Canada’s leading food and health and beauty retailer Loblaw Companies Limited (Loblaw) announced its unaudited financial results for the third quarter ended October 5, 2019, with Loblaw same-store retail sales flat at 0.1 percent growth compared to 3Q 2018 and front of store pharmacy same-store sales growth of 3.1 percent.
And Loblaw also announced it was converting a retail store of 12,000 square feet to test an online ‘micro’ order-fulfillment area for its PC Express click-and-collect grocery service, starting at the Toronto location of the Great Canadian Superstore, according to the Globe and Mail newspaper.
"With a focus on improving sales performance, we delivered solid financial results in the quarter," said Galen G. Weston, executive chairman, Loblaw Companies Limited. Sales revenue rose by 2.3 percent to CA$14.655 million compared to the third quarter of 2018, with retail segment sales of CA$14.420 million, an increase of 2.2 percent compared to the third quarter of 2018.
The Company has two reportable operating segments (with all material operations carried out in Canada): The Retail segment consists primarily of corporate and franchise-owned retail food and Associate-owned drug stores. The Retail segment also includes in-store pharmacies and other health and beauty products, apparel and other general merchandise and supports the PC Optimum Program; and The Financial Services segment provides credit card services, the PC Optimum Program, insurance brokerage services, deposit taking services and telecommunication services.
At Loblaw stores, food retail same-store sales growth was 0.1 percent, or approximately 1.0 percent after excluding the unfavorable impact of the timing of Thanksgiving. Drug retail (Shoppers Drug Mart) same-store sales growth was 4.1 percent, with pharmacy same-store sales growth of 5.3 percent and front store same-store sales growth of 3.1 percent. Loblaw retail basket size increased during the quarter, while traffic decreased.
Faced with increased competition from discount chains and Walmart Canada, Loblaw cut prices on some lines and kept its overall food price increases moderately or marginally lower than the average quarterly national food price inflation of 4.1 percent (2018 – 0.3 percent inflation) as measured by the CPI.
Loblaw said that operating income was CA$690 million, up 16.6 percent compared to the third quarter of 2018. Adjusted gross profit was CA$4,262 million, an increase of $154 million when compared to the third quarter of 2018. Margins were negatively impacted by Drug retail, while Food retail margins were stable.
Loblaw has partnered with Takeoff Technologies to build a 12,000-square-foot automated micro-fulfillment center inside the Toronto store. The new “mini-warehouse” is expected to open next year and will fulfill orders for Loblaw's PC Express click-and-collect service at the store and other nearby stores.
Loblaw offers PC Express pickup from more than 700 stores across Canada. The service has extended its reach beyond stores, with pickup lockers available at train and subway stations. Loblaw also sends out special trucks to dispense orders from a fixed spot.
Another major Canadian grocer Sobeys Inc announced in May a second agreement between the UK’s Ocado Solutions to build a second Customer Fulfilment Centre (“CFC”) in Pointe-Claire, Montreal. The new site will be Sobeys’ second, adding to the center already under construction in Vaughan, Ontario to serve the Greater Toronto Area.