Loblaw Saw Earnings Jump 31% In Q2 2023 Amid Food Inflation

Loblaw Companies (TSX: L) reported its second-quarter financial results, which showed robust growth in both earnings and revenue, despite the ongoing rise in grocery costs for consumers across the country.

For the three months ending on June 17, the company reported a net income of $508 million, equivalent to $1.58 per share. This represented a significant increase from last quarter’s figure of $418 million and last year’s figure of $387 million – a 31.3% increase from the year ago period.

It’s worth noting that this quarter’s remarkable surge was somewhat inflated due to the comparison against a prior-year commodity-tax charge of $111 million at the company’s President’s Choice Bank.

Adjusting for exceptional or one-off items, the earnings still rose impressively by nearly 15%, reaching $1.94 per share, as opposed to $1.69 per share in the same quarter of the previous year. Market analysts, according to FactSet, had anticipated a rise to $1.91 per share.

The company’s total sales also soared, reaching $13.74 billion, compared to $12.85 billion in the same quarter last year. Analysts had expected sales to rise to $13.63 billion.

“Our businesses remain focused on providing Canadians with the selection, freshness, care and value they need today,” said Galen G. Weston, Chairman and President. “We will build on this strength and continue to take meaningful steps to fight back against inflation. Our discount offering, best-in-class control brand products and PC Optimum Program are resonating with customers who are looking for value without sacrificing quality.”

The drug retail segment experienced a healthy rise in same-store sales, growing by 5.7% during the same period.

Loblaws during the quarter meanwhile spent $511 million on share buybacks, repurchasing 4.2 million shares in the process.

Food inflation

Meanwhile, the food retail segment of the company also saw an impressive 6.1% increase in same-store sales during the period. This growth was primarily driven by a notable consumer shift towards the company’s discount stores. Despite the increase in food retail traffic, the average basket size slightly decreased.

These financial results come amidst a challenging time for Canadian consumers who have been grappling with high food inflation. In June alone, food prices were reported to be 9.1% higher than the previous year, as per Statistics Canada.

Back in April, Loblaw filed its Management Information Circular, providing shareholders – and Canadians – a glimpse into just how large the salary is for the head of one of the country’s largest employers. Weston saw his total compensation increase over 11% in 2022, a time during which the general populous saw inflation of 6.8%.

Compensation for 2022 for Weston amounted to $11.8 million, versus $10.6 million last year. For comparison, CFO Richard Dufresne saw his compensation increase a mild 1.4% from $6.6 million to $6.7 million, while COO Robert Sawyer saw his income climb over 24% from $7.5 million to $9.4 million.

Loblaw last traded at $119.48 on the TSX.

Information for this briefing was found via MarketWatch, Sedar, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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