Loblaw Companies Limited

COVID-19 spurred food retail same-store sales growth of 10 per cent in the second quarter of 2020 and e-commerce sales surged with Loblaw Companies’ push on e-commerce resulting in a significant year-to-date basis spike of 280 per cent. E-commerce sales reached $1.2 billion, and the company announced plans to “expand capacity and enhance its same-day service” for its e-commerce business.

Revenue in Q2 increased 7.4 per cent to $11,957 million when compared to the second quarter of 2019 with retail segment sales climbing almost 8 per cent to $11, 768 million. While revenue increaed, profits declined becasue of COVID-19 related costs.

“Loblaw delivered strong operational performance, as both our base business and strategic growth pillars performed well amidst the extraordinary conditions brought on by COVID-19," says Galen G. Weston, executive chairman, Loblaw Companies Limited. "Significant investments in the safety and wellbeing of everyone in our stores delivered against customer expectations, despite negatively impacting earnings. At the same time, the company considerably strengthened its position in e-commerce as online grocery sales surged 280 per cent."

While acknowledging that COVID-19 investments of approximately $282 million, including $180 million related to compensation costs impacted financial performance, Weston says the pandemic accelerated longer-term trends that support Loblaw’s “strategic growth areas of Everyday Digital, Connected Healthcare and Payment and Rewards. The Company’s investments in its Everyday Digital platforms have allowed it to offer Canadians a choice of shopping in-store or online with either home delivery or convenient pickup locations.”

“As expected, profit declined year over year in the quarter as the strong growth in sales was insufficient to overcome substantial COVID-19 related costs in the quarter,” says Weston. “In total, the company invested $282 million to protect and benefit colleagues and customers, with approximately $180 million related to temporary pay premium costs which included a one-time bonus for store and distribution centre colleagues of $25 million. As the Company exited the second quarter, it continued to incur COVID-19 related costs to enhance the safety and security of its customers and colleagues, although at a lower rate of investment than in the second quarter, reflecting a greater degree of stability in store and distribution centre operations.”

Loblaw food retail sales were $8,747 million with same-store sales growth of 10.0 per cent (2019 – 0.6 per cent). The retail average article price was 4.6 per cent (2019 – 3.3 per cent), which Loblaw says reflects the year over year growth in food retail revenue over the average number of articles sold in the company's stores in the quarter. Food retail basket size increased, and traffic decreased in the quarter.

Drug retail (Shoppers Drug Mart) same-store sales were negatively impacted by COVID-19, which decreased by 1.1 per cent (2019 – increased by 4 per cent) with pharmacy same-store sales decline of 6.2 per cent  (2019 – increased by 4.8 per cent) and front store same-store sales were 3.3 per cent (2019 – 3.3 per cent).

“As expected, profit declined year over year in the quarter as the strong growth in sales was insufficient to overcome substantial COVID-19 related costs in the quarter,” says Weston. “In total, the company invested $282 million to protect and benefit colleagues and customers, with approximately $180 million related to temporary pay premium costs which included a one-time bonus for store and distribution centre colleagues of $25 million. As the Company exited the second quarter, it continued to incur COVID-19 related costs to enhance the safety and security of its customers and colleagues, although at a lower rate of investment than in the second quarter, reflecting a greater degree of stability in store and distribution centre operations.”

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