Loblaw reported a stronger profit for the second quarter, driven by increased foot traffic at its discount stores No Frills and Maxi, the company announced on Thursday. However, the largest sales growth was observed in its pharmacy division, attributed to the growing popularity of generic GLP-1 weight loss medications.
The Ontario-based retailer disclosed its financial performance for the quarter ending on June 20, noting revenue exceeding $15.3 billion, marking a four percent increase from the previous quarter. Net profit for common shareholders surged by five percent to $751 million.
Loblaw indicated a 1.6 percent rise in same-store sales for its primary retail food segment. Concurrently, its pharmacy unit, which includes Shoppers Drug Mart, experienced a 4.6 percent increase in same-store sales, primarily fueled by a 7.5 percent surge in pharmacy and health-care services.
During a conference call with analysts, Chief Financial Officer Richard Dufresne highlighted the leading role of specialty prescriptions in driving pharmacy performance. He mentioned the positive impact of generic GLP-1 drugs on the company’s financials, foreseeing increased revenue, gross profit, and margin rate due to lower generic drug pricing offset by higher volumes.
Notably, the GLP-1 drug category, encompassing brands like Ozemic and Wegovy, has seen a 40 percent sales increase year-to-date, as per Loblaw executives’ statements in the previous quarter’s report. CEO Per Bank mentioned a notable shift towards frozen vegetables over fresh produce among budget-conscious shoppers to counter inflationary pressures, with frozen veg sales growing by more than five percentage points at No Frills and Maxi stores.
Dufresne emphasized the competitive positioning of No Frills and Maxi stores in catering to value-conscious customers amidst persistent food price inflation. Loblaw remains focused on gaining market share in the discount segment while outperforming conventional rivals, with their internal food inflation metrics staying below the national grocery CPI.
Recent data from Statistics Canada indicated a decline in the headline inflation rate to 2.8 percent in June, with grocery price hikes easing to 3.9 percent from 4.3 percent in May. Loblaw’s stock traded steadily on Thursday, reflecting a year-to-date increase of approximately six percent.