AUS
NZ
UK
CA
USA
IND
Key Highlights:
- Q3 2024 net income increased to C$777 million, up 25% year-over-year.
- Revenue growth slowed to a 1.5% rise, missing analyst expectations.
- Adjusted earnings per share (EPS) were C$2.50, surpassing analyst expectations of C$2.44.
Loblaw Cos. (TSX:L), one of Canada’s largest grocery and pharmacy retailers, reported its third-quarter results on Wednesday, revealing strong profit growth but a slowdown in revenue, which missed analyst expectations. The company’s net income for the quarter climbed to C$777 million (C$2.53 per share), a 25% increase from C$621 million (C$1.95 per share) in the same period last year. This rise in net income was primarily driven by a reversal of a previous commodity tax charge related to Loblaw's financial services segment, President's Choice Bank, which added C$125 million to its earnings.
Despite this impressive profit growth, Loblaw's revenue for the quarter was more modest, rising by just 1.5% to C$18.54 billion, falling short of analysts' expectations of a C$18.67 billion result. The slowdown in sales growth across its core grocery and pharmacy operations contributed to the miss. Food retail same-store sales growth slowed to 0.5%, down significantly from 4.5% a year earlier, while drug retail sales under the Shoppers Drug Mart banner also decelerated to 2.9% from 4.6% in Q3 2023.
Loblaw pointed out that the consumer price index (CPI) for food purchased from stores had moderated significantly, coming in at 2.3% for the quarter, compared to 7.1% in the prior year. This slowdown in inflation, while beneficial for consumers, appeared to impact purchasing behavior, as more customers visited Loblaw stores, but shoppers made fewer purchases per visit.
Despite the slower-than-expected revenue growth, the company maintained a positive outlook. Loblaw raised its full-year adjusted earnings per share (EPS) guidance, now expecting low double-digit growth, up from the previous expectation of high single-digit growth. This upward revision reflects the company’s strong operating and financial performance thus far in 2024.
Looking ahead, Loblaw is also increasing its planned investments in its store network and distribution centers, raising the figure to C$1.9 billion from the previous C$1.8 billion. The company remains focused on expanding and modernizing its operations to meet growing customer demand while adapting to the evolving retail landscape.
Loblaw Cos. continues to face challenges in its core grocery and pharmacy businesses as inflationary pressures ease and consumer spending habits shift. However, the company’s ability to maintain strong profitability and its focus on strategic investments suggests it is well-positioned to navigate these challenges in the coming quarters.
In summary, while Loblaw delivered higher profits in Q3 2024, its revenue growth missed expectations due to slowing sales in its grocery and pharmacy businesses. Nonetheless, the company’s strong profit performance and its upward revision of EPS guidance provide a solid foundation for the remainder of the year.
