Shoppers continued to shift to discount stores and private-label brands in the second quarter for Loblaw Companies Ltd., which said it saw increased sales and lower gross margins.
The company reported a profit available to common shareholders of $508 million for its second quarter ended June 17, an increase of 31.3 per cent from the same period last year.
The parent company of Loblaws and Shoppers Drug Mart reported its profit amounted to $1.58 per diluted share for the quarter ended June 17, an increase from $1.16 per diluted share in the same quarter last year.
Net earnings were “unusually elevated” because of a prior-year charge at President’s Choice Bank, Loblaw said in a press release, noting that adjusted net earnings were up 10.6 per cent.
Revenue for the 12-week period totalled $13.7 billion, up from $12.8 billion a year earlier.
Food retail same-stores sales were up 6.1 per cent, while drug retail same-store sales increased by 5.7 per cent.
Food retail sales growth was driven by a continued consumer shift to discount stores, the company said.
However, it added that retail gross margin declined slightly in both the food and drug categories, saying it faced double-digit supplier cost increases that were not fully passed on to consumers.
On adjusted basis, Loblaw earned $1.94 per diluted share in its latest quarter, up from an adjusted profit of $1.69 per diluted share a year ago.
E-commerce sales for the company were up 13.9 per cent.
Loblaw expects its retail business to grow earnings faster than sales for the full fiscal year, the company said.
It plans to increase investments in the store network and distribution centres by investing a net amount of $1.6 billion in capital expenditures.