Sales likely to flatten as pandemic recovery begins: Loblaw

Against the unusual backdrop of a pandemic, Loblaw has reported four quarters of sequential growth--but it looks as though sales are levelling off as Canada’s largest grocer starts to lap year-over-year comparisons.

The Brampton, Ont.-based company reported $11.87 billion in revenue for the first quarter, compared to $11.8 billion a year ago when shopping habits started to change as a result of the pandemic and country-wide lockdowns.

In the final two weeks of March 2020, Loblaw saw a sharp increase in revenue and sales as shoppers stockpiled supplies and turned to online grocery shopping. During this period, Loblaw reported a 10.7% year-over-year increase in revenue and approximately $751 million in incremental sales.

At the top of a call with analysts Wednesday morning, Loblaw president Sarah Davis said it was helpful to look at a “two-year average growth rate” during these “extraordinary times.”

“Our consolidated Q1 2021 performance exceeded our financial framework on a two-year stacked basis with average revenue up 5.5%, EBITDA up 8.2% and EPS up 20.4%,” said Davis, who officially retired from the company on May. 6.

Sales growth and e-commerce gains will likely start to flatten now when stacked against pandemic buying and also as the economy starts to reopen. For instance, food retail same-stores sales were “relatively flat” growing by only 0.1%, said Loblaw chief financial officer Darren Myers.

Same-store sales continued with strong momentum from the fourth quarter before lapping the COVID-related pantry stocking from 2020, which drove same-store sales last year of 9.6%, including 44% in the final two weeks of the quarter,” said Myers, who stepped down from the company after its Annual General Meeting on Thursday.

Though Loblaw’s e-commerce business flourished in the quarter, with sales increasing 133% compared to the first quarter of 2020, Davis said it was a “reasonable expectation” that these numbers would start to flatten relative to the pandemic peaks of last year.

Davis said the company had been working during the first quarter to improve customer service and on lowering the cost of fulfilling online orders. And, “as the business grew exponentially, we delivered our highest fill rates, lowest wait times and the best satisfaction scores of all time,” said Davis.

Loblaw customers still tend to gravitate towards click and collect, said Davis, though home delivery is important in some parts of the country and is available through partnerships with Instacart and also the grocer’s own delivery service.