Loblaw closes out fiscal 2021 with retail sales uptick

Loblaw Cos. saw retail sales edge up in fiscal 2021, including same-store sales upticks in both its food and drug retail segments.

In the 52-week 2021 fiscal year end Jan. 1, retail sales totaled $52.27 billion (Canadian), up 0.8% from $51.86 billion in fiscal 2020, which had 53 weeks, Brampton, Ontario-based Loblaw reported yesterday. The company noted that, excluding an $878 million negative impact from the extra week in 2020, net sales for fiscal 2021 were up 2.5%.

Even with the added week from the prior year, 2021 food retail sales came in virtually flat, dipping just 0.3% to $37.48 billion. Comparable-store sales gained 0.3%, reflecting lower eat-at-home trends after strong growth last year and offset by higher industry inflation levels, according to Loblaw. On a two-year stack, food retail comp-store sales were up 5.4%. 

At the Shoppers Drug Mart drug retail unit, fiscal 2021 net sales rose 3.7% to $14.79 billion, including the extra week in the previous fiscal year. Comp-store sales advanced 5%, reflecting increases of 2.1% in the front end and 8.4% in the pharmacy. The number of prescriptions filled climbed 0.9% overall and 2.7% on a same-store basis. Average prescription value increased by 4.7%. Over two years, comparable pharmacy sales gained 5.3%.

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Food-at-home demand remained strong through the fourth quarter, according to Loblaw CFO Richard Dufresne.

“We began Q4 with restrictions loosening and customers preparing to celebrate the holidays with family and friends. We ended the quarter with another round of lockdowns. Across our mix of assets, our stores and our supply chain network rose to the challenge, and our businesses performed very well,” Loblaw Chief Financial Officer Richard Dufresne told analysts in a conference call on Thursday.

For the 12-week fiscal 2021 fourth quarter, retail sales were $12.49 billion, down 4.3% from $13.04 billion in the 13-week 2020 quarter. Excluding the extra week in the year-ago period, retail sales gained 2.6% in the 2021 quarter, Loblaw said.

Food retail sales declined 6% to $8.74 billion in the quarter yet were up 1% backing out the extra week, the retailer reported. Same-store sales in food grew 1.1% excluding the extra week and were up 4.8% on a two-year stack. 

“Although we saw eat-at-home trends coming off last year’s levels, we continue to experience strong demand,” according to Dufresne. “Our market banners continue to outperform and post share gains. Discount began to benefit from the return of price-sensitive customers, gaining momentum towards the end of the quarter. Traffic momentum continued, improving again in Q4, and is showing signs of beginning to normalize to pre-pandemic levels.”

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In the drug retail segment, net sales were flat at $3.74 billion for the fourth quarter but rose 6.8% excluding the 13th week from the fiscal 2020 period. Drug’s same-store sales increased 7.9% overall, including 6.1% in the front end and 10.2% in the pharmacy, excluding the extra week. Prescriptions filled rose 8.8%, while average script value rose 1.1%. Two-year comp-sales growth for the drug retail segment was 5.5% through the end of the quarter.

“We saw strong performance across both front-store and Rx,” Dufresne said. “Front-store same-store sales were better by 6.1%, led by double-digit growth in cosmetics and OTC, benefiting from lighter social restrictions throughout most of the quarter. Pharmacy same-store sales grew 10.2%, benefiting from the strength of pharmacy services, which grew by over 100% in the quarter as we supported the government COVID vaccine and testing programs.”

Price-conscious shoppers are returning to Loblaw's discount grocery banners as consumers begin to get back to normal from the pandemic.

Despite an 8.4% decline in the fourth quarter — following a 158% jump a year earlier — Loblaw’s e-commerce sales surged 13.9% for the full 2021 fiscal year.

“Our digital platform is now deployed and available throughout Canada. Q4 2021 was a quarter with less COVID restrictions than in 2020,” Dufresne noted. “We are pleased with our omnichannel performance, as it continues to operate at penetration levels well above pre-COVID rates. Omnichannel is a key pillar of our service offering. We continue to enhance our customers’ shopping experience through our digital platform, while offsetting its costs through optimizing operational efficiencies, deploying new technology, refining our delivery offering, and seeking out promotional and advertising opportunities.”

On the earnings side, fiscal 2021 fourth-quarter net income from continuing operations (available to common shareholders) was $744 million, or $2.20 per diluted share, compared with $345 million, or 98 cents per diluted share, a year earlier. Adjusted net earnings from continuing operations (common shareholders) came in at $515 million, or $1.52 per diluted share, versus $431 million, or $1.22 per diluted share, in the prior-year period.

Full-year 2021 net earnings from continuing operations (common shareholders) totaled $1.86 billion, or $5.45 per diluted share, compared with $1.1 billion, or $3.06 per diluted share, in 2020. On an adjusted basis, net income from continuing operations (common shareholders) was $1.91 billion, or $5.59 per diluted share, versus $1.5 billion, or $4.18 per diluted share, a year ago.

Analysts, on average, had projected Loblaw’s fiscal 2021 adjusted EPS at $1.36 for the fourth quarter and $5.40 for the full year, according to Refinitiv. Estimates ranged from $1.27 to $1.44 for the quarter and $5.15 to $5.50 for the year.

“I’m pleased for Loblaw’s performance in the fourth quarter, as we ended the year in a position of strength. Our results were driven by retail excellence, with a focus on the fundamentals, top-line growth, margin expansion and cost control. This took place amid complex circumstances of the communities we serve, through various lockdowns and reopenings, and the country felt the impact of repeated supply-chain disruptions, including several remarkable weather events,” Loblaw Cos. Chairman and President Galen Weston said in the analyst call. “Our ability to respond to those extraordinary conditions was enabled by scaling up several of our growth areas. Our e-commerce platform stretched beyond the $3 billion mark [in sales], and we kept our customers fed and well.”

During the last 12 months, Loblaw opened 23 food and drug stores and closed 24 locations. As of the 2021 fiscal year-end, the company’s retail network encompassed 2,438 stores, including 545 corporate-owned supermarkets under multiple banners, 551 franchised grocery stores and 1,342 Shoppers Drug Mart/Pharmaprix associate-owned drugstores.