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Walmart Canada turns focus to grinding down grocery prices

Walmart executives said Wednesday "price investments" in Canada -- or cutting prices to drive higher sales -- are working here. Patrick T. Fallon/Bloomberg via Getty Images

If there’s one thing Walmart Canada wants Canadian shoppers to think of whenever the retail giant’s name comes up it remains rock bottom prices, above all.

“Price leadership is important, both in perception and reality,” David Cheesewright, head of Walmart’s international division, which includes Canada, said Wednesday.

Indeed, as the world’s largest retailer zeroes in on Canadian grocery sales this year with the rollout of dozens of food-carrying “supercentres” nearing an end, Walmart Canada now plans to bring the same ceaseless focus on grinding prices lower in its new grocery aisles that it has taken to general merchandise.

MORE: Walmart makes bigger push into grocery aisle 

Cheesewright said Walmart, as a principle, is steadfastly committed to being the “lowest-cost operator” wherever it has a presence. Walmart’s “purpose,” the executive said, “is to save people money.”

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That means a fresh focus over the next year for Walmart Canada will be shaving costs on its most important growth category, food sales, in the hope that lower individual prices lift overall sales.

“There’s a lot of growth in supermarkets,” Cheesewright said. “It’s really important we win there.”

Supercentre expansion

Over the past year or so, Walmart has spent in the neighbourhood of half a billion dollars expanding 300 Canadian stores into Supercentres that sell food alongside its other products.

The present count stands at just over three quarters of Walmart’s 395 stores here.

With the groundwork approaching an end – Walmart added 10 per cent to total square footage in 2013 and another 2.6 per cent this year — it’s time to refine its supermarket business, the Walmart executive said.

“We’ve laid down a huge amount of food space,” Cheesewright said. “Now it’s time to develop and innovate that space.”

Slowing sales

Walmart is ratcheting up efforts in the grocery aisle for a reason – Canadian sales have been decelerating, with same store sales growth, a key retail metric, experiencing a prolonged slide over the past two years.

Cheesewright called Canada a “slower growth” market, like the United Kingdom. In order to boost business, new avenues are being pursued, like food sales as well as investing in ecommerce strategies.

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BMO analysts said this week Walmart.ca is the No.2 market leader in Canadian ecommerce, trailing Amazon.ca.

MORE: Amazon jumps out to lead in Canada’s online shopping wars

Yet analysts have noted that Walmart Canada’s expansion efforts have yet to meaningfully increase overall sales.

“The huge infusion of capital has not yielded the returns to which Walmart is accustomed,” Desjardins Securities said in a Oct. 6 note to clients. “General merchandise sales appear to have been particularly weak, given that grocery sales have been increasing.”

Price gap

Shelley Broader, the former head of Walmart Canada and new leader of operations in Europe, Canada, the Middle East and Africa said the arrival of main U.S. rival Target in Canada last year has inaugurated a “hyper competitive phase” that’s taking a toll on many retailers – while benefiting consumers with more competitive pricing.

“Price investments,” a term used to describe cutting prices in order to drive more traffic through the door and lift overall sales, is a key priority at Walmart Canada and something Broader said is working.

“The price gap in Canada is stronger than ever,” she said.

MORE: Walmart slashes prices to win more Canadians’ grocery business

‘Lowest cost to operate’

Still, Broader’s boss said Walmart will be looking long and hard at costs in Canada to see where it can find savings.

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To that end, while Walmart says it is adding more jobs this year, it eliminated about 750 managers earlier in May.

Cheesewright said taking labour hours out operations across the international unit is accomplishing Walmart’s cost-savings goals. Standing on stage in front of a slide entitled “Lowest cost to operate,” Cheesewright touted Walmart’s ability to erase millions in paid labour hours from its Chinese and Mexican operations over the past year.

“Now some of that [savings] gets reinvested, and some of that drops down to the bottom line,” he said.