Loblaw, headquartered in Brampton, Ontario, reported a stronger profit for the second quarter, driven by increased sales at its discount chains No Frills and Maxi, in addition to robust growth in its pharmacy division influenced by the emergence of generic GLP-1 weight loss medications.
The company disclosed its financial performance for the three-month period ending June 20, revealing a revenue surpassing $15.3 billion, marking a four percent rise compared to the preceding quarter. Profit attributable to common shareholders surged by approximately five percent to $751 million.
Loblaw noted a 1.6 percent increase in same-store sales for its primary retail food segment, while its drug retail sector, including Shoppers Drug Mart, experienced a 4.6 percent growth in same-store sales, primarily fueled by a 7.5 percent uptick in pharmacy and health-care services.
During a conference call with stock market analysts, Chief Financial Officer Richard Dufresne highlighted the leading role of specialty prescriptions in the pharmacy’s performance, particularly emphasizing the impact of generic GLP-1 drugs. He indicated that lower generic drug prices were being offset by higher volumes, anticipating elevated revenue, gross profit dollars, and gross margin rate.
The rise in sales of GLP-1 drugs, such as Ozemic and Wegovy, has been significant, climbing by 40 percent year-to-date according to Loblaw executives. This growth trend was initially observed in the prior quarter, as reported in May.
CEO Per Bank mentioned that cost-conscious consumers are increasingly opting for frozen vegetables over fresh produce due to inflationary pressures, with fresh tomatoes experiencing a substantial 45.2 percent year-over-year price surge, as per Statistics Canada data. The preference for frozen vegetables has seen notable growth in Loblaw’s No Frills and Maxi stores.
As customers continue to prioritize value amidst persistent food price inflation, Dufresne highlighted the strong positioning of No Frills and Maxi stores within the market, emphasizing their ability to cater to value-conscious shoppers effectively.
Despite the economic landscape, with Statistics Canada reporting a 2.8 percent inflation rate in June, Loblaw’s performance remains solid, with its shares trading relatively stable on Thursday. Year-to-date, the stock has shown a six percent increase in value.