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The two biggest grocery retailers in Canada have below 5% profit margins: Loblaw's profit margin is less than 4% [1] and Empire ~2.5% [2]. The other smaller one

The two biggest grocery retailers in Canada have below 5% profit margins: Loblaw's profit margin is less than 4% [1] and Empire ~2.5% [2]. The other smaller ones are in the same ballpark. Put it another way, if grocery stores reduce all prices by 4%, they will be operating at a loss. Prices have jumped, but I am inclined to believe it is due to fundamental market forces (Ukraine war, avian flu, energy crisis, etc.) and not the retailer, who just happens to be the only part people can see and direct their anger at. [1] https://ycharts.com/companies/L.TO/profit_margin https://ycharts.com/companies/L.TO/profit_margin [2] https://ycharts.com/companies/EMP.A.TO/profit_margin https://ycharts.com/companies/EMP.A.TO/profit_margin

Scoundreller 4y ago
They both segmented all their real estate into REITs (Choice and Crombie), so a lot of the margin has been pushed there for tax reasons (and to keep the retail operations from tanking the capital, which I think will one day happen, but I'm anti-retail). But it's also true that prices jumped, but margins were unchanged, so they were making more money for the same work. In an efficient market, you'd expect margins to drop. (Unless it can all be explained by inflation of course and that extra money gets you as far as it used to).
- smnrchrds 4y ago
  > so a lot of the margin has been pushed there It doesn't seem to be the case. I am just gonna look at Loblaw/Choice, but I imagine the other would not be too different. Loblaw had a revenue of 55.25B and a net income of 2.12B [1], bringing the profit margin to 3.84% over the previous 12 months. Choice's revenue was 1.34B [2] over the same period. Even if the entire revenue was pure profit for Loblaw, it would bring Loblaw's profit margin to (2.12 + 1.34) / 55.25 = 6.3%. This seems higher, but still not remotely high enough to explain the price increases. But more importantly, Choice REIT's revenue has been fairly consistent over the past couple of years. There is no sudden increase in the past year or so to coincide with the price increases. So the extra price is NOT getting passed from Loblaw to Choice. Choice gets the same amount it was getting in 2019 more or less. Choice's total revenue has been 1.29B (2019), 1.27B (2020), 1.29B (2021), and 1.28B (past 12 months) [3]. Disclaimer: I am not well-versed in the field of finance, so I may have misunderstood the statistics. Please double-check them from the links below if you so prefer. I do not understand why the revenue in the statistics page is 1.34B, but total revenue in the financials page is 1.28B. But the difference is small enough not to change the conclusions either way. [1] https://ca.finance.yahoo.com/quote/L.TO/key-statistics?p=L.TO https://ca.finance.yahoo.com/quote/L.TO/key-statistics?p=L.T... [2] https://ca.finance.yahoo.com/quote/CHP-UN.TO/key-statistics?p=CHP-UN.TO https://ca.finance.yahoo.com/quote/CHP-UN.TO/key-statistics?... [3] https://ca.finance.yahoo.com/quote/CHP-UN.TO/financials?p=CHP-UN.TO https://ca.finance.yahoo.com/quote/CHP-UN.TO/financials?p=CH...
throw0101c 4y ago
Someone charted the margins for the last twenty years: * https://old.reddit.com/r/ontario/comments/xqigdu/profit_margins_of_canadian_grocers_2002_to_present/ https://old.reddit.com/r/ontario/comments/xqigdu/profit_marg...

Scoundreller 4y ago

They both segmented all their real estate into REITs (Choice and Crombie), so a lot of the margin has been pushed there for tax reasons (and to keep the retail operations from tanking the capital, which I think will one day happen, but I'm anti-retail). But it's also true that prices jumped, but margins were unchanged, so they were making more money for the same work. In an efficient market, you'd expect margins to drop. (Unless it can all be explained by inflation of course and that extra money gets you as far as it used to).

smnrchrds 4y ago
> so a lot of the margin has been pushed there It doesn't seem to be the case. I am just gonna look at Loblaw/Choice, but I imagine the other would not be too different. Loblaw had a revenue of 55.25B and a net income of 2.12B [1], bringing the profit margin to 3.84% over the previous 12 months. Choice's revenue was 1.34B [2] over the same period. Even if the entire revenue was pure profit for Loblaw, it would bring Loblaw's profit margin to (2.12 + 1.34) / 55.25 = 6.3%. This seems higher, but still not remotely high enough to explain the price increases. But more importantly, Choice REIT's revenue has been fairly consistent over the past couple of years. There is no sudden increase in the past year or so to coincide with the price increases. So the extra price is NOT getting passed from Loblaw to Choice. Choice gets the same amount it was getting in 2019 more or less. Choice's total revenue has been 1.29B (2019), 1.27B (2020), 1.29B (2021), and 1.28B (past 12 months) [3]. Disclaimer: I am not well-versed in the field of finance, so I may have misunderstood the statistics. Please double-check them from the links below if you so prefer. I do not understand why the revenue in the statistics page is 1.34B, but total revenue in the financials page is 1.28B. But the difference is small enough not to change the conclusions either way. [1] https://ca.finance.yahoo.com/quote/L.TO/key-statistics?p=L.TO https://ca.finance.yahoo.com/quote/L.TO/key-statistics?p=L.T... [2] https://ca.finance.yahoo.com/quote/CHP-UN.TO/key-statistics?p=CHP-UN.TO https://ca.finance.yahoo.com/quote/CHP-UN.TO/key-statistics?... [3] https://ca.finance.yahoo.com/quote/CHP-UN.TO/financials?p=CHP-UN.TO https://ca.finance.yahoo.com/quote/CHP-UN.TO/financials?p=CH...

throw0101c 4y ago

Someone charted the margins for the last twenty years: * https://old.reddit.com/r/ontario/comments/xqigdu/profit_margins_of_canadian_grocers_2002_to_present/ https://old.reddit.com/r/ontario/comments/xqigdu/profit_marg...