Loblaw, a major grocery retailer based in Brampton, Ontario, announced increased profits in the second quarter, driven by strong sales at its discount chains No Frills and Maxi. However, the most significant sales growth was seen in its pharmacy unit, attributed to the popularity of generic GLP-1 weight loss medications.
For the three months ending June 20, Loblaw reported 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 during the same period.
The company’s core retail food business experienced a 1.6 percent increase in same-store sales, while its drug retail segment, including Shoppers Drug Mart, recorded a 4.6 percent growth in same-store sales, primarily fueled by a 7.5 percent rise in pharmacy and health-care services sales.
Loblaw’s chief financial officer, Richard Dufresne, highlighted the growth in specialty prescription sales, especially in the GLP-1 drug category, which has recently seen the introduction of generic versions. Dufresne mentioned that despite lower generic drug prices, higher volumes are expected to drive increased revenue, gross profit dollars, and gross margin rates.
The GLP-1 drug category encompasses brands like Ozemic and Wegovy, with Health Canada approving the country’s first generic semaglutide injection in late April. Loblaw executives reported a 40 percent year-to-date increase in GLP-1 drug sales, a trend noted in the previous quarter as well.
During an analyst call, Loblaw’s CEO, Per Bank, observed a shift in consumer behavior towards purchasing frozen vegetables over fresh produce due to inflation concerns. Bank noted a significant increase in frozen vegetable sales at No Frills and Maxi stores, as customers seek ways to manage rising food prices.
Dufresne emphasized that No Frills and Maxi stores are strategically positioned to cater to value-conscious customers amidst ongoing food price inflation. The company continues to gain market share in the hard discount segment, outperforming competitors in conventional retail. Internal metrics show Loblaw’s food inflation rate remains lower than the national grocery consumer price index.
According to Statistics Canada, the inflation rate in June decreased to 2.8 percent, with grocery price hikes moderating to 3.9 percent from 4.3 percent in May. Loblaw’s Toronto-listed shares traded steadily on Thursday, reflecting a six percent year-to-date increase.