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TORONTO ? PC Decadent chocolate chip cookies and other popular Loblaw food brands are having a sweet impact on Shoppers Drug Mart’s performance.
Canada’s biggest pharmacy retailer sold greater than a quarter of a billion dollars of Loblaw’s house-branded President’s Choice with no Name merchandise in the stores across Canada this past year, Loblaw Cos. executives told a fourth quarter and year-end conference call with analysts Thursday.
During the quarter ended Jan. 2, same-store sales, an important retail metric that strips out the effects of added sq footage, climbed five per cent at Shoppers Drug Mart. Front of store sales, including beauty products and food, rose 5.7 per cent on a same-store basis and pharmacy sales were up 4.2 per cent. Loblaw’s same-store sales rose 3.1 percent, excluding gas.
After the $12.4 billion acquisition of Shoppers in 2014, Shoppers axed its own private-label packaged foods including Nativa, Simply Food and Everyday Market towards Loblaw’s popular house brands.
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“The PC brand resonates way more with consumers and the margin that we are obtaining on that clients are significantly higher than what Shoppers was obtaining on its own business,” chief financial officer Richard Dufresne told analysts Thursday. “(It’s) creating a halo effect through the store that is benefiting all categories.”
Shoppers, which gained some momentum in the health and beauty business after the exit of Target Canada this past year, has additionally rolled out a lineup of fresh and perishable items at 30 urban drugstores in Toronto, and began piloting a similar format in Regina since last spring.
“We are excited particularly about the performance of fresh foods stores within the urban market of Toronto,” said president Galen Weston, saying fresh groceries will be put into 10 more Shoppers stores within the city.
After a sluggish start in Regina, he explained fresh food sales have improved at Shoppers, but the retailer is “not yet ready to determine whether there is a suburban chance of Shoppers and fresh foods.”
Loblaw will also extend its grocery “Click and Collect” online pickup service, now available at 39 Loblaw stores in B.C., Alberta and Ontario, for an unspecified number of new locations. “These things essentially lose money because they start to ramp up to some certain level of scale,” Weston told analysts, but said profitability ramps up once the initiative gets enough sales traction.
Net income at that time ended Jan. 2 was $128 million, or 31 cents per share, compared with profit of $247-million (60 cents) in the same period a year earlier, due to the writedown of retail pharmacy assets and other special items. With an adjusted comparable week basis, Loblaw earnings rose 5.5 percent to $363 million, or 88 cents per share, compared with $344 million, (83 cents), within the fourth quarter of 2014, which had an additional week.
Overall revenue rose to $10.9 billion, up $241 million from $10.6 billion on a comparable week basis from the same duration of 2014.
Loblaw’s internal food price inflation was moderately higher than the average 4.1 percent national average in the quarter as measured by the Consumer Price Index.
Asked about the impact from the economy on the business, Weston noted consumers tend to switch from items such as cauliflower and beef once they hit a particular price point to other protein and vegetables. Consumers in the most economically pressured areas, for example Alberta, are spending a higher proportion of cash in the chain’s discount grocery stores.
“All of those situations are happening, but none of them of them are happening at a rate that’s fundamentally changing the sales trajectory from the market,” Weston said.
hshaw@nationalpost.com
Twitter.com/HollieKShaw
