Loblaw, a major grocery retailer, reported higher profits in the second quarter, driven by increased sales at its discount chains No Frills and Maxi. The company also experienced strong growth in its pharmacy unit, attributed to the popularity of generic GLP-1 weight loss medications.
Based in Brampton, Ontario, Loblaw disclosed its financial performance for the quarter ending June 20, with revenue exceeding $15.3 billion, marking a four percent increase from the previous quarter. Profit available to common shareholders rose by five percent to $751 million.
The company noted a 1.6 percent growth in same-store sales for its core retail food business, while its drug retail unit, including Shoppers Drug Mart, saw a 4.6 percent increase in same-store sales, primarily due to a 7.5 percent surge in pharmacy and health-care services.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, highlighted the impact of generic GLP-1 drugs on pharmacy performance, anticipating higher revenue and gross profit margins despite lower generic drug pricing offset by increased volumes.
Notably, sales of GLP-1 drugs like Ozemic and Wegovy have surged by 40 percent year-to-date, following Health Canada’s approval of the country’s first generic semaglutide injection in April.
CEO Per Bank mentioned that cost-conscious consumers are opting for frozen vegetables over fresh produce due to inflation, with frozen vegetable sales experiencing over five percent growth in No Frills and Maxi stores, as shoppers seek to manage rising food costs.
Dufresne emphasized Loblaw’s strong positioning in the market, particularly in hard discount stores, where the company continues to attract value-focused customers amid food price inflation. Despite the challenging market conditions, Loblaw’s internal food inflation metric remains lower than the national grocery CPI.
Statistics Canada reported a decrease in the inflation rate to 2.8 percent in June, with grocery price hikes moderating to 3.9 percent, down from 4.3 percent in May. Loblaw’s stock, listed on the Toronto exchange, traded flat on Thursday, with a year-to-date gain of approximately six percent.