TORONTO ? PC Decadent chocolate cookies and other popular Loblaw food brands are having a sweet impact on Shoppers Drug Mart’s performance.
Canada’s biggest pharmacy retailer sold more than a quarter of the billion dollars of Loblaw’s house-branded President’s Choice with no Name merchandise in the stores across Canada last 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 essential retail metric that strips the results of added sq footage, climbed five per cent at Shoppers Drug Mart. Front of store sales, including beauty items and food, rose 5.7 percent on the 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 purchase 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 far more with consumers and the margin that we’re obtaining with that business is 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’s benefiting all categories.”
Shoppers, which gained some momentum in its health and beauty business following the exit of Target Canada this past year, has additionally presented 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 concerning the performance of fresh foods stores in 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 foods sales have improved at Shoppers, but the retailer is “not yet ready to determine if 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 as they start to increase to some certain level of scale,” Weston told analysts, but said profitability ramps up when the initiative gets enough sales traction.
Net income in the period ended Jan. 2 was $128 million, or 31 cents per share, in contrast to profit of $247-million (60 cents) in the same period a year earlier, because of the writedown of retail pharmacy assets along with other special items. On an adjusted comparable week basis, Loblaw earnings rose 5.5 per cent to $363 million, or 88 cents per share, compared with $344 million, (83 cents), in the fourth quarter of 2014, which had an extra 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 greater than the average 4.1 percent national average within the quarter as measured by the Consumer Price Index.
Asked concerning the impact of the economy on the business, Weston noted consumers tend to switch from items such as cauliflower and beef once they hit a certain cost to other protein and vegetables. Consumers in the most economically pressured areas, such as Alberta, are spending a higher proportion of cash at the chain’s discount grocery stores.
“All of those situations are happening, but none of them of them are happening for a price that’s fundamentally changing the sales trajectory of the market,” Weston said.
hshaw@nationalpost.com
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