Loblaw reports 10% adjusted profit increase amid high demand for essential goods
Loblaw Companies Ltd. reported a 10 per cent increase in its adjusted profits for its first quarter on Wednesday, as the company emphasized sales growth in drug stores amid mounting criticism that it is profiting from food inflation.
The parent company of supermarket giant Loblaws and Shoppers Drug Mart said a slight decline in food retail margins was offset by higher sales growth in more profitable front-store sales in drug stores."
And for 2023, the company said it continues to expect its retail business to grow earnings faster than sales," reiterating a previous forecast from February that profits will grow faster than its sales this year.
Consumers over the last year have grown weary of skyrocketing grocery bills as the big supermarkets report record profits amid prices that continue to surge far past the headline" inflation rate. Food inflation continued to outpace headline inflation in March, as the price of groceries rose 9.7 per cent compared with the same period last year, while the general inflation rate was 4.3 per cent, down from 5.2 per cent in February.
Canadians for Tax Fairness economist DT Cochrane said that while food prices will eventually stabilize as inflation slows, overall prices are not likely coming down.
The prices we're seeing now are largely baked in," Cochrane said.
Loblaw reported revenue for the 12-week period of nearly $13 billion, up from nearly $12.3 billion a year earlier. Food retail same-stores sales were up 3.1 per cent, while drug retail same-store sales increased by 7.4 per cent.
The retailer also said it raised its dividend 10 per cent as it reported a profit available to common shareholders of $418 million for its first quarter. It will now pay a quarterly dividend of 44.6 cents per share, up from 40.5 cents per share.
The increase for shareholders came as Loblaw reported its profit amounted to $1.29 per diluted share for the quarter ended March 25, down from $437 million or $1.30 per diluted share in the same quarter last year when the company saw a one-time gain from a favourable court ruling."
Loblaw in recent months has been on the receiving end of a wave of consumer ire as photos circulating on social media show a surge in prices for certain food items, including a package of President's Choice Free From Chicken Breast priced at a whopping $28.20 per kilogram.
The retailer has blamed rising food costs on price hikes passed down from suppliers and manufacturers. But suppliers counter that they are being subjected to unfair industry practices including exorbitant fees charged by Canada's major grocers including Loblaws, Metro and Sobeys.
Cochrane says food inflation is as high as it is because of the length of the supply chains involved.
At each step of the supply chain, you're going to find companies with greater and lesser ability to pass along costs plus boosting their own profit margins," he said.
You're really just seeing a wave of price increases at each previous stage, making their way to the next stage."
More to come.
With files from The Canadian Press
Ghada Alsharif is a Toronto-based business reporter for the Star. Reach Ghada via email: galsharif@torstar.ca