Loblaw, a major grocery retailer, reported an increased profit for the second quarter due to the success of its discount chains, No Frills and Maxi, in attracting budget-conscious shoppers. Notably, the company experienced significant sales growth in its pharmacy unit, driven by the popularity of generic GLP-1 weight loss drugs.
The Ontario-based company disclosed its financial performance for the quarter ending on June 20, with revenue reaching over $15.3 billion, marking a four percent increase from the previous quarter. Profit available to common shareholders also saw a five percent rise, reaching $751 million.
Loblaw reported a 1.6 percent increase in same-store sales for its core retail food business and a notable 4.6 percent growth in its drug retail unit, particularly in pharmacy and health-care services, under the Shoppers Drug Mart brand.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, highlighted the impact of generic GLP-1 drugs on the company’s pharmacy performance. Dufresne expressed optimism about the potential benefits of lower generic drug pricing offset by higher volumes, anticipating elevated revenue, gross profit dollars, and gross margin rate.
GLP-1 drug sales, including brands like Ozemic and Wegovy, have surged by 40 percent year-to-date, a trend observed since the previous quarter. Additionally, Loblaw CEO Per Bank noted an increasing preference for frozen vegetables over fresh produce among cost-conscious consumers due to inflationary pressures on fresh food items.
Bank emphasized the growth in frozen vegetable sales at No Frills and Maxi stores, as customers seek ways to manage rising food costs. Dufresne reiterated that Loblaw’s discount stores remain competitive in providing value to customers amidst food price inflation.
The company continues to excel in the hard discount sector and outperform its competitors in conventional retail. Furthermore, Loblaw’s internal food inflation metric remains lower than the national grocery CPI, aligning with a decrease in the headline inflation rate to 2.8 percent in June, as reported by Statistics Canada.
Loblaw’s stock traded relatively unchanged on Thursday, maintaining a year-to-date gain of approximately six percent.
