Loblaw said the boycott of its stores in the last quarter had minimal impact, with the company attributing the drop in profits to a settlement over an alleged bread price-fixing scheme.
“The overall financial impact was minor,” Per Bank Chairman and CEO said of the boycott during a conference call with analysts to discuss the company’s second-quarter results.
“Every customer is important to us,” he added. “And one lost customer is one too many.”
Loblaw saw its profit fall 10% year over year to $457 million, which it attributed mainly to the settlement of two $500 million class actions between it and its parent company George Weston.
Same-store retail sales in the grocery sector – which measure sales at stores open at least a year – were nearly flat, increasing just 0.2% from a year ago. They had risen 3.4% in the first quarter.
Loblaw attributed the slim increase in part to the company’s strong performance a year earlier, making it a difficult comparison.
“Our food sales were a bit weak, mainly due to last year’s solid 6.1 percent growth,” Bank said. “Other than that, it’s hard to isolate any specific factor for weakness.”
RBC analyst Irene Nattel asked for more details, saying the grocery industry’s same-store sales numbers were “weaker than most of us expected.”
CFO Richard Dufresne reiterated last year’s strong quarter, adding that the sales trend so far in 2024 is “about the same.” He also said this year’s “wet spring,” compared to an “extremely hot” May last year, may have been a factor.
Regarding the boycott, “we saw a small impact in certain stores in specific markets, but that said, at the end of the quarter, things returned to normal,” explained Mr. Dufresne.
Countless customers have said they will boycott Loblaw-owned stores in May, with some calling for the action to continue indefinitely to protest rising grocery prices. Bank and Loblaw Chairman Galen Weston have previously dismissed what they called “misguided criticism” of the company.
The company noted in its earnings release that grocery retail traffic increased during the quarter, while average basket size decreased.
Pharmacy segment same-store retail sales increased 1.5%. Within this segment, same-store front-of-store sales decreased 2.4% and same-store prescription drug and health care services sales increased 5.4%.
A third quarter “that starts off strong”
Mr. Dufresne said the company’s strategies, including promotions like “Crazy Monthly Deals,” appear to be working as it heads into the third quarter.
“Looking further ahead, our third quarter is off to a strong start,” the CFO said, noting improved comparable store sales performance.
He argued that 2024 would bring a normalization of Loblaw’s retail business.
“The pandemic and subsequent periods of high global food inflation are now behind us. When we compare this year’s performance to last year, we see a slowdown in our same-store performance.”
Discount stores like No Frills and Maxi continue to outperform conventional stores, Dufresne said.
The company opened 14 new discount stores during the quarter and Mr. Dufresne said it plans 20 more openings in the third quarter.
The parent company of Loblaws, Provigo, Maxi and Shoppers Drug Mart (Pharmaprix) said it earned $457 million in profit attributable to common shareholders, or $1.48 per diluted share, for the quarter ended June 15.
Profit was down from $508 million, or $1.58 per diluted share, in the same quarter last year, a result Loblaw attributed mainly to class-action settlement charges. On Thursday, the grocer announced that its parent company George Weston has agreed to pay $500 million to settle two class-action lawsuits over their involvement in an alleged bread price-fixing scheme.
Revenue for the quarter totaled $13.95 billion, up from $13.74 billion a year earlier.
On an adjusted basis, Loblaw said it earned $2.15 per diluted share in its latest quarter, up from adjusted earnings of $1.94 per diluted share a year earlier.