Brampton, Ontario. –
Loblaw Companies Ltd. says it is facing fresh price hikes from suppliers, suggesting food inflation will not ease any time soon, but Canada’s largest grocer has said it has We expect our earnings to increase.
The parent company of grocery chains such as No-Frills, Authentic Canadian Superstore and Fortinos The company on Thursday expects earnings to grow at a faster pace than revenue in 2023, and expects low double-digit growth in adjusted net earnings per common share.
The outlook comes as inflation continues to weigh on Canadian households. Statistics Canada reported this week that food prices in January were up 11.4% year-on-year.
Loblaw Chairman and President Galen G. Weston said on a conference call with analysts about the company’s latest results.
“While we continue to believe that these inflationary pressures are temporary and will ease over time, it is very difficult to predict how long that will take. We will continue to resist unjustified cost increases.”
The company, which owns grocery chains like Provigo, Zehrs and T&T and drugstores like Shoppers Drug Mart, said it posted fourth-quarter earnings of $529 million, or $1.62 per diluted share. says.
This result was $744 million in the year-ago quarter, which included recoveries of $301 million related to the Supreme Court’s ruling on the GlenHuron Bank Limited tax litigation involving Robleur Financial Holdings. Down from $2.20 per diluted share.
Gross margins also declined slightly for the quarter ended December 31, with adjusted gross margins down 30.6% from 30.9% a year ago.
Declines in food retail margins, primarily related to No Name price freezes and increased promotional activity, were partially offset by growth in higher-margin pharmaceutical retail sales, according to the company.
Still, Loblaw’s adjusted earnings increased nearly 12 percent to $575 million from $515 million in the year-ago quarter.
Adjusted earnings were $1.76 per diluted share in the latest quarter, compared with $1.52 per diluted share in the prior quarter. On average, analysts expected earnings of $1.71 per share, according to financial market data firm Refinitiv.
The supermarket giant is under intense scrutiny amid rising food prices.
Critics have suggested the company is trying to capitalize on inflation to make a profit, but profits will outpace sales this year, even as grocery inflation continues to climb at a staggering pace. This accusation is unlikely to lose momentum, as the company expects to grow even faster.
The company says profit margins on food have remained flat since inflation began.
Meanwhile, the company’s revenue increased by nearly 10% compared to a year ago.
Revenue increased to $14.0 billion from $12.8 billion in the fourth quarter of 2021.
Sales growth was driven by discount grocers continuing to outperform traditional chains as grocery retail same store sales increased 8.4%. Meanwhile, drug retailer same-store sales rose 8.7%, driven by strong demand for cough and cold products, beauty and cosmetics. .
Loblaw Chief Financial Officer Richard Dufresne said on the conference call:
Statistics Canada announced this week that butter prices rose 19.1% year-on-year in January. Bread prices rose 18.1%, eggs rose 15.6%, and fresh or frozen poultry rose 14%, according to federal agencies.
At Loblaw grocery stores, shoppers continue to “trade down” to cheaper groceries to save money, Weston said.
“We see customer price sensitivity across the board,” he said.
Shoppers are increasingly seeking deals and promotions and choosing the company’s own brand, No Name. According to Galen, No Name has 25% less than domestic brand names on average.
Customers are also more active with the company’s PC Optimum loyalty program, and are redeeming more points for grocery purchases, he said.
Loblaw said in its 2023 outlook, it expects annual net capital expenditures of $1.6 billion, including about $2.1 billion of gross capital investment offset by $500 million in proceeds from real estate sales.
This report by the Canadian Press was first published on February 23, 2023.
