Loblaw’s retail sales climbed 5.4 per cent to $14.4-billion in the quarter ended June 14. The retailer reported earnings of $714-million in its second quarter, about a 56-per-cent increase over the same quarter last year.Aaron Vincent Elkaim/The Canadian Press
Canadian retail giant Loblaw Companies Ltd. L-T outperformed second-quarter revenue and profit expectations, driven by better same-store sales and certain lower costs.
Shoppers were returning to stores more often and increasing their basket size compared to the same time last year, Loblaw said Thursday. Same-store sales grew by 3.5 per cent in the second quarter, while its drug retail unit sales grew by 6.2 per cent – led by specialty prescriptions and new health care services.
Loblaw’s retail sales climbed 5.4 per cent to $14.4-billion in the quarter ended June 14. The retailer reported earnings of $714-million in its second quarter, about a 56-per-cent increase over the same quarter last year.
Its adjusted earnings per share increased nearly 12 per cent to $2.40, above analyst expectations of about $2.33.
Loblaw shares were up more than two per cent in afternoon trading.
The year-over-year earnings increase was largely driven by favourable comparables, including a $121-million hit to its earnings last year related to the settlement of class-action lawsuits over bread-price fixing, and an end to the bulk of amortization costs related to its 2014 acquisition of Shoppers Drug Mart Corp.
E-commerce sales also jumped 17.5 per cent from last year, continuing a trend of online shopping that president and chief executive officer Per Bank said in April was driven by a noticeable shift to buying more Canadian products as digital tools allowed consumers to swap goods for items made in Canada.
Loblaw attributed its food retail growth to more buyer focus on discount banners and Real Canadian Superstore locations.
“We see discount resonating with customers and it’s showing up in not insignificant sales growth,” Richard Dufresne, Loblaw chief financial officer, said during an earnings call Thursday.
Loblaw also recently noted the company’s internal food inflation was lower than the consumer price index for food purchased from stores.
In its report on June food inflation, Loblaw noted a 3.1-per-cent drop in fresh vegetable prices, thanks to a summer shift to local produce suppliers that cut back on freight costs and foreign exchange rates.
The price of beef, on the other hand, rose again in June as tight cattle supply met the strong demand of the barbecue season, it said.
In recent months, Loblaw predicted U.S. tariffs and the ensuing Buy Canadian movement would boost sales for the Brampton, Ont., grocer, though it had previously said it expected the push for Canadian goods to taper off.
Mr. Bank said Thursday that Loblaw sales of Canadian products are doing better than the industry average.
“We feel very good on the Buy Canadian sentiment,” he said.
The food inflation report noted the future of food prices is partly dependent on tariffs levied by the United States and the Canadian countertariff response.
Earlier this month, U.S. President Donald Trump threatened to impose a 35-per-cent tariff for goods imported from Canada, beginning Aug. 1.
Alongside its second-quarter report, Loblaw announced it would complete a four-for-one stock split in August.
A stock split is when a company divides existing stock into multiple shares. It maintains the company’s market value while lowering the price of each share, making it more accessible to investors.
Loblaw’s stock-split announcement follows rising profits and a rocketing stock price, which has increased about 27 per cent since mid-February, from about $175 per share up to about $222 currently.
The split will be effective as of the close of business on Aug. 18.