The chief executive of Canada’s second-largest grocery chain says multinational food suppliers are still passing along price increases that are forcing the cost of groceries up for Canadians, even as inflation ebbs.

“They just can’t be justified,” Empire Co. Ltd. CEO Michael Medline told investors on a Dec. 14 call to discuss the company’s fiscal second quarter earnings. “Inflationary times are not an excuse to pass every single rising cost down to grocers, and most importantly, to Canadians. This is not the way business was conducted before these inflationary times.”

Canada’s grocery giants have been on the hot seat when it comes to rising food prices, with some accusing them of profiteering. Chief executives of Loblaw Companies Ltd., Metro Inc., Empire, Walmart Canada Corp. and Costco Wholesale Canada Ltd. were summoned to Ottawa in September, where the met with MPs including Industry Minister Francois-Philippe Champagne and Deputy Prime Minister Chrystia Freeland before pledging to work to stabilize prices.

Since then, however, the grocers have repeatedly pointed the finger at suppliers for ongoing inflationary pressures.

While stabilizing food prices for Canadians is a “top priority” for Empire, Medline said the grocer cannot keep prices down on its own.

“I’ve got to emphasize that all key players in the food supply chain have a role to play in stabilizing food prices; not only grocery retailers.”

Medline said Empire has noticed customers are feeling the strain of higher interest rates and economic uncertainty and that shoppers began cutting costs in August as a result.

It’s part of the reason the company reported disappointing results in its latest quarter, he said.

Empire reported a modest increase in overall revenue for its fiscal second quarter, but posted lower net earnings despite increased profitability in its core food retailing business.

The grocer, which oversees a network of around 1,600 stores under the Sobeys, Safeway, IGA, Foodland, Longo’s and Farm Boy brands, reported net earnings of $181.1 million for the 13 weeks ending Nov. 4, 2023, down from $189.9 million for the same period last year.

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Sales came in at a record $7.75 billion, up 1.4 per cent from $7.64 billion at the same time last year.

Operating income in the food retailing business rose 9.2 per cent to $301.6 million due to higher sales and gross profit, the company said. It noted that internal food inflation was below the 6.1 per cent figure shown in the Consumer Price Index for food purchased from stores.

“While higher interest rates and overall economic uncertainty are impacting customer purchasing behaviours, the fundamentals of our business remain strong,” Medline said in a press release on Dec. 14. “We continue to attract more customers in our stores, our promotions are constantly improving, and we continue to protect our margins.”

The company also declared a dividend of 18 cents per share, up from 17 cents.

Net income in the quarter was boosted by insurance recoveries of $15.2 million related to a major cyberattack last year.

The 2022 incident stalled self-checkouts and prevented access to gift cards, as well as the company’s Scene+ loyalty program, for a week. Empire had to shut down its pharmacies for four days and some of its operational systems remained offline for several weeks, according to a March 16 earnings update.

The insurance payments were delayed due to the “complexity of cyber insurance coverage and related claims,” management said, adding that it expects additional payouts to continue through the rest of the fiscal year.

Overall, Medline was positive about Empire’s direction.

“While the macro environment continues to be challenging, there’s a lot of momentum in our business,” he said. “We are seeing increased sales momentum … and we are optimistic that this trend will continue as consumers regain confidence.”

• Email: gmvsuhanic@postmedia.com

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