Loblaw, the Canadian grocery giant, reported an increased profit for the second quarter, attributing it to the continued attraction of budget-conscious shoppers to its discount chains, No Frills and Maxi. The company highlighted strong sales growth in its pharmacy unit, emphasizing the impact of generic GLP-1 weight loss drugs.
In its financial report for the three months ending June 20, Loblaw revealed that its revenue exceeded $15.3 billion, marking a four percent increase from the previous quarter. The profit available to common shareholders also saw a five percent rise to $751 million.
The company noted a 1.6 percent growth in same-store sales for its core retail food business, with its drug retail unit, including Shoppers Drug Mart, experiencing a 4.6 percent increase in same-store sales, primarily driven by a 7.5 percent surge in pharmacy and health-care services.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, pointed out that the growth in specialty prescriptions, particularly due to the introduction of generic GLP-1 drugs, is positively impacting pharmacy performance. The lower pricing of generic drugs is being offset by higher volumes, leading to expectations of increased revenue, gross profit dollars, and gross margin rate.
The category of GLP-1 drugs, which includes brands like Ozemic and Wegovy, has witnessed a 40 percent surge in sales year-to-date, a trend that was initially observed in the prior quarter.
CEO Per Bank mentioned that consumers are shifting towards frozen vegetables over fresh ones due to inflation, with a notable price increase in fresh produce. Loblaw’s No Frills and Maxi stores are seeing increased demand for frozen vegetables as customers seek to manage the impact of inflation.
Dufresne highlighted the company’s competitive positioning in the market, especially in the hard discount segment, as customers prioritize value amidst rising food prices. Loblaw’s internal food inflation metric remains lower than the national grocery CPI, reflecting its ability to navigate inflationary pressures effectively.
Recent data from Statistics Canada showed a decrease in the inflation rate to 2.8 percent in June, with grocery price hikes moderating to 3.9 percent from 4.3 percent in May. Loblaw’s shares on the Toronto Stock Exchange remained stable on Thursday, showing a year-to-date gain of approximately six percent.