A No Frills discount grocery store in Toronto. Half of the 14 new locations Loblaw opened in the second quarter were discount formats.Fred Lum/The Globe and Mail
Customers grappling with high food prices in Canada are increasingly turning away from the fresh-produce aisles in the grocery store and instead heading to the freezer sections in an attempt to stretch their budgets, the chief executive officer of Loblaw Cos. Ltd. L-T said on Thursday.
“They’re trying to mitigate the inflation,” Per Bank said during a conference call to discuss the company’s second-quarter results.
While shoppers changing their habits to save money is nothing new – people have consistently been turning to discount stores, buying more on promotions, and switching up name brands for private-label products in recent years – there are still shifts in buying patterns that Loblaw has observed, Mr. Bank said.
One example is the roughly 5-per-cent increase in sales of frozen vegetables at the company’s No Frills and Maxi discount locations.
The country’s largest grocer is continuing to benefit from those trends, and to expand its store footprint to win more customers away from its competitors. Loblaw, based in Brampton, Ont., has previously said it plans to open 30 to 40 new discount stores this year. Of the 14 new grocery and drugstore locations that Loblaw opened in the second quarter, half were discount formats.
“Customers, they are looking for more and more value, more and more for discount,” Mr. Bank said.
Same-store sales – an important metric in the industry that tracks sales growth excluding the impact of new store openings – increased by 1.6 per cent at Loblaw’s grocery stores. That represented slower growth than the same time last year, when food same-store sales rose by 3.5 per cent.
But discount locations outperformed the company’s other banners, with same-store sales for No Frills and Maxi up nearly four per cent in the quarter.
Loblaw reported that its net earnings available to common shareholders grew to $751-million or 64 cents in diluted earnings per share in the second quarter, compared with $714-million or 59 cents per diluted share in the same period last year.
Revenue grew to $15.3-billion in the quarter ended June 20, up 4.1 per cent compared with the same period last year, as customers visited its stores more often, and also bought more items during each visit.
Shoppers Drug Mart reported same-store sales growth of 4.6 per cent, driven largely by prescriptions for specialty drugs, and medications to treat chronic illnesses, along with revenue from other pharmacy sales and health care services.
Sales of GLP-1 drugs remained strong, even as generic forms of the blockbuster weight-loss and diabetes medications have begun to hit the market, executives said. Generic forms of the drug semaglutide became legal in January, after Danish drug maker Novo Nordisk’s remaining market protections on the sale of Ozempic and Wegovy in Canada expired.
The supply of generic Ozempic for Canadians has been lower than expected, because of a manufacturing issue at an Indian plant that caused delays for at least two companies hoping to produce more semaglutide to meet growing global demand.
Despite those near-term issues, sales of the drugs are expected to grow significantly. So far, lower pricing for generic GLP-1s has been offset by higher sales volumes, Loblaw executives said on Thursday.
“Our data is telling us that next year, GLP-1 sales – despite the price decrease – should grow double digits, in dollars,” chief financial officer Richard Dufresne said on the conference call with analysts to discuss the results.