Loblaw, a major grocery retailer, reported a higher profit in the second quarter driven by increased sales at its discount chains No Frills and Maxi, as well as growth in its pharmacy unit due to the popularity of generic GLP-1 weight loss medications. The company, headquartered in Brampton, Ontario, revealed its financial results 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 also rose by five percent to $751 million.
Loblaw noted a 1.6 percent increase in same-store sales for its core retail food business, while its drug retail unit, including Shoppers Drug Mart, experienced a 4.6 percent growth in same-store sales, primarily fueled by a 7.5 percent surge in pharmacy and health-care services.
During a conference call with stock market analysts, Loblaw’s chief financial officer, Richard Dufresne, highlighted the leading performance of specialty prescriptions in the pharmacy segment, particularly due to the emergence of generic GLP-1 drugs. Dufresne emphasized that lower generic drug prices are being offset by higher volumes, projecting increased revenue, gross profit dollars, and gross margin rates.
The GLP-1 drug category, which includes brands like Ozemic and Wegovy, has seen a 40 percent increase in sales year-to-date, following Health Canada’s approval of the country’s first generic semaglutide injection in late April.
CEO Per Bank mentioned that cost-conscious consumers are turning to frozen vegetables over fresh produce due to inflation, with frozen vegetable sales experiencing more than a five percentage point growth at No Frills and Maxi stores. Dufresne added that Loblaw’s discount stores are well-positioned to cater to customers seeking value amidst food price inflation.
Despite challenging market conditions, Loblaw continues to excel in the hard discount sector, outperforming competitors in the conventional grocery market. The company’s internal food inflation metric remains lower than the national grocery consumer price index (CPI).
Statistics Canada reported that Canada’s inflation rate decreased to 2.8 percent in June, with grocery price hikes moderating to 3.9 percent from 4.3 percent in May. Loblaw’s stock traded steadily on Thursday, showing a year-to-date gain of approximately six percent.