Quebec Standard

Tuesday, August 16, 2022

Sales of everything but food are stalling as inflation bites into customer spending

Quebec

Key takeaways: 

  • Returns at grocery and pharmacy chains inches up to $387M.
  • Loblaw posted growth in returns and sales in its second quarter, with drugstore sales driving overall margin growth.

The firm’s president and chairman said Wednesday that Loblaw Companies Ltd.’s sales increase is easing as inflation continues to grip the economy and shape customer shopping habits.

While the nation’s biggest grocery and pharmacy chain sees “a little piece of softening” with its Joe Fresh apparel brand going on, what it calls “general merchandise” or non-food sales outside of garments are “notably down” in the most recent quarter, Galen Weston stated.

“It had a drag on our overall (comparable) sales results,” he told critics during a conference call to discuss the grocery and pharmacy chain’s second-quarter outcomes.

Some large U.S.-based retailers have cautioned in recent months around unsold inventory as shoppers rein in spending due to increasing costs. Firms like Walmart and Target have suggested earnings could take a hit as they are forced to mark down extra inventory.

“The key to this possibility is inventory. The question is, how do you feel about inventory, and do you have fierce markdowns that you ought to put through to clear that inventory,” Weston said.

Also read: Granby Agropur plant reaches deal in principle with employees’ union

The firm’s president and chairman said Wednesday that Loblaw Companies Ltd.’s sales increase is easing as inflation continues to grip the economy and shape customer shopping habits

“We feel good around inventory and don’t see any noteworthy margin threat associated with clearing what’s left.”

The firm posted an expansion in profit and sales in its second quarter, with drugstore sales driving overall margin expansion.

Pharmacy same-store sales rose 5.6 percent, while pharmacy and healthcare services grew 6.1 percent.

“Right now, cough and cold (sales) … it’s like we’re in the middle of winter,” Loblaw chief financial officer Richard Dufresne stated during the call.

Weston added: “There’s incredible power in fragrances. We’re wondering what people are doing with all of those perfumes.”

Source – CBC News

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