Loblaw is seeing more sales at its discount grocery stores such as No Frills than at its full-priced stores.Chris Young/The Canadian Press
The removal of Canadian countertariffs on U.S. imports has driven some shoppers, who had made a patriotic shift in their buying habits earlier this year, to switch back to buying U.S. products, the chief executive officer of Loblaw Cos. Ltd. L-T said on Wednesday.
The countertariffs increased the price of some U.S. goods while they were in place, Loblaw CEO Per Bank said during a conference call to discuss the company’s third-quarter results. But now that they have come down, some customers have been more inclined to add them to their baskets.
“Of course, we are seeing some customers who are going back to those products that they love, now that they are much cheaper than they were, and that will have some impact on Canadian sales,” Mr. Bank said.
Sales of Canadian-made products at Loblaw stores are still higher than they were before U.S. President Donald Trump instigated a trade war against Canada and other countries in March, imposing sweeping new tariffs on imports to the United States. But the spike in sales seen earlier this year has levelled out, he said.
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Retailers scrambled to respond to the ensuing movement among shoppers to support domestic manufacturing, introducing new labels and signs in stores to call out homegrown products. Loblaw slapped a “T” symbol on a number of items that were subject to price increases because of the retaliatory tariffs implemented by former prime minister Justin Trudeau in March. Those labels have now been removed.
Loblaw has also added more than 200 new Canadian suppliers since the beginning of the year, Mr. Bank said.
“Overall, Canadians just love to buy Canadian products,” he said.
Loblaw reported increased sales and profits in the third quarter, as shoppers still stinging from high food inflation in recent years visited its discount grocery stores looking for savings.
Canada’s largest grocer reported on Wednesday that its revenue grew by 4.6 per cent to $19.4-billion in the quarter ended Oct. 4, aided by store expansions. Loblaw has opened 76 new stores over the past 12 months. However, the company’s sales fell below analysts’ expectations of $19.5-billion, according to the consensus estimate from S&P Capital IQ.
Discount stores such as No Frills, Maxi and Real Canadian Superstore continued to outperform the company’s full-price grocery stores. Loblaw has been expanding its offerings in the discount space, opening 19 new stores in the quarter.
In addition to visiting discount stores more often, shoppers are responding quickly to price increases, buying more chicken as red meat prices increase or forgoing berries to cut down on costs.
The number of visits to all of Loblaw’s banners grew, as did the size of shoppers’ purchases during each visit. The company is taking market share from competitors, executives told analysts on Wednesday’s call.
Same-store sales – an important metric in the industry, which tracks sales growth at locations open for more than a year to show growth not tied to new store openings – grew by 2 per cent in the quarter at Loblaw grocery stores.
That fell below analysts’ expectations of 2.75-per-cent growth, according to S&P Capital IQ.
Same-store sales grew by 4 per cent at the company’s Shoppers Drug Mart chain. Pharmacy and health care services contributed to the growth at Loblaw-owned drug stores.
The company opened 55 new pharmacy clinics in the quarter, part of a larger strategy to expand its health care business within Shoppers Drug Mart stores.
Loblaw is on track to have 250 in-store clinics by the end of this year, and is looking at possibilities for further expansion in provinces beyond Alberta and Nova Scotia, where many of the locations are concentrated, executives said. Customers who visit those clinics are also proving more inclined to spend money on products elsewhere in Shoppers stores.
On Wednesday, Loblaw announced that European retail executive Gregers Wedell-Wedellsborg has been appointed president of Shoppers Drug Mart, following a global search. Former president Jeff Leger left Shoppers in April of this year to take a new job as CEO of 123Dentist.
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Mr. Wedell-Wedellsborg, who like Loblaw CEO Mr. Bank comes from Denmark, was most recently CEO of Matas A/S, a health and beauty retailer that operates more than 500 locations in Denmark, Sweden, Norway and Finland.
E-commerce sales increased by 18 per cent in the quarter.
Loblaw’s net earnings available to common shareholders grew to $794-million or 66 cents in diluted earnings per share, compared with $777-million or 63 cents in the same period last year.
During the quarter, the company wound down its Theodore & Pringle optical business after striking an agreement with Specsavers Canada Inc. to open 111 of its eyewear locations in grocery stores across the country.
The closing of the Theodore & Pringle business led to one-time expenses of $22-million. Not including that impact, and other adjustments, adjusted net earnings grew to $828-million or 69 cents in diluted net earnings per share.