Loblaw reported an increased profit for the second quarter as the grocery leader continued to attract cost-conscious customers to its discount outlets, No Frills and Maxi, according to a statement made by the company on Thursday. Nonetheless, the most significant sales growth was observed in its pharmacy division, where executives noted that the introduction of generic GLP-1 weight loss medications is having a substantial effect.
The retailer, based in Brampton, Ontario, released its financial results for the quarter ending June 20 on Thursday. According to the company, revenue reached over $15.3 billion, marking a rise of approximately four percent compared to the previous quarter. Profit attributable to common shareholders increased by about five percent to $751 million.
Loblaw indicated that same-store sales—a key metric in the retail sector—increased by 1.6 percent for its primary retail food operation. Concurrently, the company behind Shoppers Drug Mart revealed that its drug retail division experienced a same-store sales growth of 4.6 percent, primarily fueled by a 7.5 percent increase in pharmacy and health-care services.
“Growth in specialty prescriptions is continuing to drive our pharmacy performance. Within this segment, we are starting to observe the effects of generic GLP-1 medications. Although it is still early, initial signs are promising,” stated chief financial officer Richard Dufresne during a conference call with stock market analysts on Thursday morning.
“The decline in generic drug prices is being balanced by increased volumes, and we anticipate higher revenue, greater gross profit dollars, and an improved gross margin rate,” he added.
The GLP-1 category encompasses brands such as Ozemic and Wegovy. In late April, Health Canada authorized the first generic semaglutide injection in the nation.
Loblaw’s executives reported that sales of GLP-1 medications have surged by 40 percent year-to-date, a trend first identified in the previous quarter reported in May.
Consumers turning to more frozen vegetables: CEO
CEO Per Bank mentioned during the call that budget-minded consumers are increasingly choosing frozen vegetables over fresh options due to inflationary pressures. Fresh produce has faced considerable price increases, with Statistics Canada recently reporting a 45.2 percent year-over-year rise in fresh tomato prices.
“We have observed over [five percentage points] growth in frozen vegetables within our hard discount banner,” Bank noted, referring to the No Frills and Maxi stores owned by the company.
“Customers shopping at these stores are attempting to manage their inflation costs.”
Dufresne remarked that the No Frills and Maxi stores are well-positioned as customers continue to seek value amid persistent food price inflation.
“We are continuing to gain market share in hard discount, and we are outperforming our conventional competitors,” he stated. “Our internal food inflation metric remains lower than Canada’s grocery CPI.”
As reported by Statistics Canada, the overall inflation rate dropped to 2.8 percent in June. The federal agency indicated that grocery price hikes slowed to 3.9 percent last month, a decrease from 4.3 percent in May.
Shares of Loblaw, listed on the Toronto Stock Exchange, remained relatively stable on Thursday. The stock has appreciated by approximately six percent since the beginning of the year.