Shoppers Drug Mart fuels Loblaw's Q1

BRAMPTON, Ontario — Shoppers Drug Mart helped fuel Loblaw’s first quarter as the company continues to implement best-of-breed practices across its network.



“It’s hard to believe that it has been just over a year since the Shoppers Drug Mart acquisition closed. We’ve made tremendous progress and are excited about the possibilities going forward,” Galen Weston, executive chairman and president of Loblaw, told analysts during Wednesday’s first quarter conference call. “Many acquisitions can create distractions for companies. With the acquisition of Shoppers Drug Mart in many ways, I believe, we have become more focused.”



Weston said the company is starting to incorporate best-of-breed practices across the companies to further enhance its effectiveness and competitive advantage. The company’s leadership team is working to enhance the health and beauty offering in its grocery stores, as well as expanding and improving the food offering at Shoppers Drug Mart.



As previously reported by Drug Store News, Shoppers Drug Mart is tapping into Loblaw’s strengths and expertise via a fresh foods pilot. Since October, six Shoppers Drug Mart stores in Toronto have been piloting an improved convenience food offering, including fresh produce, meats and prepared meals.



When asked about the food pilots during Wednesday’s call, Galen said, “While it’s still early to determine the long-term performance, I can tell you that we are encouraged by the progress pretty much across the board, both the incremental impact on sales for the store itself [and] the performance of food sales, specifically. The fresh food proposition is being well-responded to by the consumers as well.”



The pilot has since expanded to Regina, where nine Shoppers Drug Marts were renovated. “The difference between Toronto and Regina is that we’ve taken an entire market with what we think is a disproportionate mix toward suburban as opposed to downtown urban. This is a test to determine really how much reach a convenience fresh foods proposition has in small stores in some of the more suburban markets in Canada,” Galen said.



During the quarter, Loblaw posted retail segment sales of U.S. $8.2 billion, an increase of 38.5%, including U.S. $2.2 billion in retail sales contributed by Shoppers Drug Mart.



Shoppers Drug Mart retail sales were comprised of pharmacy sales of U.S. $1.04 billion and front-store sales of U.S. $1.11 billion. Same-store sales increased 3.1%, with pharmacy increasing 3.5% and front-store increasing by 2.7% compared with the year-ago period.



“Shoppers Drug Mart continues to see a sales lift from market share gains in pharmacy and continued strength in OTC, beauty, food and confection. Traffic and basket were up across our divisions,” Weston said.



Consolidated sales rose 37.8% to U.S. $8.35 billion. Net earnings increased 21.7% to U.S. $121 million.



“The industries in which we operate remain intensely competitive but, on balance, we expect to see continued momentum based on our competitive position and moderating square footage growth,” said Weston. “Our outlook remains unchanged.”