Loblaw Companies’ sales growth is slowing as inflation continues to weigh on the economy and alter consumer buying habits, the company’s chairman of the board said Wednesday.
The nation’s largest grocery and drugstore chain sees “a bit of a downturn” with its Joe Fresh clothing brand in the coming months, but it’s mostly in “general merchandise,” or sales not food excluding clothing, which she observed “a significant decline” during the last quarter, said Galen Weston. “It certainly had an impact on our overall sales results [comparables] he told analysts on a company’s second-quarter earnings conference call.
Several major U.S. retailers have warned the industry in recent months about unsold inventory as shoppers cut spending amid rising prices. Companies like Walmart and Target have spoken that their profits could suffer as they are forced to liquidate excess inventory.
“The key, in this circumstance, lies in the stocks. The question is how do you feel about the inventory and whether you need to use dynamic markdowns to drive that inventory away,” Weston said. “The answer is that we feel good with the stocks, and we don’t see any significant margin risk associated with liquidating what’s left. »
The company reported higher profits and sales in the second quarter as drugstore sales boosted overall margin expansion. Sales at pharmacies that have been open for at least a year increased by 5.6%, while the sale of pharmaceutical and health care services increased by 6.1%.
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Meanwhile, Shoppers Drug Mart — operating as Pharmaprix in Quebec — opened its first walk-in clinics in Canada, staffed exclusively by pharmacists, during the quarter, he added. “We have four consultation rooms, we have four pharmacists and we see patients very, very frequently,” Weston explained. “As provinces become more comfortable with the idea of expanding the scope of practice for pharmacists, we see an opportunity to have select locations that can provide a service like that of health clinics, provided by pharmacists. »
Additionally, the retailer’s low-cost grocery division continues to show strong growth. Loblaw noted that its “big discount” No Frills and Maxi banners as well as its house brands No Name and President’s Choice continued to be popular with shoppers looking for bargains.
Still, there are signs that inflation has peaked or will peak soon, and some expect inflation to moderate in the second half of the year, said Loblaw Chief Financial Officer Richard Dufresne. . “Raw material prices are falling, some freight costs are falling, and supply chain issues are [règlent] — with the exception of fuel costs, which remain high, but down from their highs of last March,” he said.
The company operating Loblaws and Provigo grocery stores reported net income attributable to common shareholders of $387 million, or $1.16 per share, a 3.2% increase from $375 million, or $1. 09 dollar per share, a year ago. Adjusted earnings were $566 million, or $1.69 per share, from $464 million, or $1.35 per share, in the second quarter of 2021.
Revenues amounted to 12.85 billion, an increase of 2.9%, compared to a turnover of 12.49 billion in the same quarter of the previous financial year.