4 million on sales of $4.1 billion (U.S.). Same-store sales increased by 1.7%.

In a conference call discussing results, Bill McEwan, chief executive officer of Sobeys, said he anticipated that margins would be under pressure as price competition flares up in various markets including Western Canada, where Sobeys is implementing a lower everyday pricing program in response to competitive activity.

“I think we are going to see either self-imposed or competitively imposed continued pressures on pricing,” McEwan said. “We intend to continue to sustain our competitive pricing position and that will have downward presence on margins.”

In Western Canada, Sobeys responded to a pricing program by a conventional competitor — Canada Safeway, according to sources — with a comprehensive pricing investment strategy to regain its pricing spread for the long term.

“We have no intention of giving up our competitive position and with the benefit of being able to plan, we looked at different mix initiatives, looked at different category pricing, looked at different mechanisms to put ourselves in a position to invest appropriately department by department and establish a better everyday pricing position in balance with retooled promotional strategy,” McEwan said.

“We're not the kind of an organization that comes over the big hoopla and says, price is dropping this Monday,” he added. “We kind of go out in a more disciplined way.”