Loblaw says that “inflation has peaked or is about to peak” as it posts a profit of $387 million

Loblaw expects inflation to moderate in the second half of the year. (Getty Images)

According to Loblaw Companies Ltd. (L.TO) there are signs that inflation “is about to peak or is about to peak” as supply chain problems normalize and central banks take aggressive action to tame skyrocketing prices.

Canada’s largest grocery chain said after releasing its second-quarter financial results on Wednesday that the company expects inflation to moderate in the second half of the year as commodity prices retreat from their peaks, freight costs fall and supply chain problems deepen normalize.

“Inflation remains a significant external force affecting business performance. However, we are seeing some signs of stabilization,” Loblaw chairman and president Galen Weston said on a conference call with analysts.

“However, supplier costs remain high and are putting retail prices under sustained pressure. We continue to work hard to reduce their impact on our customers.”

Grocery prices have skyrocketed into 2022, putting pressure on many Canadian households and forcing many to limit themselves to basic necessities purchases. Statistics Canada’s Consumer Price Index (CPI) showed that the cost of groceries at the grocery store rose 9.4 percent in June. Loblaw says its internal food inflation rate, which it measures based on a basket of foods similar to Statistics Canada’s, was “generally consistent” with the CPI.

Loblaw says rising prices mean more shoppers are switching to its discount brands, including No Frills and Maxi. The company adds that its budget-friendly No Name brand is seeing historic growth.

“The shift towards discounters is continuing at a rapid pace. Price sensitivity is growing,” Weston said.

The comments came as Loblaw reported an increase in its profit and sales in the second quarter, thanks to strong drugstore sales. Net income available to common shareholders was $387 million, or $1.16 per diluted share, an increase of 3.2 percent from $375 million, or $1.09 per share in 2021 is equivalent to. Total revenue reached $12.85 billion, up 2.9 percent from $12.49 billion in the same period last year, which fell short of analysts’ expectations. According to Refinitiv’s IBES data, analysts on average expected sales of $12.98 billion.

Loblaw’s stock was down about 2 percent as of 12:45 p.m. ET, trading at $118.87 a share.

The company says same-store sales — a key metric in the retail industry that excludes new-store sales — at its grocery chains are up 0.9 percent year-over-year. However, same-store sales in drugstore retail grew 5.6 percent annually, driven by sales growth in over-the-counter products and cosmetics. Sales of beauty products and cosmetics are back to pre-pandemic levels, according to Richard Dufresne, the company’s chief financial officer.

“Shoppers Drug Mart had a terrific quarter, delivering high-margin beauty and cough and cold sales while expanding the pharmacy services it created for Canadian patients,” Weston said, noting the impact of inflation on its drugstore retail business are different.

“There’s not as much inflation in the health and beauty space, but we’re certainly seeing the same inflationary pressures on all consumables in Shoppers Drug Mart’s front store.”

With files from Reuters

Alicja Siekierska is Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

Download the Yahoo Finance app, available for Apple and Android.

Leave a Comment

Your email address will not be published.