Loblaw Companies Limited

Loblaw Companies Ltd. has reported its financial results for the second quarter of 2019.

Same-store drug retail (Shoppers Drug Mart) sales led the way with four per cent growth, at $3.0 billion. Pharmacy same-store sales grew 4.8 per cent while front store same-store sales grew 3.3 per cent.

Same-store food retail sales (Loblaw) were slower but still positive, up 0.6 per cent at $7.85 billion. Food retail traffic decreased while basket size increased for the quarter, an exact reversal of what happened in Q2 2018.

A TD Waterhouse analysis commented on the 0.6 per cent food sales metric, which fell well short of its own two per cent projection. “This is the one negative the market may focus on, but we see this simply as Loblaw over-rotating toward ‘smart tonnage’ (i.e., reducing low-margin sales) which led to lower traffic.” All the same, TD Waterhouse expects that, given a three per cent decline in sales tonnage, management will adopt “a more balanced approach to its merchandising strategy going forward in managing sales and gross margin.”

Revenue for the quarter was $11.13 billion, up 2.9 per cent or $312 million from the same quarter in 2018. Retail sales were $10.9 billion, up $306 million or 2.9 per cent from Q2 of 2018.

Overall, profit for the quarter was down 2.4 per cent compared to the second quarter of 2018, but executive chair Galen Weston was upbeat.

"We delivered on our financial plan in the quarter," he said. "We have a long-term approach to investing and to building customer loyalty, and we remain committed to our strategy."

TD Waterhouse also noted that growth in retail operating expenditures was low, at only one per cent. This was much lower than figures from Loblaw’s competitors, which TD Waterhouse attributes to the effect of Loblaw’s “significant efficiency programs” in offsetting inflationary pressures.

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