A slew of new discount stores helped push profit at Loblaw Cos. Ltd. higher in the second quarter, as shoppers continue to seek lower-priced products, a trend the company’s CEO says will remain for the long term.
“Our hard discount stores: They’re doing well and they’re still leading and doing better compared to the rest of the portfolio,” Loblaw chief executive Per Bank told analysts on a conference call Thursday. He said Canadians are increasingly seeking promotions and private-label products, driving up sales at the grocer’s discount stores. “The global shift toward discount retail is a long-term trend and we are leading it here in Canada,” Bank said.
Earlier this year, Loblaw announced its plan to spend $2.2 billion, opening 80 new grocery and pharmacy stores, with about 50 of them being smaller-format discount stores. So far, the company has opened 20 new stores and 23 new pharmacy clinics.
Loblaw reports strong Q2 profit but holds off on raising outlook
The parent company of Loblaws and Shoppers Drug Mart said its net earnings available to common shareholders amounted to $714 million or $2.37 per diluted share for the quarter ended June 14. The result was up from a profit of $457 million or $1.48 per diluted share in the second quarter of 2024.
Despite the upbeat quarterly results, Loblaw did not upgrade its guidance, with chief financial officer Richard Dufresne saying it was too early to do so. “There’s still a lot of uncertainty out there, so we thought it’d be more prudent to wait,” he told analysts. The company could update its financial guidance in its third-quarter results, Dufresne said.
Bank said the company is continuing to strengthen its local supply chain, onboarding another 130 Canadian vendors onto its network.
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Loblaw highlights tariff-hit goods as shoppers shift to Canadian-made products
The ongoing tariff dispute with the United States and the trend of shoppers favouring Canadian made products have led many grocers to increase their local offerings.
Earlier this year, Loblaw began highlighting domestic products in its stores while also marking products that have seen price hikes due “swap and shop” feature to its loyalty app to help shoppers find Canadian products more easily. “As intended, it has helped our customers by clearly identifying tariff items, supporting Canada, and saving money,” Bank said.
Sales volume on items labelled with a “T” were down more than 15%. “There’s some misconception that the tariffs are no longer a factor in grocery,” he said. “Nothing could actually be further from the truth.” Bank said about a third of all supplier cost increase requests are tariff related.
Loblaw’s share price increases
On an adjusted basis, Loblaw said it earned $2.40 per diluted share in its latest quarter, up from an adjusted profit of $2.15 per diluted share a year earlier. Analysts on average had expected an adjusted profit of $2.33 per diluted share, according to LSEG Data & Analytics.
Revenue for the quarter totalled $14.7 billion, up from $13.9 billion, as food retail same-store sales rose by 3.5%. The company said sales growth was driven by new store openings and improved same-store sales, with “impactful promotions driving higher customer engagement.” Drug retail same-store sales rose 4.1%, with pharmacy and health care services same-store sales up 6.2%, and front store same-store sales increasing 1.7%.
RBC analyst Irene Nattel called it “another solid quarter” for the “a string bean ahead of forecast.”
Separately, Loblaw announced a four-for-one stock split, citing continued affordability and accessibility of its shares for investors. Over the past year, Loblaw shares have risen more than 30% to trade just above $220.
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