Shoppers Drug Mart again proved to be a catalyst as Loblaw Cos. reported higher retail sales for its fiscal 2019 fourth quarter and full year, though the Canadian food and drug retailer missed analysts’ earnings estimates.
In the 12-week fourth quarter ended Dec. 28, retail sales totaled $11.32 billion (Canadian), up 3.1% from $10.98 billion a year earlier, Loblaw said Thursday. Excluding the consolidation of franchises, retail sales advanced 2.7% year over year, the company noted.
Food retail sales rose 2.7% to $7.96 billion from $7.75 billion in the quarter, with same-store sales edging up 1.9%. Backing out the impact of the timing of Thanksgiving, food comparable-store sales growth came in at 0.8%, according to Loblaw. The company said supermarkets’ food and pharmacy sales growth was moderate during the quarter, while the food retail basket and traffic increased.
Drug retail sales, covering Loblaw’s Shoppers Drug Mart division, climbed 4.2% to $3.36 billion from $3.23 billion. Same-store sales, lifted in part by the timing of Thanksgiving, were up 3.9%, reflecting gains of 2.2% in the front end and 6.1% in the pharmacy. Prescription count increased 3.2% overall and 3.1% on a comparable-pharmacy basis. Year over year, the average prescription value grew 2.4%, Loblaw said.
For all of fiscal 2019, retail sales came in at $47.1 billion, up 2.8% from $45.84 billion in 2018. The gain was 2.2% excluding franchise consolidation.
Full-year food retail sales increased 2.4% to $33.76 billion, and same-store sales inched up 1.1%. Results reflected moderate food and flat pharmacy sales growth for the period, as well as a bigger basket size and decreased traffic, according to Loblaw.
Fiscal 2019 drug retail sales totaled $13.34 billion, up 3.7% from a year ago. Comp-store sales rose 3.6%, including increases of 2.9% in the front end and 4.4% in the pharmacy. The number of prescriptions filled rose 3.2% overall and 3.1% on a same-store basis. Average prescription value gained 0.7%.
“In Q4, we continued our positive trading momentum. Shoppers [Drug Mart] delivered another impressive quarter with continued leadership in beauty, strong performance in cold and flu, and the best pharmacy comps that we've seen in five years led by strong script count growth,” Loblaw President Sarah Ruth Davis told analysts in a conference call on Thursday.
“In our food business, you may remember from our Q3 call that we reported an improved trajectory for food tonnage and sale. That continued in Q4,” she said. “We invested in sales by promoting items in key weeks, lowering prices in the right market and giving more relevant offers to our customers. We are pleased with the result. Our tonnage share, basket and traffic all increased in the quarter. Our ability to generate sales and hold market share with stable margins is key as we expect competitive pressures to continue in 2020.”
Davis noted that Loblaw’s brand, stores and digital services are well-positioned, as shown by the strides being made in e-commerced.
“We have continued to refine our food, pharmacy, beauty and apparel e-commerce businesses, improving customer service by shortening the wait time between clicking an order and receiving it. Our customers rewarded us in 2019 with more than $1 billion in e-commerce sales almost double that of the previous year,” she explained in the call. “While we often refer to our online food business, the impressive growth in e-commerce is right across the board, including mass and prestige cosmetics, prescriptions and services. We are assembling the right pieces to lead in everyday digital retail. With increasing stability in our base business and confidence in our strategy, we continue to invest for the future. We are investing in infrastructure, announcing the closure of two aging DCs, and migrating to a modern facility four times more productive.”
Loblaw posted overall revenue of $11.59 billion (+3.3%) for the 2019 fourth quarter and $48.04 billion (+2.9%) for the full year.
At the bottom line, fourth-quarter net income from continuing operations (available to common shareholders) was $254 million, or 70 cents per diluted share, compared with $228 million, or 61 cents per diluted share, a year earlier. Adjusted net earnings from continuing operations (common shareholders) came in at $395 million, or $1.09 per diluted share, versus $388 million, or $1.03 per diluted share, in the prior-year period.
Full-year 2019 net income from continuing operations (common shareholders) totaled $1.07 billion, or $290 per diluted share, compared with $707 million, or $1.87 per diluted share, in 2018. On an adjusted basis, net earnings from continuing operations (common shareholders) were $1.52 billion, or $4.12 per diluted share, versus $1.54 billion, or $4.06 per diluted share, a year ago.
Analysts, on average, had projected Loblaw’s fiscal 2019 adjusted EPS at $1.12 for the fourth quarter and $4.18 for the full year, according to Zacks Investment Research.
“At the close of 2019, I'm satisfied with our progress. Our results reflect the challenges of a competitive marketplace with a strong strategic plan,” Loblaw Cos. Chairman and CEO Galen Weston said in the analyst call. “Sales have been hard-won as we made meaningful adjustments to our merchandising and promotional programs throughout the year. At the same time, our industry is in a transitional phase with new cost pressures, potential competitive disruption and exciting new opportunities. We will continue investing in those opportunities with conviction as we see a number of them begin to bear fruit.”
Over the past 12 months, Loblaw opened 15 food and drug stores and closed six locations, accounting for a 0.6% net gain in total retail square footage.
As of the 2019 fiscal year-end, the company’s retail network encompassed 2,431 stores, including 548 corporate-owned supermarkets under multiple banners, 540 franchised grocery stores and 1,343 Shoppers Drug Mart/Pharmaprix associate-owned drugstores.