Discount grocery a ‘long-term shift:’ Loblaw CEO

Loblaw Companies chief executive Per Bank is betting on discount grocery’s long-term potential. 

The food and pharmacy retailer, which operates No Frills and Quebec's Maxi, has been steadily growing its discount footprint over the past several years. And Bank said the strategy is paying off. 

“We are confident that consumer preference for discount is a long term shift,” he said on the company’s second quarter earnings call Thursday (July 30). 

Loblaw opened 14 stores in the quarter. Seven of those were discount supermarkets. 

In June, No Frills opened its 200th store in Ontario. Bank said Loblaw is looking to open discount stores in underserved markets. 

“Our momentum on investing in this area and the differentiation of our Maxi and No Frills banners position us very well for continual growth,” Bank said. 

Bank credits discount’s growth to customers’ continued search for value. He said Loblaw’s customers are turning to promotions and the company's private label brands as a way of stretching their grocery budgets. 

“We are applying more value both to our discount stores and conventional banners,” he told analysts. 

Chief financial officer Richard Dufresne said Loblaw’s discount banners “continued to outperform” in Q2, posting comparable sales close to 4%. 

“We continue to gain share in our discount, and we are outperforming our peers in conventional,” Dufresne said, pointing to Fortinos and T&T as two of its well-performing traditional grocery banners. 

Executives said the company is on track to open 75 stores this year and anticipate opening around the same number of stores in its fiscal 2027.

“The pace will be stable. We won't be accelerating nor decelerating,” Dufresne said. 

Loblaw Companies reported net earnings of $751 million for its second quarter, an increase of $37 million from last year.

Retail sales increased by 4.1% to $15.05 billion for the period ended June 20.

Food retail same-store sales were up 1.6%, which Loblaw attributed to higher customer traffic, basket size and e-commerce sales growth.

Drug retail same-store sales grew 4.6% and e-commerce sales increased by 19.3%.

This is a developing story. More to come...