Loblaw reported increased profits in the second quarter as it continued to attract cost-conscious shoppers to its discount stores No Frills and Maxi, the company announced. Notably, the pharmacy segment experienced robust sales growth, driven by the popularity of generic GLP-1 weight loss medications.
The Brampton-based retailer disclosed its financial performance for the three months ending June 20, highlighting a revenue surpassing $15.3 billion, marking a four percent increase from the previous quarter. Net profit available to common shareholders surged by five percent to $751 million.
Loblaw noted a 1.6 percent rise in same-store sales for its primary retail food business, while its drug retail unit, which includes Shoppers Drug Mart, reported a 4.6 percent increase in same-store sales, primarily fueled by a 7.5 percent growth in pharmacy and health-care services.
During a conference call with market analysts, Chief Financial Officer Richard Dufresne emphasized the leading role of specialty prescription growth in driving pharmacy performance. Dufresne highlighted the positive impact of generic GLP-1 drugs on revenue, gross profit, and gross margin rate, driven by increased volumes despite lower pricing.
The GLP-1 drug category, encompassing brands like Ozemic and Wegovy, has witnessed a significant uptick in sales, with Loblaw executives noting a 40 percent increase year-to-date. Health Canada recently approved the country’s first generic semaglutide injection in late April, contributing to this growth trajectory.
CEO Per Bank mentioned that price-conscious consumers are opting for frozen vegetables over fresh produce due to inflationary pressures, with significant price spikes observed in fresh items. Frozen vegetable sales at No Frills and Maxi stores have seen notable growth, reflecting customers’ strategies to counter inflation.
Despite food price inflation challenges, Loblaw’s No Frills and Maxi stores continue to resonate with consumers seeking value, outperforming industry peers in the hard discount and conventional segments. The company’s internal food inflation metric remains lower than the national grocery inflation rate.
Recent data from Statistics Canada indicated a decline in the headline 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 Toronto-listed shares traded relatively stable on the day, with a year-to-date gain of approximately six percent.