The Loblaws flagship location on Carlton Street in Toronto on Thursday May 2, 2013. Loblaw Companies Ltd. says it earned a profit available to common shareholders of $529 million in its latest quarter as its revenue rose nearly 10 per cent compared with a year ago. THE CANADIAN PRESS/Aaron Vincent Elkaim
Canada’s biggest grocer is facing fresh price hikes from suppliers, signalling food inflation will continue its relentless ascent in the coming months.
“We still have over 1,000 supplier requests on our desks for significant cost increases,” Galen G. Weston, chairman and president of Loblaw Companies Ltd., said during a call with analysts on Thursday.
“We continue to believe that these inflationary pressures are temporary and that they will ease with time, but predicting how long that will take is proving extremely challenging,” he said. “We will continue to push back on unjustified cost increases from suppliers.”
His comments came as the parent company of grocery chains like Loblaws and No Frills and drugstores like Shoppers Drug Mart said its fourth-quarter profit amounted to $529 million or $1.62 per diluted share.
That’s down from $744 million or $2.20 per diluted share a year earlier.
The result is “evidence that retail prices are not growing faster than costs and the company is not taking advantage of inflation to drive profit,” Loblaw chief financial officer Richard Dufresne said during the call.
The supermarket giant has come under intense scrutiny amid rising food prices, with critics suggesting the company is profiteering off inflation to pad profits.
Yet the grocer’s gross margins also dipped slightly in the quarter ended Dec. 31, with an adjusted gross profit of 30.6 per cent down from 30.9 per cent in the same quarter a year earlier.
The company said a decrease in its food retail margin – largely related to its No Name price freeze and increased promotional activity – was partially offset by growth in higher margin drug retail sales.
But while Loblaw’s profit edged down its revenue rose nearly 10 per cent compared with a year ago.
Revenue totalled $14.0 billion, up from $12.8 billion in the fourth quarter of 2021.
The increase in revenue came as food retail same-store sales gained 8.4 per cent, with discount grocery stores continuing to outperform conventional chains, while drug retail same-store sales rose 8.7 per cent on strong demand for cough and cold products and beauty and cosmetics.
“Our strong sales and market share performance this quarter are a clear indication that our efforts resonate with customers,” Dufresne said.
On an adjusted basis, Loblaw said it earned $1.76 per diluted share in its latest quarter, compared with an adjusted profit of $1.52 per diluted share a year earlier.
Analysts on average had expected a profit of $1.71 per share and $13.7 billion in revenue, according to financial markets data firm Refinitiv.
In its outlook for 2023, the company said it expects its retail business to grow earnings faster than sales, with adjusted net earnings per common share growth in the low double digits.
Loblaw said it expects net capital expenditures of $1.6 billion for the year including gross capital investments of about $2.1 billion offset by $500 million in proceeds from real estate sales.
This report by The Canadian Press was first published Feb. 23, 2023.
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