Loblaw, a major grocery retailer based in Brampton, Ontario, reported a higher profit for the second quarter, driven by increased foot traffic at its discount chains No Frills and Maxi. The company highlighted robust sales growth in its pharmacy division, attributing it to the popularity of generic GLP-1 weight loss medications.
In the financial results released for the quarter ending June 20, Loblaw disclosed a revenue of over $15.3 billion, marking a four percent increase from the previous quarter. Net profit attributable to common shareholders rose by five percent to $751 million.
The company noted a 1.6 percent rise in same-store sales for its core retail food business and a more significant uptick of 4.6 percent in its drug retail unit, including Shoppers Drug Mart. This growth was primarily fueled by a 7.5 percent increase in pharmacy and health-care services sales.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, emphasized the positive impact of generic GLP-1 drugs on the pharmacy segment’s performance. He mentioned that the lower pricing of generic drugs was offset by higher sales volumes, leading to anticipated growth in revenue, gross profit, and gross margin rate.
The company highlighted the increasing demand for GLP-1 medications like Ozemic and Wegovy, following Health Canada’s approval of the first generic semaglutide injection in April. Loblaw executives reported a 40 percent year-to-date surge in GLP-1 drug sales, building on the momentum from the previous quarter.
CEO Per Bank mentioned a shift in consumer behavior towards frozen vegetables over fresh produce due to inflationary pressures. Customers at No Frills and Maxi stores are opting for frozen options, with a notable growth in sales. Dufresne reiterated Loblaw’s focus on offering value to customers amidst rising food prices, positioning their stores well in the market.
Despite inflation concerns, Loblaw remains competitive, gaining market share in the hard discount segment and outperforming rivals in conventional retail. The company’s internal food inflation metric continues to be lower than the national grocery inflation rate.
Recent data from Statistics Canada indicated a decline in the inflation rate to 2.8 percent in June, with grocery price hikes easing to 3.9 percent from the previous month. Loblaw’s stock, listed on the Toronto exchange, traded steadily on Thursday, reflecting a year-to-date increase of approximately six percent.