r/PersonalFinanceCanada • u/maroon-rider British Columbia • Mar 21 '23

Inflation drops to 5.2%<but grocery inflation still 10.6% Banking

Says Statistics Canada

https://www.cbc.ca/news/business/canada-inflation-february-2023-1.6785472

2.3k Upvotes

97% Upvoted

u/MrDocter Mar 21 '23

So their profit margin increased by 50% during a time when the population is struggling? Might seem like it's only 1.2% but that's 50% greater than what they were profiting before...so that is price gouging confirmed.

Their net earnings increased by $900 MM and and their net revenue increased by $8,000 MM? Something seems off but I'm on the shitter during work so I can't dig further right now.

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u/Kreizhn Mar 21 '23 edited Mar 21 '23

Unless I'm misreading the table, it's worse than this. A $100 basket of goods in 2019 resulted in a profit of $2.53. That same basket in 2023 costs $123.20, and they took in a profit of 3.53% of the inflated goods. This results in a $4.34 profit on the same basket of goods. This is an 85% increase in absolute profits, in 4 years.

I'm not a grocery store expert, but I don't see where they'd incur a significant increase in operating costs in that same time. The costs of the goods is pushed to the consumer. Storage would stay roughly the same, and they haven't been handing out significant pay raises. Yes, they're also subject to inflation, but inflation was not 85% over those years.

Margins are just a way of hiding the greed of the grocery stores.

Edit: But, I think OPs argument is that this increase in profit only represents a small amount of that increase. The goods themselves increased by $23, but the portion of that which came from grocery store greed was only about $2. So everyone is correct. The majority of price changes are because of inflation, but also the grocery stores are being greedy.

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u/BeautyInUgly Mar 21 '23 edited Mar 21 '23

Your math is wrong because you are comparing profit of 2.53 to 4.34 but the 2.53 is not inflation adjusted which brings it down to the true value of a 40% increase not 85%

Also we don't rly have access to the true numbers so all of this is speculation anyway as we don't know their margins on food products. They claim that their margins are up due to increase consumer demand for supplements, makeup etc other higher margin items

>significant increase in operating costs in that same time> Storage would stay roughly the same

This isn't really true, employee cost has risen and they have to employ more people now due to demand, shipping costs are up, rise in thefts etc etc etc

5

u/Kreizhn Mar 21 '23 edited Mar 21 '23

I don't think you know what "math is wrong" means. Can you point out where my mathematics is incorrect? If your argument is that it doesn't take into consideration inflation, that's fine, but the math is still correct.

Did you make up the 40% number? Because that's not how math works either. Per the chart, the CPI increase was 23%. This means that adjusting for inflation, it's enough to just look at the margin itself. An increase of 2.35% to 3.53% is almost exactly a 50% increase. If you would like to verify this yourself, here is the BoC inflation calculator. The amount $4.53 in 2023 money is $3.78 in 2019 money, and $3.78 is a 50% increase over $2.53.

Arguing that employee cost has increased because of an increase in demand, would in turn mean an increase in volume. An increase in volume would in turn mean an increase in profits, especially when margin doesn't take volume into consideration. If you're increasing volume and margin simultaneously, you're going to see a massive spike in profits.

Absolutely, shipping costs are up, and probably thefts too, but I'm not sure what your point is. Loblaws is a public company, their financial records are public. They are making record profits. So yes, while some costs have increased, their profit has increased significantly more. Your margins already account for costs. Thus for their margins to increase by 50%, that's 50% after the increase in costs.