Canadian grocery companies are anticipating a challenging year in 2018 due to a number of headwinds that have emerged. First was the purchase of Whole Foods Market, Inc. by Amazon.com, Inc. Grocers have been quick to rollout e-commerce options to buyers to get ahead of Amazon’s own offerings.
Loblaw Companies Ltd. (TSX:L) stock recently took a hit after the company revealed an internal bread price-fixing scheme that had operated from 2001 to 2015. Loblaw responded by removing the employees responsible. Its stock has fallen 3.7% in 2017 thus far.
Loblaw Companies leadership has also warned that the new Ontario minimum wage laws will result in heightened operating costs upwards of $150 million in 2018. The company recently laid off 500 office workers in an effort to cut costs, but said that it expects to create more jobs in the near future. The stock offers a quarterly dividend of $0.27 per share representing a 1.5% dividend yield.
Shares of Montreal-based Metro Inc. (TSX:MRU) have moved up 0.95% in 2017. Metro also announced that it would cut 280 jobs by 2021 as part of a modernization initiative. Leadership is confident that operating costs from minimum wage hikes in Ontario will be offset by pressure applied to competitors.
Metro announced in November that it would scale back store hours while also expanding its e-commerce service into Ontario. The stock boasts a dividend of $0.16 per share with a 1.6% dividend yield at offering.
Modest dividends and headwinds in the grocery industry should drive investors to seek out better options for capital growth and income in 2018.
