Loblaw's discount stores on upswing after 'flight to conventional' stores: president

Loblaw Companies Ltd.'s discount grocery stores are starting to win back market share after consumers flocked to conventional supermarkets at the outset of the pandemic, the company's president said Thursday.

Sarah Davis said COVID-19 restrictions prompted many consumers to opt for conventional grocery stores as they sought a more "complete shop" while they limited the number of times they shopped a week.

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"When the pandemic started, we saw a flight to conventional, which had a significant impact on our discount business," she told analysts during a conference call after Loblaw reported its fourth-quarter profit and revenue rose compared with a year ago.

The trend positively impacted sales at the company's conventional grocery stores. But given Loblaw's food business breakdown is about 60 per cent discount stores and 40 per cent conventional, Davis said the company has been "working to win that market share back."

The company's fourth-quarter results showed a "closing of the gap," she said. "We're seeing an improved trajectory."

Loblaw said its food retail same-store sales grew 8.6 per cent, with its conventional division growing 10.6 per cent and its discount division growing 7.4 per cent. That's up from the discount division's growth of 4.7 per cent in the previous quarter.

Davis said the "food divisional results" were more balanced in the fourth quarter than they have been since the beginning of the pandemic, suggesting customers are returning to discount stores following a "short pandemic hiatus."

"We're seeing a little bit of change in consumer patterns, maybe not just the one shop," she said. "We're seeing a few more shoppers doing more than one shop in a week, perhaps shopping in a few different banners as well."

Loblaw has conventional grocery stores like Loblaws, Zehrs, Your Independent Grocer, Real Atlantic Superstore and Provigo, as well as a discount division, which includes No Frills and Maxi.

Overall, the company said it earned net income available to common shareholders of $345 million or 98 cents per diluted share for the 13-week period ended Jan. 2, boosted in part by an extra week in the quarter.

The result compared with a profit of $254 million or 70 cents per diluted share for the 12-week period ended Dec. 28, 2019. Revenue totalled $13.29 billion, up from $11.59 billion.

Loblaw’s e-commerce sales spiked 160 per cent during the quarter as many provinces reinstated lockdowns and stay-at-home orders.

Meanwhile, Davis said the company is "ready to play a key role in the nationwide vaccination effort."

She said the retailer's supply chain is able to deliver vaccines and begin administering the shots the day it receives them.

The company's 1,300 Shoppers Drug Mart and Pharmaprix drugstores across the country are within 10 minutes of most Canadians, Davis added.

The company's pharmacies have administered seasonal influenza vaccinations for years and are well positioned to do the same with the COVID-19 vaccines, she said.

Yet Davis said Loblaw has not been given the rollout strategy across all provinces or the timing yet.

The company's pharmacists in Alberta will start offering the vaccine in some stores next week, she said.

Ontario, Manitoba and Saskatchewan have all indicated the company will be part of the vaccination process, but Loblaw hasn't received more details such as the exact timing, Davis said.

In British Columbia and Quebec, meanwhile, she said it appears pharmacists could play a role at the mass vaccination sites, but not within the drugstores themselves.

However, Davis said the vaccine will likely be around for a long time and it's possible the scope of the pharmacy's role in some provinces could expand over time.

This report by The Canadian Press was first published Feb. 25, 2021.

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