Loblaw reported increased profits in the second quarter as the grocery chain continued to attract budget-conscious shoppers to its discount stores like No Frills and Maxi, the company announced on Thursday. Sales growth was particularly strong in its pharmacy division, driven by the popularity of generic GLP-1 weight loss medications.
The Brampton-based retailer disclosed its financial results for the quarter ending June 20. Revenue reached over $15.3 billion, marking a four percent increase from the previous quarter. Profit attributable to common shareholders rose by five percent to $751 million.
Loblaw noted a 1.6 percent rise in same-store sales for its core retail food business. Concurrently, the company, which also owns Shoppers Drug Mart, saw a 4.6 percent increase in same-store sales in the drug retail segment, fueled by a 7.5 percent surge in pharmacy and health-care services.
During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, highlighted the growth in specialty prescription sales, particularly due to the introduction of generic GLP-1 drugs. Dufresne mentioned that lower generic drug prices were being offset by higher volumes, leading to anticipated increases in revenue, gross profit dollars, and gross margin rate.
GLP-1 medications like Ozempic and Wegovy have seen a surge in sales, with Loblaw executives reporting a 40 percent year-to-date growth in sales of these drugs. Health Canada approved the country’s first generic semaglutide injection in late April.
CEO Per Bank shared that cost-conscious consumers are increasingly opting for frozen vegetables over fresh produce due to inflation. Frozen vegetable sales at No Frills and Maxi stores have seen significant growth, with customers trying to manage rising prices.
Dufresne emphasized that No Frills and Maxi stores are well-positioned to meet customer demand for value amidst food price inflation. The company continues to excel in the hard discount sector and surpass industry peers in conventional retail.
Statistics Canada reported a drop in the inflation rate to 2.8 percent in June, with grocery price increases moderating to 3.9 percent from 4.3 percent in May. Loblaw’s Toronto-listed shares showed minimal movement on Thursday, with a year-to-date gain of around six percent.