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Shoppers Drug Mart leads growth as Loblaw reports profit

Shoppers Drug Mart saw same-store sales increase as the number of prescriptions being dispensed jumped. (Andrew Francis Wallace/Toronto Star via Getty Images)

Loblaw Companies Ltd. (L.TO) raked in a $254 million profit in the fourth quarter of 2019, up from last year, with Shoppers Drug Mart leading the way in terms of growth for the retailer.

The company said Thursday that net earnings increased to $254 million, or 70 cents per diluted share, for the 12-week period ending Dec. 28, up from $221 million, or $59 cents per diluted share, in 2018.

When it came to same-store sales, a key metric in the retail industry, Shoppers Drug Mart posted a 3.6 per cent increase, the most significant growth for the company. That growth is partly due to a jump in the number of prescriptions being dispensed.

“Shoppers delivered another impressive quarter with continued leadership in beauty, strong performance in cold and flu and the best pharmacy (same-store sales) that we’ve seen in five years,” Sarah Davis, president at Loblaw, told analysts on a conference call Thursday.

Loblaw’s grocery business, which makes up more than 70 per cent of its sales, saw same-store sales growth increase 1.9 per cent in the quarter. However, when the impact of Thanksgiving – a significant shopping event that is usually in the third quarter – was taken out of the equation, same-store sales were up a more moderate 0.8 per cent.

While Loblaw saw strong sales overall, the company said sales in the apparel and general merchandise categories, including home items, have been weak as more customers go online to purchase those products.

Darren Myers, the company’s chief financial officer, said the company has deployed several strategies to address the weaker sales, which have been impacting not only Loblaw but the broader retail industry. He also said the retailer plans to move more of those products online.

“We like being in the general merchandise and apparel businesses, but when you consider our suite of stores, we have over 2,000 stores and GM and apparel is a very small portion of those,” Davis said, adding that the categories do not have a “significant impact” on overall sales.

“It is a question of making sure that we have the most efficient types of products that we sell in those stores.”

When asked by an analyst on Thursday whether Joe Fresh, Loblaw’s clothing brand, was still a strategically important business to Loblaw, Davis responded with “yes.”

Loblaw also said Thursday that the anti-pipeline blockades that have brought rail traffic across the country to a halt has not affected the company’s performance as it moves more goods via truck.

“From our perspective, our logistics team and supply team have actually done a nice job in dealing with that and having a mitigation plan,” Davis said.

“It hasn’t been a big impact on us as we’ve moved from rail to road. You shouldn’t expect at this point, a big impact on our performance (in the next quarter).”

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