Food Prices Set To Rise As Additional Costs Hit Grocers, Says Sobeys Executive

U.S. tariffs, a higher minimum wage and rising freight fees are conspiring to increase food prices in Canada, warns Empire Company Ltd. (TSX.EMP.A), the parent of grocery store chain Sobeys.

Michael Medline, Chief Executive Officer of Empire Co., said this week that increased costs such as tariffs and higher employee salaries will inevitably be passed onto Canadian consumers in the form of higher sale prices on food items.

"It's clear with what's going on in terms of transportation cost and tariff-related cost that our expectation — although we're not economists — is that there will be some inflation," he said during a conference call with analysts on Thursday.

Medline added that many of Sobeys national suppliers send the company letters on a weekly basis asking if they can pass onto consumers the price hikes that have resulted because of U.S. tariffs.

Rising freight charges and increases in minimum wage in multiple provinces are adding pressure to grocery retailers as well, said Medline. Sobeys is doing what it can to hold off on price hikes, he added, but admitted the grocer will have to pass some through in order to remain competitive. Sobeys' biggest competitors have made similar predictions. Loblaw Companies Ltd. (TSX: L) and Metro Inc. (TSX: MRU) have each predicted higher prices in the near future due to U.S. tariffs.

Medline's comments came as the company reported a first-quarter profit of $95.6 million, up from $54 million a year ago. The profit amounted to 35 cents per share for the quarter ended August 4, compared with a profit of 30 cents per share in the same quarter last year. Sales totaled $6.46 billion, up from $6.27 billion.