Canada’s largest grocery and drugstore chains, Loblaw Cos. Ltd., have announced a robust quarterly profit of $508 million for the past three months, showcasing consistent sales growth across its various businesses.
The company reported a notable 31.3 percent increase in net income for the quarter ending on June 17, attributing the substantial rise in profit to a favorable comparison with the same period the previous year when the financial services arm, PC Bank, recorded a one-time charge of $111 million.
Loblaw also revealed that during the quarter, it invested $511 million in repurchasing over four million of its own shares. While this move may not directly impact the business’s operation, it benefits shareholders by reducing the available number of shares, thereby increasing earnings per share.
On an adjusted basis, the company reported a 10.6 percent growth in net earnings, translating to a profit of $1.58 per share, compared to $1.16 per share a year earlier. The company’s overall revenue across all its businesses reached $13.7 billion, representing an impressive increase of $891 million, nearly seven percent higher than the previous year.
One of the standout performers for Loblaw has been its grocery division, which includes popular brands like Loblaws, No Frills, Provigo, and Real Canadian Superstore. These stores recorded a significant 6.1 percent increase in same-store sales. The growth in the food division is particularly driven by discount stores as consumers continue to grapple with persistent high inflation.
However, Loblaw did face some challenges during the quarter, with its gross margin slipping slightly from 31.4 percent to 31.1 percent. This decline was attributed to double-digit increases in supplier costs that were not entirely passed on to consumers, as well as increased losses from shrinkage, a term used to describe product loss due to factors such as shoplifting.
Sales at Loblaw’s drugstore chain, Shoppers Drug Mart, showed a respectable 5.7 percent increase, primarily driven by growth in the pharmacy unit. E-commerce sales also surged across all divisions, recording an impressive 13.9 percent growth during the quarter.
While consumers have expressed concerns about rising food prices, Loblaw emphasized that they have raised retail prices by a smaller margin than the increased costs absorbed from suppliers. According to company chair Galen Weston, suppliers have imposed price hikes exceeding $1 billion, double what would typically be expected. This has led to noticeable price increases in several products compared to just a couple of years ago.
In summary, Loblaw Cos. Ltd. has reported strong quarterly financial results, driven by sales growth in its grocery and drugstore businesses. Despite facing challenges such as supplier cost increases and shrinkage, the company has managed to navigate these obstacles while delivering solid profitability. As consumers continue to grapple with inflation, Loblaw’s strategies and financial performance remain closely watched.