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Loblaw notches food, drug retail sales gains in Q2

Executives cite top-line pressure as Canadian grocer laps pandemic-fueled increases last year

Russell Redman

July 28, 2021

5 Min Read
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Loblaw noted that its two-year food retail sales compound annual growth rate was 6.3% through the fiscal 2021 second quarter.Gatik

Gains in both the food and drug channels lifted retail sales for Loblaw Cos. in its fiscal 2021 second quarter, and per-share earnings exceeded analysts’ forecast.

Loblaw said Wednesday that retail sales in the 12-week quarter ended June 19 totaled $12.28 billion (Canadian), up 4.4% from $11.77 billion a year earlier. 

Food retail sales edged up 1.5% to $8.88 billion from $8.75 billion a year ago, though same-store sales were virtually flat, down 0.1%. The comparable-store dip followed a 10% gain in the fiscal 2020 quarter, which was fueled by pandemic-driven consumer demand, Loblaw noted, adding that its two-year food retail sales compound annual growth rate (CAGR) was 6.3%. Basket size was down and traffic was up on a comparable basis for the quarter.

Richard Dufresne-Loblaw.png“Food retail same-store sales were flat in the quarter. The market declined slightly against same-store sales growth of 19% last year, while discount same-store sales were positive,” Loblaw Chief Financial Officer Richard Dufresne (left) told analysts in a conference call on Wednesday. 

“Our average article price was up 1.4% for the quarter and declined from 3.9% in Q1. The increase in average article price compared to last year was mainly driven by sales mix. Loblaw’s CPI comparable inflation rate was less than 1% in the first half of 2021,” said Dufresne, who also is president and CFO of George Weston Ltd., Loblaw’s parent company. “Traffic improved in Q2, recording growth for the first time since the beginning of the pandemic. On a two-year rate, food same-store sales reflected average growth of 5.6%.”

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Drug retail sales, from Loblaw’s Shoppers Drug Mart chain, came in at $3.4 billion, up 12.7% from $3.02 billion in the prior-year period. Sales rose by 5.3% to $1.75 billion in the front end and by 21.7% to $1.66 billion in the pharmacy. Comparable pharmacy sales surged by 9.6%, including gains of 3.6% in the front end and 17.2% in the pharmacy.

Prescription count grew 1.9% overall and inched up 0.3% on a comp-store basis, Loblaw reported. Average prescription value increased 18.3%, following an 11.2% decrease a year earlier.

“Front-store sales saw some momentum from cosmetics and OTC categories as [pandemic] restrictions loosened, recording strong growth compared to last year,” Dufresne said. “Pharmacy performance was strong, lapping volatility of day supply restriction in the prior year. On a two-year average rate, drug same-store sales have grown 5.7%, with front store at 4.6% and Rx at 6.9%.”

E-commerce sales dipped in the second quarter after a 133% year-over-year jump in the 2021 first quarter and a big gain in the 2020 second quarter.

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“Our online business continued to operate at penetration levels well above pre-COVID rates. After record growth of 280% in Q2 last year, sales declined 0.5% versus Q2 of last year,” Dufresne said in the call. “That said, online sales increased in the mid-single digits versus Q1. We remain focused on driving customer metrics and delivered sequential improvements in both customer-facing metrics and profitability.”

For the 24-week fiscal 2021 first half, retail sales totaled $23.95 billion, up 2.6% versus a year ago. Food retail sales advanced 1.6% to $17.36 billion, with same-store sales flat. Shoppers Drug Mart’s first-half sales totaled nearly $6.6 billion, a gain of 5.1%. Comp-store sales rose 3.8%, including an increase of 10% in the pharmacy and a decrease of 1.4% in the front of the store. 

Galen_Weston-Loblaw_Companies_CEO_0.jpg“Our grocery divisions performed well in the first part of the [second] quarter, aided by COVID restrictions that kept Canadians eating at home during the spring and early summer. This translated into strong market share demonstrating the underlying health of our business. As communities across the country began opening up, we were particularly pleased with the re-emergence of value-seeking shopping trips, which was good for our discount formats,” Loblaw Chairman and President Galen Weston (left) told analysts during the call. 

“Our drugstore business was also impacted by the pandemic,” he said. “Spring cough-and-cold season was virtually nonexistent due to the mask usage and social distancing. On the other hand, allergy season was particularly robust, as people rushed outside at the first hint of spring. And we’re seeing customers return to our beauty counters as communities open up.”

At the bottom line, fiscal 2021 second-quarter net income (available to common shareholders) came in at $375 million, or $1.09 per diluted share, compared with $688 million, or $1.99 per diluted share, in the prior-year period, when pandemic-driven demand hoisted profits, Loblaw reported. Adjusted net earnings for common shareholders totaled $464 million, or $1.35 per diluted share, versus $856 million, or $2.48 per diluted share, a year earlier.

Analysts, on average, had projected adjusted earnings per share of $1.17, with estimates ranging from $1.07 to $1.36, according to Refinitiv.

“As we look forward, the good news of an increasingly vaccinated nation and a far less restricted life for Canadians will change our business yet again, and it is difficult to predict exactly what the magnitude of those impacts will be,” said Weston, who also serves as chairman and CEO of George Weston Ltd. “We expect our Shoppers [Drug Mart] business to grow stronger as some of its most important categories, like beauty and pharmacy, return to a more normal run rate. We expect our e-commerce business to shift from headwind to tailwind. And we expect a return of value-focused shopping to deliver a relative benefit for our discount format. However, we also know that our entire business will face top-line pressure as we lap the elevated sales from COVID."

Loblaw said it opened 20 nine food and drug stores and closed nine. As of the second quarter’s end, the company’s retail network encompassed 2,442 stores, including 548 corporate-owned supermarkets under multiple banners, 548 franchised grocery stores and 1,346 Shoppers Drug Mart/Pharmaprix associate-owned drugstores.
 

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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