Loblaw, a major grocery chain, reported increased profits in the second quarter driven by strong sales in its discount chains No Frills and Maxi, as well as robust growth in its pharmacy unit influenced by the popularity of generic GLP-1 weight loss medications.
The Ontario-based retailer disclosed its financial performance for the quarter ending June 20, with revenue exceeding $15.3 billion, marking a four percent rise from the previous quarter. Profit attributable to common shareholders surged 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, which includes Shoppers Drug Mart, experienced a 4.6 percent rise in same-store sales, primarily fueled by a significant 7.5 percent growth in pharmacy and health-care services.
During a conference call with analysts, Chief Financial Officer Richard Dufresne highlighted the impact of generic GLP-1 drugs on pharmacy performance, emphasizing the positive early signs such as increased revenue and gross profit dollars despite lower generic drug pricing.
The company pointed out a 40 percent year-to-date surge in GLP-1 drug sales, with brands like Ozemic and Wegovy leading the category following Health Canada’s approval of the country’s first generic semaglutide injection in late April.
In response to consumer behavior amid inflation, Loblaw’s CEO Per Bank mentioned a shift towards frozen vegetables over fresh produce, attributing this trend to cost concerns. He noted a notable growth in frozen vegetable sales in the company’s discount stores, where customers are seeking ways to manage their expenses amidst rising food prices.
Dufresne emphasized Loblaw’s competitive positioning in delivering value to customers amid persistent food price inflation, with the company’s hard discount stores performing well compared to conventional retailers.
Despite economic fluctuations, Loblaw’s stock traded steady on Thursday, reflecting a six percent increase year-to-date on the Toronto stock exchange.