Loblaw Companies (TSX: L) reported its third-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 October 7, the company reported net earnings of $621 million, equivalent to $1.58 per share. This represented a significant increase from last quarter’s figure of $508 million and last year’s figure of $556 million – an 11.7% increase from the year ago period.
“Our stores are delivering more value, including deeper discounts on essentials, and customers are responding positively,” said board chair Galen Weston. “We remain focused on doing what we can to fight inflation and deliver lower prices for Canadians, while continuing to invest for the future.”
Adjusting for exceptional or one-off items, the earnings rose by nearly 12.4%, reaching $2.26 per share, as opposed to $2.01 per share in the same quarter of the previous year. Market analysts, according to FactSet, had anticipated a rise to $2.24 per share.
The company’s total revenue also soared, reaching $18.27 billion, compared to $17.39 billion in the same quarter last year. Analysts had expected sales to rise to $18.21 billion.
The upswing can be attributed to a 4.5% surge in sales within the same-store food retail segment and a 4.6% uptick in same-store sales within its drug retail business.
Loblaw noted that its discount stores experienced increased footfall during the period, with customers actively seeking value in their grocery purchases. The company emphasized its ongoing commitment to opening new discount stores.
Simultaneously, the retail gross margin witnessed a decrease in both the food and drug segments due to promotional investments and heightened shrink. Despite this, growth in adjusted net earnings for the quarter was propelled by higher sales and effective cost control measures.
The escalating cost of living in Canada, primarily driven by the soaring cost of food, has become a pressing concern. According to the Canadian consumer price index, grocery inflation slowed to a 5.8% year-over-year rate in September, down from 6.9% in August.
Loblaw highlighted its increased investments aimed at reducing food prices, a strategy reflected in the company’s internal food inflation, which remained lower than Canada’s food CPI.
The earnings release come on the heels of Lowblaw’s pending legal battle with Metro, after the latter has taken legal action alleging that Loblaw falsely implicated Metro in a bread price-fixing conspiracy, causing damage to its reputation.
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