Loblaw reported increased profits in the second quarter as the supermarket chain attracted cost-conscious shoppers to its discount stores No Frills and Maxi, according to the company’s announcement on Thursday. The company, based in Brampton, Ontario, disclosed its financial performance for the quarter ending on June 20, revealing that revenue exceeded $15.3 billion, marking a four percent rise from the previous quarter. Profit attributable to common shareholders surged approximately five percent to $751 million.
Loblaw noted a 1.6 percent growth in same-store sales for its primary retail food business, while its pharmacy segment experienced the strongest sales expansion, with same-store sales climbing by 4.6 percent. Executives attributed this growth to a 7.5 percent increase in pharmacy and health-care services, driven by the popularity of generic GLP-1 weight loss medications.
During a conference call with analysts, Chief Financial Officer Richard Dufresne highlighted the positive impact of lower generic drug prices offset by higher volumes, anticipating increased revenue, gross profit dollars, and gross margin rates. The company’s pharmacy unit saw a significant boost in specialty prescription sales, particularly from the introduction of generic GLP-1 drugs, such as Ozemic and Wegovy, following Health Canada’s approval of the country’s first generic semaglutide injection in late April.
Loblaw executives also reported a 40 percent year-to-date increase in GLP-1 drug sales, a trend observed since the previous quarter. CEO Per Bank mentioned that budget-conscious consumers are shifting towards purchasing frozen vegetables over fresh produce due to inflation, with frozen veg sales growing by more than five percentage points in their discount stores. Dufresne emphasized the company’s strong positioning in providing value to customers amidst food price inflation, with No Frills and Maxi stores continuing to outperform competitors in both hard discount and conventional retail segments.
Statistics Canada highlighted a 45.2 percent year-over-year surge in fresh tomato prices, contributing to the shift towards frozen vegetables. Despite this, Loblaw’s internal food inflation metric remains lower than the national grocery CPI. The overall inflation rate in Canada decreased to 2.8 percent in June, with grocery price hikes moderating to 3.9 percent, down from 4.3 percent in May.
Loblaw’s Toronto-listed shares remained relatively stable on Thursday, showing a six percent increase year-to-date.