Loblaw Companies (TSX: L) posted Q2 2025 revenue of $14.67 billion, up 5.2% YoY and 3.8% from the prior quarter.
On operations, same-store food sales rose 3.5%, barely ahead of internal food inflation of 3.3%. Hard discount banners drove the gains, while drug retail comps added 4.1%, but that included a 6.2% lift from high-margin specialty drugs that could prove cyclical. E-commerce advanced 17.5% but still represents a single-digit share of total revenue.
Operating income vaulted 42.7% YoY to $1.24 billion from $868 million, far outstripping the revenue trajectory. The jump was driven by a $106 million drop in amortization tied to the now-fully written off Shoppers Drug Mart intangibles, not by any material gross margin expansion, which stayed flat at 32.0%. This is also aided by the one-time $164 million class action lawsuit settlement charges last year.
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Net earnings jumped 56% YoY to $714 million from $457 million, lifting diluted EPS by 60.1% to $2.37. Strip out the amortization benefit and other one-offs, however, and adjusted net income rose a comparatively tame 8.6% YoY to $721 million, with adjusted EPS at $2.40, an 11.6% jump. Management’s claim that “customers are increasingly rewarding us” rings hollow against that disparity.
Adjusted EBITDA climbed to $1.84 billion, but the margin edged up only 20 basis points YoY to 12.5% and remains razor-thin relative to US grocery peers. Interest expense increased 11.6% YoY to $212 million, neutralizing roughly one-sixth of the EBITDA gain.
Consolidated free cash flow swung to a positive $468 million after last quarter’s retail outflow of $264 million, aided by reduced capex and property sale proceeds. Yet net capital investments of $239 million still trailed the $445 million returned to shareholders.
The board approved a 4-for-1 stock split effective August 18, ostensibly to “keep shares accessible,” yet the timing conveniently masks the EPS optics of share-repurchase-fuelled growth. Management reaffirmed “high single-digit” adjusted EPS expansion for 2025, but the guide already bakes in a 53rd-week tailwind worth roughly 2%. Remove that and the outlook implies mid-single-digit growth.
Loblaw last traded at $217.51 on the TSX.
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