Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew by 1.5% to $13.9 billion, demonstrating steady operational and financial performance.
- Adjusted EBITDA increased by 4.5%, reflecting strong financial health.
- Adjusted diluted net earnings per share grew by 10.8% to $2.15.
- Drug retail absolute sales increased by 2.4%, with same-store sales growing by 1.5%.
- Online sales in the quarter increased by 14.2%, showing strong digital growth.
Negative Points
- GAAP net earnings declined by 10% due to the impact of the class-action settlement charge.
- Front store same-store sales declined by 2.4%, indicating a slowdown in certain retail segments.
- SG&A spend rate as a percentage of sales increased by 60 basis points, driven by lower operating leverage and higher costs.
- Food retail same-store sales grew only by 0.2%, showing minimal growth in this segment.
- The company faces headwinds from lower spending on certain food and household items and the decision to exit certain electronics categories.
Q & A Highlights
Q: Can you update us on the beauty category's performance and market share?
A: Beauty continues to perform very well, particularly in the prestige category. We are delivering above market growth, and while we don't have specific market share data, we are seeing low double-digit growth in this segment. (Per Bank, President & CEO)
Q: How is Loblaw progressing with the rollout of its pharmacy clinics, and what is the outlook for pharmacy services?
A: We remain bullish on the new clinics, with plans to have around 250 clinics by the end of next year. The recent developments in Ontario are promising and should help reduce pressure on the healthcare system. (Per Bank, President & CEO)
Q: Can you discuss the factors impacting food same-store sales and where you saw the most pressure?
A: Same-store sales appear softer due to high year-over-year comps. Factors include a wet spring affecting garden center sales and some impact from specific market boycotts. However, our promotions and competitive pricing are resonating well with customers. (Roy Macdonald, Group Vice President, Investor Relations)
Q: What is driving the stronger trends in Q3 to date for both food and front-store sales?
A: Our strategies, such as the "Hit of the Month" program, are resonating with customers. Additionally, we are benefiting from easier year-over-year comps. We are confident in our strategy and expect continued strong performance. (Per Bank, President & CEO)
Q: How are the smaller local stores performing versus expectations?
A: The smaller format stores are doing very well, with strong customer feedback. These stores provide access to lower prices in areas that previously lacked such options. We plan to open more of these stores in the coming quarters. (Per Bank, President & CEO)
Q: How are the pharmacy clinics performing relative to expectations?
A: The clinics are performing well, meeting or exceeding our expectations. They are supported by expanded prescribing capabilities, and we plan to continue adding new clinics. (Per Bank, President & CEO)
Q: Have you been able to get more promotional support from vendors as inflation moderates?
A: Yes, we are seeing increased promotional support from vendors looking to drive volume growth. This support allows us to offer competitive pricing and strong promotions. (Per Bank, President & CEO)
Q: Can you explain the swing in financial services revenue growth and margins between Q1 and Q2?
A: The significant benefits in Q1 were due to a new MasterCard contract signed in March. The ongoing benefits will continue, but the key driver of profitability remains the Expected Credit Loss (ECL), which can vary. (Roy Macdonald, Group Vice President, Investor Relations)
Q: What are the expectations for SG&A rates for the full year?
A: We expect SG&A rates to be flat for Q3, with potential for slight improvement in the second half of the year due to various cost management initiatives. (Roy Macdonald, Group Vice President, Investor Relations)
Q: How is the gross margin expected to trend in Q3 compared to Q2?
A: Gross margin will be up in Q3 but not to the same extent as Q2. We expect continued benefits from shrink improvements and stronger same-store sales. (Roy Macdonald, Group Vice President, Investor Relations)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
