August 14, 2014 12:13 pm

Walmart slashes prices to win more Canadians’ grocery business

Walmart said Thursday it's gaining on Canadian grocery competitors.

Justin Sullivan/Getty Images

Walmart Canada is throwing half a billion dollars at expanding hundreds of locations into “supercentres” this year that offer a full complement of groceries on top of the thousands of products it already sells.

And the expansion is going to plan.

The world’s largest retailer said Thursday it continues to steal business from the likes of Loblaw, Metro, Sobeys and newcomer Target.

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Sales across its more than 380 Canadian locations jumped nearly three per cent in the three months up to June 30, despite the fact that the chain saw a dip of 1.1 per cent in the number of people walking through the door.

New store openings helped. But a big driver was the increase in how much customers spent at Walmart as it introduced food aisles at existing locations.

“We’re encouraged by our performance in food and consumables, driven by supercentre expansions,” Walmart said in a statement.

READ MORE: Meet the guy who wants you buying your groceries from Walmart

Still, Walmart is paying up to win that new grocery business.

On top of the hundreds of millions it’s pouring into the introduction of new grocery aisles, the U.S. discount giant said Thursday it saw a drop in operating profit during the latest three-month stretch.

That means it earned less on its day-to-day sales than it did in the spring and early summer of 2013, when it had far fewer supercentres.

Walmart blamed the decline on “price investments,” a subtle term for slashing the cost of products in order to lure more customers into stores.

Consumers gain?

Walmart didn’t specify whether the cuts were on food products or on general merchandise, but experts say it was likely a blend of both.

The price “investments” are benefiting shoppers who are feeling more cost pressure on food at the moment. By offering food items at lower prices, Walmart’s keeping them in check at other supermarkets.

READ MORE: Grocers absorb some ‘shock’ of sky-high fresh food prices

The country’s biggest supermarket operator, Loblaw, said late last month prices continue to fall on dry good items like cereal, crackers and cookies (though fresh foods like meat and produce are rising sharply). It’s a battle that’s only intensified as Walmart has rolled out more supercentres.

“There’s still deflation in the dry groceries side of the store,” Galen Weston, president and executive chairman of Loblaw, said on July 24.

Job cuts

But the lower prices have come with collateral damage. Canadian grocers have sought to reset wages at dozens of stores lower this year to lower costs.

Meanwhile, Walmart said Thursday the “very competitive environment” compelled the low-cost behemoth to cut back on store managers and other employees this spring.

In May, Walmart Canada said it was slashing about 750 jobs. Experts who follow the company closely suggest around two to three employees per store were terminated, or between 760 and 1,140 workers.

© Shaw Media, 2014

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