Loblaw hikes dividend by 11% as Canadians dining in boost profit

Inflation has driven more shoppers to switch to the grocery giant’s discount stores

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Loblaw Companies Ltd., the largest grocery chain in Canada, is increasing its dividend for shareholders after making significant profit gains in its latest quarter.

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In an earnings update on May 4, Loblaw announced an 11-per-cent hike to the dividend, to 40.5 cents per common share — the 11th consecutive annual increase, according to the company.

Loblaw, a network of more than 2,400 stores that includes No Frills, Shoppers Drug Mart and Real Canadian Superstore, booked profits of $473 million on revenues of roughly $12.3 billion in the first quarter of this year, ended March 26.

Net earnings were up roughly 41 per cent, from $335 million in the same period last year. Loblaw said its adjusted net earnings available to common shareholders were $459 million, a year-over-year increase of about 17 per cent.

Retail revenues reached about $12 billion in the quarter, an increase of $375 million, or 3.2 per cent, compared to last year. Same-store sales — a retail metric that gives a clear picture of year-over-year growth by ignoring results from new locations — increased by 2.1 per cent in Loblaw’s food division.

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“Food sales continued to benefit from higher than normal eat-at-home levels,” Loblaw said in a news release on May 4.

The earnings update comes in the middle of the worst food inflation in 13 years, with suppliers pushing hard to get Canadian grocery chains to pay more for their products. When retailers accept those price increases, they then have to decide whether to pass it onto the customer or absorb it in their margins to remain competitive.

Loblaw’s gross profit percentage across its food and drug retail business was 31.1 per cent in the first quarter, compared with 30.3 per cent in the same period in 2021.

Loblaw’s internal food inflation was slightly higher than Statistics Canada’s Consumer Price Index, which measured price inflation in food retail at 7.5 per cent in the quarter, the company said.

Inflation has driven more shoppers to switch from conventional grocery stores to discount banners, like No Frills. Loblaw said No Frills saw “strong growth,” while its more traditional banners performed well compared to peers but were “impacted by the shift to discount.”

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