Sales of everything but food slow as inflation bites into consumer spending, Loblaws says

The growth in sales of Loblaw Companies Ltd. is slowing as inflation continues to weigh on the economy and shape consumer buying habits, the company’s chairman of the board said Wednesday.

While the nation’s largest grocery and drugstore chain sees “some softening” with its Joe Fresh clothing brand in the future, what it calls “general merchandise” or non-food sales in outside apparel are “significantly down” over the past quarter, said Galen Weston.

“It certainly had an impact on our overall (comparable) sales results,” he told analysts on a conference call to discuss the grocery and drug store chain’s second quarter results.

Several major US-based retailers have warned of unsold inventory in recent months as shoppers rein in spending amid rising costs. Companies like Walmart and Target have suggested profits could take a hit as they are forced to cut excess inventory.

“The key in this circumstance is inventory. The question is how do you feel about the inventory and do you have aggressive markdowns that you need to put in place to clear that inventory,” Weston said.

“The answer is that we feel good with the stocks and we don’t see any significant margin risk associated with netting what’s left over.”

The company reported higher profits and sales in the second quarter as drugstore sales boosted overall margin expansion.

Same-store pharmacy sales increased 5.6%, while pharmacy and healthcare services increased 6.1%.

“Right now, cough and cold (sales) … it’s like we’re in the middle of winter,” Loblaw chief financial officer Richard Dufresne said on the call.

Weston added: “There’s a tremendous strength in fragrances. We kind of wonder what people are doing with all these scents.”

Meanwhile, Shoppers Drug Mart opened the first walk-in clinics in Canada staffed exclusively by pharmacists during the quarter, he said.

“We have four consulting rooms, we have four pharmacists, and we see patients very, very frequently,” Weston said.

“As provinces become more confident in expanding the scope of practice for pharmacists, we see an opportunity to have select dedicated locations that can provide a health clinic-like service delivered by pharmacists.”

Pharmacists treat minor ailments, prescribe medication for cold sores and offer treatments for strep throat and urinary tract infections, he said.

Meanwhile, the retailer’s discount grocery division continues to show strong growth.

Loblaw said its “hard discount” banners No Frills and Maxi as well as its in-house brands No Name and President’s Choice continue to benefit shoppers looking for value.

Still, there are signs that inflation has peaked or will soon, with expectations that inflation will moderate in the second half of the year, Dufresne said.

“Commodity prices are falling, some freight costs are falling and supply chain issues are normalizing — with the exception of fuel costs, which remain high but down from their highs of last March,” he said. he declared.

The company said its net income available to common shareholders was $387 million or $1.16 per diluted share, a 3.2% increase from $375 million or $1.09 per share it a year ago.

Adjusted earnings were $566 million or $1.69 per diluted share, compared to $464 million or $1.35 per diluted share in the second quarter of 2021.

Revenue was $12.85 billion, an increase of $356 million or 2.9% from $12.49 billion in the prior year quarter.

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