Walmart gobbling up bigger slice of Canadians’ grocery budgets

Walmart Canada continues to win a greater slice of Canadians’ weekly grocery budgets, it says, but it’s costing the U.S. discount giant to do so.

The world’s largest retailer said Thursday sales across its network of 390 or so Canadian department stores have “gained momentum” in recent months, as key rival Target Canada announced it was shutting down while Walmart plowed ahead with a strategy to beef up its supermarket offering.

That plan includes making “price investments” or undercutting its competitors on retail pricing — Walmart’s trademark. The tactic is shrinking the mega-retailer’s profits in Canada but winning higher sales.

Sales at stores opened more than a year, a key retail metric that shows the ongoing pace of purchases, grew 1.8 per cent in the three months ended Jan. 30 compared to the same three-month stretch a year earlier, when same-store sales were actually falling.

Foot traffic, or the number of customers walking through the doors, edged 0.1 per cent higher.

“Overall, we’re pleased with the positive sales trend we’ve seen in our Canadian operations and we expect the momentum to continue,” David Cheesewright, the head of Walmart’s international operations, said on a conference call.

Walmart Canada clawed about 0.4 per cent of market share away from main food competitors like Loblaw, Sobeys, Metro and Safeway in the 12 weeks ended Jan. 24, the company said. Experts suggest about $1 in every $10 spent on food at stores in Canada now goes to Walmart, which first began selling groceries through its Supercentres in Canada in 2006.

The company plans to have 309 of 396 locations outfitted to sell groceries by early next year, up from 282 Supercentres spread throughout the country right now.

General merchandise

The drive into food is a key strategy for Walmart, which continues to suffer from weaker general merchandise sales amid stiff bricks-and-mortar competition from the likes of Canadian Tire and Dollarama, as well as the growing shift toward online sales.

“While general merchandise and apparel sales improved versus prior quarter results, they were still below the rate of growth in the market,” Cheesewright said.

Last month, Walmart Canada said it will spend $340 million over the next year in part to convert 27 existing stores into “Supercentres” outfitted with a full complement of grocery aisles, adding to the 282 locations that already sell food (up from 247 locations in 2013).

Walmart’s struggles to maintain foot traffic to stores is a key rationale in its push into groceries, a known driver of frequent visits that often lead to purchases elsewhere in the store, experts say.

Job cuts

To address flagging profitability amid the downturn in traffic –while at the same time funding the ongoing Supercentre expansion—Walmart Canada cut payrolls at stores and at headquarters last year.

In November, 210 white-collar jobs were eliminated. That move was preceded by the firing of 700 store-level personnel earlier in the year. Both moves have helped “streamline” operations, Walmart said, while improving the bottom line this year.

Food fight

Like Walmart Supercentres, the discount banners of Canada’s big grocery operators easily fended off Target Canada’s brief, two-year incursion into the Canadian food retailing business.

MORE: In food fight, Canada’s discount supermarkets ate Target’s lunch

Banners like Loblaw’s No Frills, Metro’s Food Basics, Empire’s Price Chopper and FreshCo managed to increase sales in the face of Target’s aggressive expansion into Canada.

But weathering Walmart’s more gradual assault will prove tougher, experts say, with the world’s largest retailer continuing to win more business away from Canadian supermarkets.

“We want to be right rather than fast,” Walmart spokesperson Andrew Pelletier said last month.

jamie.sturgeon@globalnews.ca
Follow @jasturgeon