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Loblaw sees profits under pressureLoblaw sees profits under pressure
Inflation remains a concern as consumers gravitate to discounted offerings
Mark Hamstra
February 20, 2025
3 Min Read
Sales growth in the fourth quarter, which ended Dec. 28, was driven by the success of the PC Optimum loyalty offers, along with in-store promotions and everyday value.Loblaw
Loblaw Cos. on Thursday said it expected its profits for the year to fall below analysts’ expectations as the company faces pressure from cautious Canadian consumers and ongoing price inflation. Although the company reported sales gains for the fourth quarter and full fiscal year, profits were down relative to a year ago after the company took a one-time charge related to the costs of its loyalty program.
Sales growth in the fourth quarter, which ended Dec. 28, was driven by the success of the PC Optimum loyalty offers, along with in-store promotions and everyday value. Loblaw said these efforts led to increases in traffic, tonnage, and market share gains in its food retail business.
The company said it expected earnings growth for the current fiscal year in the high single digits, which was below some analysts’ estimates, according to reports.
The earnings report followed Loblaw’s announcement earlier this week that it planned to open 80 new stores this year, including 50 hard-discount grocery locations, and invest in more than 300 remodels, including adding 100 clinics in its Shoppers Drug Mart division.
Large, global vendors driving price increases
Loblaw said it continues to see higher-than-normal price increases from its large, global vendors, including some increases in double digits. These increases are compounded by the weak Canadian dollar, the company said in a conference call with analysts. This is especially challenging in the produce category, which Loblaw sources primarily from the U.S.
Asked about the potential impact of tariffs, Loblaw said U.S. goods represent less than 10% of its total product costs, and that it expects its own-brand products to gain market share in some categories, such as household and cleaning supplies, if Canada places reciprocal tariffs on U.S. goods. The Trump Administration’s proposed 25% tariffs on Canadian goods are currently on hold until March 4.
By the numbers (in U.S. dollars):
Loblaw said its operating income for the fourth quarter was down 9.7%, to about $600.4 million, vs. the year-ago fourth quarter. Net income available to common shareholders was down 14.6%, to $325.6 million, primarily driven by a non-cash charge of about $91 million related to the revaluation of its PC Optimum loyalty program. The company said the charge reflects the increasing popularity of the program, leading to higher redemption rates
Q4 revenues were up 2.9%, to $10.5 billion, including 3% growth in retail sales. Same-store sales in food retail were up 2.5%, or 1.5% after accounting for a shift in the timing of the Canadian Thanksgiving holiday. At Shoppers Drug Mart, same-store sales were up 1.3%, including pharmacy and healthcare services same-store sales growth of 6.3%, partially offset by a decline in front store same-store sales of 3.1%
For the full year, Loblaw said net income available to common shareholders was up 3.2%, to about $1.5 billion, on revenue gains of 2.5%, to about $43 billion
Loblaw said it opened 52 new food and drug retail stores and 78 pharmacy care clinics in 2024
In their own words: Consumers still want discounts
“We see consumers continuing to favor discount offerings. This is clearly demonstrated in our hard-discount banner same-store sales performance, which is outperforming our conventional stores.” —Richard Dufresne, chief financial officer, Loblaw
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