Loblaw Companies Ltd. saw sales surge due to the COVID-19 pandemic, which prompted demand at grocery stores and pharmacies to skyrocket in the last two weeks of March.
Canada’s largest grocery retailer said on Wednesday that it generated $751 million in revenues in the 12-week period ending March 31, or 14 cents per diluted share. This came as overall sales grew by $1.1 billion when compared to the same time last year to $11.8 billion in 2020, an increase of 10.8 per cent.
Same store sales, a key metric in the retail industry, were up 9.6 per cent at the company’s grocery store chains, and up 10.7 per cent at its Shoppers Drug Mart business.
Loblaw’s stock was down about 3 per cent in mid-day trading on Wednesday.
“As it turned out, (the first quarter) was a tale of 14 days, when the government offered their pandemic warning and suggested Canadians prepare for a long stretch at home,” Loblaw president Sarah Davis said on a conference call with analysts Wednesday shortly after financial results were released.
“In a matter of days, customers counts and basket size spiked fourfold. Sales of paper, frozen and meat products skyrocketed, e-commerce traffic tripled, restaurants closed and our prepared meal business and recipe making categories took off. Pharmacies were lined with patients filling prescriptions seeking health essentials and advice.”
Grocery stores across the country saw demand surge beginning as early as late February as customers began panic-buying on stockpiling items. Metro Inc., which reported earnings last week, saw same store sales jump 25 per cent over the four weeks starting March 15.
Loblaw’s e-commerce grocery business has also been surging as customers look to stay home and avoid long line-ups at stores. It saw e-commerce traffic triple overall, with higher demand in the Greater Toronto Area, although Davis expects that will drop off when the pandemic passes.
The pandemic has also prompted many customers to shop at conventional stores instead of discount stores such as No Frills, Davis said.
“We’re attributing that to the fact people are only doing one shop,” Davis said.
“They’re looking for a higher product assortment and shorter lines and I would say they are probably a little less conscious of price.”
The company is also seeing high growth in products related to home cooking.
“We’re definitely seeing high growth in areas for people cooking from scratch, which we would have said, prior to this COVID time, would have been a declining area,” Davis said.
“Now there’s a big resurgence. Lots of flour, and cooking and baking supplies.”
While sales are up dramatically, Loblaw is also seeing expenses increase as the company spends more on expanding online capabilities, increasing staffing and wages, cleaning and safety supplies, plexiglass barriers and social distancing promotion. The measures are costing the company approximately $90 million every four weeks.
Whether those expenses will remain in place after COVID-19 remains to be seen. In the meantime, Loblaw has withdrawn its 2020 outlook due to the COVID-19 pandemic.
“It’s incredibly hard for us to predict the future after all this,” Darren Myers, Loblaw’s chief financial officer, said.
“These are temporary costs right now that we expect to continue through the pandemic, but it’s too difficult for any of us to predict what happens afterwards.”