Loblaw, a leading grocery retailer, reported a stronger profit in the second quarter, driven by increased foot traffic at its discount chains No Frills and Maxi. The company also saw robust sales growth in its pharmacy segment, attributed to the popularity of generic GLP-1 weight loss medications.
Based in Brampton, Ontario, Loblaw released its financial results for the quarter ending June 20, revealing a revenue surpassing $15.3 billion, marking a four percent increase from the previous quarter. Profit available to common shareholders surged by five percent to $751 million.
The company disclosed that same-store sales for its core retail food business rose by 1.6 percent, while its drug retail unit, which includes Shoppers Drug Mart, reported a substantial 4.6 percent increase in same-store sales, propelled by a 7.5 percent growth in pharmacy and health-care services.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, highlighted the significant impact of generic GLP-1 medications on the pharmacy performance. Dufresne noted that lower generic drug prices were being offset by higher volumes, leading to anticipated growth in revenue, gross profit dollars, and gross margin rate.
The company noted a 40 percent year-to-date increase in GLP-1 drug sales, reflecting a trend observed in the previous quarter. Loblaw’s CEO, Per Bank, mentioned that cost-conscious consumers were opting for frozen vegetables over fresh produce due to inflationary pressures, with frozen vegetable sales experiencing solid growth at No Frills and Maxi stores.
Dufresne emphasized that No Frills and Maxi outlets remained well-positioned to cater to value-seeking customers amidst persistent food price inflation. Loblaw’s continued success in the hard discount sector and its outperformance in conventional retail were highlighted, with internal food inflation metrics remaining lower than Canada’s grocery CPI.
Statistics Canada reported a drop in the headline inflation rate to 2.8 percent in June, with grocery price increases moderating to 3.9 percent from 4.3 percent in May. Loblaw’s shares on the Toronto Stock Exchange remained relatively stable on Thursday, with a year-to-date gain of approximately six percent.