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Loblaw continues to adjust for COVID-19 impacts

Despite changes in shopping behaviour and increased operating costs, the company saw third-quarter improvements in market share, margin and profit

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Nine months into the pandemic and COVID-19 continues to have an impact on Loblaw’s day-to-day operations and performance, but the grocery company has its “feet squarely beneath” it, said president Sarah Davis.

Changes in consumer spending habits–shifts from discount to conventional and a dip in discretionary purchases–coupled with a significant investment in COVID-related health and safety measures had a “substantial drag on our profitability” in the earlier part of the year, said Davis during a call with analysts on Tuesday.

Though COVID costs increased spending in the quarter by approximately $85 million, the company saw improved performance in areas such as tonnage, market share, margin and profit.

Revenue for the 16-week period totalled $15.67 billion, up from nearly $14.66 billion in the same quarter a year earlier. Food retail same-store sales gained 6.9% in the quarter–Loblaw’s market division (Loblaws, Atlantic Superstore, Provigo), delivered 9.7% growth and its discount division (No Frills, Zhers) delivered 4.7% growth.

Basket size was high in the third quarter, but foot traffic was low. “At the height of the pandemic, there would have been the panic buying,” said Davis. “But I would say now, through Q2 and Q3, it’s stabilized and people are just buying bigger-size packs.”

Davis said the company invested in price and maintained strong promotions in the quarter to provide customers with value during these uncertain times.

“Banner-by-banner our food stores are well positioned to meet the challenges of the pandemic,” said Davis. “While we continue to provide customers with the everyday value that has always been important to them.”

Though Canadians may have celebrated Thanksgiving and Halloween differently this year, Davis said sales remained relatively unchanged. “I would say that people are still getting together and celebrating just in smaller groups,” she said. “But our sell-through for both Thanksgiving and Halloween was strong.”

Davis said she expected similar results for the upcoming holiday season. “People will still be eating meals in smaller groups,” she said. “They likely won’t be going out to as many restaurants and parties, and so will be eating at home in small groups that we are anticipating for the holiday season.”

 

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