Cheaper prices meet higher volumes as Shoppers Drug Mart posts 7.5% script growth
Loblaw Companies Limited is beginning to feel the effect of generic versions of GLP-1 weight-loss drugs moving through its pharmacy business, executives told analysts, as the grocery and drug retailer reported second-quarter same-store sales growth of 7.5 percent in pharmacy and healthcare services.
Specialty prescriptions keep leading pharmacy performance, chief financial officer Richard Dufresne told a conference call reported by CBC News.
He said the company is beginning to see GLP-1 drugs go generic and that early indications look "encouraging."
The dynamic matters for anyone tracking drug-plan costs.
Rather than cheaper generics simply cutting revenue, Dufresne said volume is making up the difference.
"Lower generic drug pricing is being offset by higher volumes, and we expect higher revenue, higher gross profit dollars and higher gross margin rate," he told analysts.
Health Canada approved the country's first generic semaglutide injection in late April, according to CBC News.
The GLP-1 category, which includes Ozempic and Wegovy, has seen sales rise 40 percent year-to-date at Loblaw, a pace the company first flagged in its prior quarter reported in May.
Drug retail same-store sales, measured through Shoppers Drug Mart, rose 4.6 percent in the quarter, up from 4.1 percent a year earlier, the company said.
Front-store sales grew 1.3 percent.
The Brampton, Ontario-based retailer reported the results on July 30 for the three months ended June 20. Revenue rose 4.1 percent to $15.27bn, and profit available to common shareholders increased about five percent to $751m, as per the company's filing.
Adjusted diluted net earnings per common share climbed 11.9 percent to $0.66. E-commerce sales grew 19.3 percent.
Food retail told a more cautious story on the cost-of-living front.
Same-store sales in the core grocery business rose 1.6 percent, down from 3.5 percent a year earlier.
Chief executive Per Bank said budget-conscious shoppers are increasingly swapping fresh produce for frozen as food prices bite, with frozen-vegetable sales in the company's No Frills and Maxi discount banners growing more than five percentage points.
"Those customers who shop there, they are trying to mitigate their inflation," Bank said on the call. Statistics Canada recently recorded a 45.2 percent year-over-year jump in the cost of fresh tomatoes, CBC News reported.
Dufresne said the discount banners remain well placed as households prioritize value.
"We continue to gain share in hard discount, and we are outperforming our peers in conventional," he said, adding that Loblaw's internal food-inflation measure sits below Canada's grocery consumer price index.
Statistics Canada said the headline inflation rate fell to 2.8 percent in June, with grocery price increases easing to 3.9 percent from 4.3 percent in May.
The quarter was Loblaw's last before it closed the sale of PC Financial to EQB Inc.
The company said it received $625m in cash on closing and now holds roughly 19.9 percent of EQB's common shares.
Beginning in the third quarter, Loblaw will stop reporting PC Financial results and will instead recognize its proportionate share of EQB's net income.
Loblaw expects to repurchase about $2.1bn in common shares for cancellation over the full year, up from $1.9bn in 2025, the company said.
It bought back 8.8m shares for $552m in the second quarter.
Toronto-listed shares traded roughly flat on the day and have gained about six percent year-to-date, according to CBC News.
