Loblaw misses earnings estimates in third quarter
Though its Q3 profit was up from a year ago, even despite Canada’s Thanksgiving holiday changing dates this year
A pre-holiday traffic bump helped propel Loblaw to solid third-quarter results, but the Canadian discount retailer still missed the mark on earnings estimates, according to an earnings call on Wednesday.
Total revenue reached $13.28 billion, reflecting a 1.5% increase year over year. Retail segment sales totaled $13.05 billion, also showing a 1.5% gain compared to Q3 2023.
A decline in sales for non-essential items, however, had Loblaw missing third quarter estimates.
Same-store sales in the food retail division rose by 0.5% year-over-year (or 1.3% when factoring out Thanksgiving, which was celebrated in Q3 last year), while drug retail same-store sales grew by 2.9%. Pharmacy and health care services same-store sales increased by 6.3% year-over-year, supported by ongoing strength in both acute and chronic prescriptions.
Gross profit in the retail segment was nearly $713.3 million, marking an 8.4% improvement year-over-year.
The food retail segment also saw an increase in customer visits during the third quarter, despite the Thanksgiving holiday sales shifting to the fourth quarter this year, the company said. However, drug retail sales growth outpaced that of food retail.
Drug front-store sales reflected continued strength in the beauty category but were somewhat offset by Loblaw’s exit from certain low-margin electronics categories and lower customer spending on convenience items, according to the company.
Ecommerce sales grew by 18.5% year-over-year, and adjusted EBITDA increased by 7.4% compared to a year ago.
Loblaw also opened 25 new hard discount stores and is currently piloting two ultra-discount No Name stores.
The first No Name store opened in Windsor, Ontario, during the first week of September. The stores reduce operating costs in several ways, including shorter operating hours, a smaller product assortment (1,300 items) that simplifies operations, limited marketing with no flyers, no refrigeration costs, fewer weekly deliveries to reduce logistics costs, and the reuse of fixtures to minimize building expenses.
Products in the new stores are priced 20% lower than comparable products at other main discount grocers in the area.
For the full year of 2024, Loblaw expects retail business earnings to grow faster than sales and has slightly raised its guidance for full-year adjusted net earnings per common share, from a high single-digit increase to a low double-digit increase.
The Ontario-based retailer operates over 2,400 stores in Canada.
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