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Nov 13, 2019

Loblaw Q3 revenue rises amid higher Shoppers Drug Mart sales

Loblaw is a high quality, defensive addition to your portfolio: Kash Pashootan

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Loblaw Companies Ltd. saw traffic to its grocery stores drop in its most recent quarter, and the retailer lowered prices and took other measures to win over customers in an increasingly competitive industry.

The company noticed an uptick in competitive intensity during the third quarter, particularly in the discount division, said Loblaw president Sarah Davis during a conference call with analysts Wednesday.

It has seen rivals add stores, complete renovations and lower prices, she said.

Loblaw also took steps to lower food prices in the third quarter, which resulted in a sales lift.

The company's internal inflation measure for the quarter ended Oct. 5 was about one to two per cent below Statistic Canada's consumer price index of 4.1 per cent, she said, with some categories nearing deflation.

"This has positioned us better with customers," she said. "And in the quarter, our trajectory on traffic, basket and tonnage improved."

Traffic, which is based on the key retail metric of same-stores sales, was still negative for the quarter, but Loblaw is pleased with the progress it's seeing, she said.

Food same-store sales were up 0.1 per cent for the quarter, however Loblaw says excluding the unfavourable impact of the timing of Thanksgiving, food same-store sales were up one per cent.

The company said it will continue to watch competitive intensity, monitor prices and take action as necessary.

Loblaw's third-quarter profit of $331 million and a 2.3 per cent revenue lift was helped by higher sales at its Shoppers Drug Mart stores.

The profit amounted to 90 cents per share for the 16-week period. That compared with a profit of $106 million or 28 cents per share in the same quarter last year.

Revenue totalled $14.66 billion, up from $14.32 billion a year ago.

Drug store same-store sales were up 4.1 per cent to mark its strongest performance since the second quarter of 2016.

Shoppers Drug Mart's strong performance was boosted by the key pharmacy and beauty categories, said Davis, adding the company is seeing signs of a strong flu season.

On an adjusted basis, Loblaw reported a profit from continuing operations of $458 million or $1.25 per share. That compared with an adjusted profit from continuing operations of $466 million or $1.24 per share in the same quarter last year when the company had more shares outstanding.

Analysts on average had expected a profit of $1.24 share and $14.57 billion in revenue, according to financial markets data firm Refinitiv.