Loblaw reported increased profits in the second quarter as the company continued to attract budget-conscious shoppers to its discount chains No Frills and Maxi. The pharmacy unit saw the strongest sales growth, driven by the popularity of generic GLP-1 weight loss drugs.
The Ontario-based retailer disclosed its financial performance for the quarter ending June 20, with revenue exceeding $15.3 billion, representing a four percent increase from the previous quarter. Profit available to common shareholders rose by five percent to $751 million.
Loblaw noted a 1.6 percent rise in same-store sales for its retail food business, while its drug retail unit, including Shoppers Drug Mart, experienced a 4.6 percent increase in same-store sales, primarily fueled by a 7.5 percent growth in pharmacy and health-care services.
During a conference call with analysts, Chief Financial Officer Richard Dufresne highlighted the impact of generic GLP-1 drugs on the company’s pharmacy performance. The lower pricing of generic drugs was offset by higher volumes, leading to anticipated revenue, gross profit dollar, and gross margin rate increases.
The company executives mentioned a 40 percent year-to-date growth in GLP-1 drug sales, attributing it to brands like Ozemic and Wegovy, following Health Canada’s approval of the country’s first generic semaglutide injection in April.
CEO Per Bank informed analysts that cost-conscious consumers are increasingly opting for frozen vegetables over fresh produce due to inflationary pressures. Frozen vegetable sales have seen significant growth in the company’s discount stores, as shoppers aim to manage rising food costs.
Dufresne emphasized Loblaw’s strong positioning in the market, particularly in the discount segment, as consumers prioritize value amidst persistent food price inflation. The company continues to excel in hard discount sales and outperform peers in conventional retail, with its internal food inflation metric remaining lower than the national grocery inflation rate.
Statistics Canada reported a decline 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 Toronto-listed shares traded relatively unchanged on Thursday, showing a year-to-date increase of around six percent.
