Grocer Loblaw reports sluggish food sales, touts e-commerce progress

loblaw

Canada's largest grocer reported sluggish same-store sales in its food business during its latest quarter, but touted growth in its online offerings after the company spent the past year prioritizing its digital business.

Loblaw Companies Ltd. reported same-store sales, a key retail metric, during its fourth quarter grew 1.9 per cent at Shoppers Drug Mart and 0.8 per cent at its grocery stores.

The food metric was "sluggish" and lagged the forecast, Irene Nattel, an analyst at RBC Dominion Securities Inc. wrote in a note. She pointed out that rival Metro Inc., reported an increase of 3.2 per cent in food same-store sales for its most recent quarter.

Loblaw president Sarah Davis said when general merchandise was excluded and only food was taken into account, same-store sales grew 1.8 per cent the grocery stores.

"So, we're happy with our core food. We're not happy with our (general merchandise) performance," she said, adding the drop happened as the company changed its promotional strategy to everyday low prices.

That strategy improved margins, she said, but the company would have liked to have seen more sales. It may look at tweaking that strategy this year, she added.

Executives said the company has grown its digital sales to more than $500,000 during 2018.

"We feel like we're gaining share on, in digital sales in Canada," said Davis, adding the company is seeing higher than expected volumes at its Western Superstores, and traction in urban centres, like Toronto and Vancouver.

When customers shop online, they order more on average than when shopping in store, she said, but the digital sales do cannibalize from the bricks-and-mortar locations to some degree.

The company has learned that customers seem to like a fast turnaround time for online orders and will work to improve fulfillment speed this year, she said.

Loblaw said its profit for the quarter ended Dec. 29 improved compared with a year ago when it was hit by restructuring and other one-time charges.

The grocer earned a profit of $221 million attributable to common shareholders or 59 cents per share. That compared with a profit of $31 million or eight cents per share in the same quarter a year earlier.

Revenue totalled $11.22 billion, up from $10.99 billion.

On an adjusted basis, Loblaw earned $1.03 per diluted share from continuing operations, up from $1.02 per diluted share in the final quarter of 2017.