Loblaws made $556 million in profits in 16 weeks, (partially) because a lot of people got sick
Also, that freeze on No Name products was great for business
How are things going at Loblaw Companies Ltd. these days? On Wednesday morning, the company reported more than half a billion dollars in profits in a mere 16 weeks.
The $556 million in profits was an increase of 29 per cent compared to the same period last year. Loblaw management specifically made a point of saying that the increase in profits is absolutely definitely not because they’re hiking prices and using inflation as an excuse.
I legitimately don’t think the story with inflation is a bunch of greedy robber barons rubbing their hands together and twisting their mustaches as they raise prices, but if you’re not inclined to believe Loblaw Co. CEO Galen Weston Jr. on the matter, I won’t waste my time trying to convince you .
However, Weston had another explanation for the stellar financial results:
“As the summer ended and Canadians returned both to the office and to school, we saw a marked acceleration of sales in our beauty aisles as a high margin category, this significantly benefitted our results. Then, as the weather cooled and people stayed indoors, all that extra social contact contributed to more respiratory illnesses than would be typical. The combination of Covid, RSV and flu brought more customers to our pharmacies, leading to all-time highs in the sale of cough and cold meds, and sustained growth in prescriptions.”
(emphasis added by me)
I guess that’s interesting.
I’m fascinated by Loblaw Co. because they’re so massive.
The company owns Shoppers Drug Mart and Loblaws and No Frills and a bunch of other grocery stores, and that allows Weston to look out at a statistically meaningful chunk of the Canadian population.
So Weston can observe the flow of profits from the makeup aisle in one month as people go out, and then he can see people migrate to the cold & flu aisle a little while later, as everyone gets sick.
I was interested in listening to the Loblaw Co. earnings conference call on Wednesday because the company caused a bit of a stir about a month ago, when they announced that they would freeze prices on about 1,500 No Name brand items.
The charitable way of looking at it is that this gives people a break from food inflation in the lead-up to the holiday season.
The less charitable way of looking at it is that this is a PR stunt.
Also, there’s this:
Back in October, I was curious whether the decision to freeze prices would actually cost Loblaw Co. anything. Would this eat into their profits in any way?
I figured if Loblaw Co. was ever going to reveal that answer, they’d probably give it in response to a professional investment analyst. These people get to ask questions when a publicly traded company like Loblaw Co. reports their quarterly financial results.
Unfortunately for my insatiable curiosity, nobody asked about the price freeze. But Mr. Galen Weston Jr. did have something to say on the topic anyway:
“As you know we took the unprecedented step of freezing prices on Canada’s second largest brand — No Name — locking down 1,500 items. The response has been overwhelmingly positive, leading to even stronger control brand sales outperformance, since the announcement”
(Emphasis added)
So. That’s definitely interesting.
What happened here is that Loblaw Co. got a lot of free publicity and provoked a whole bunch of discussion about whether it was a PR stunt.
And then consumers bought No Name brand products instead of the brand name products in grocery stores.
I assume Loblaw Co. makes higher profit margins on the No Name stuff because it’s their own store brand, but Weston didn’t say anything about that on Wednesday.
However, we do know that Loblaw Co. is willing to act aggressively to steer customers toward store brands. They went to war with ketchup a few years ago.
In conclusion: If a large corporation is publicly traded on the stock market, then every three months they report their financial results, and senior executives typically hold a conference call with financial analysts where they talk about their financial results.
These calls are broadcast publicly. It’s interesting to listen in.
By the way, Loblaw Co. owns a lot of stuff.