Loblaw, a prominent grocery retailer based in Brampton, Ontario, reported increased profitability in the second quarter as it continued to attract budget-conscious customers to its discount chains No Frills and Maxi. The company highlighted robust sales growth in its pharmacy segment, attributing it to the popularity of generic GLP-1 weight loss medications.

For the quarter ending on June 20, Loblaw disclosed that its revenue surpassed $15.3 billion, marking a four percent rise from the previous quarter. The profit available to common shareholders also saw a notable increase of five percent, reaching $751 million.

In terms of same-store sales performance, the core retail food business experienced a 1.6 percent growth, while the drug retail unit, including Shoppers Drug Mart, achieved a 4.6 percent increase in same-store sales. This growth was primarily driven by a 7.5 percent surge in pharmacy and health-care services sales.

During a conference call with analysts, Loblaw’s chief financial officer, Richard Dufresne, emphasized the significant impact of generic GLP-1 drugs on the company’s pharmacy performance. Dufresne noted that the lower pricing of generic drugs was being offset by higher volumes, leading to anticipated growth in revenue, gross profit dollars, and gross margin rate.

The company also highlighted a 40 percent year-to-date increase in GLP-1 drug sales, with brands like Ozemic and Wegovy contributing to this growth following Health Canada’s approval of the country’s first generic semaglutide injection in late April.

CEO Per Bank mentioned that price-conscious consumers are opting for frozen vegetables over fresh produce due to inflationary pressures. Statistics Canada reported a substantial 45.2 percent year-over-year increase in the cost of fresh tomatoes, prompting shoppers to seek cost-effective alternatives like frozen vegetables at No Frills and Maxi stores.

Loblaw executives emphasized the continued relevance of No Frills and Maxi stores in meeting consumer demands for value amidst rising food prices. The company remains competitive in the hard discount sector, outperforming conventional peers while maintaining a lower internal food inflation metric compared to the national grocery consumer price index.

Recent data from Statistics Canada revealed that Canada’s inflation rate eased to 2.8 percent in June, with grocery price increases moderating to 3.9 percent from 4.3 percent in May. Loblaw’s Toronto-listed shares traded steadily on Thursday, reflecting a year-to-date gain of approximately six percent.