FINANCIAL POST
LOBLAW PLANS NATIONWIDE E-COMMERCE ROLLOUT.
TORONTO • Grocery giant
Loblaw Cos. Ltd. is adding more markets to its e-commerce home delivery and store pick-up service — including Shoppers Drug Mart sites — as supermarkets across the country mobilize for the battle with Amazon.
Chief executive Galen Weston told analysts on the retailer’s conference call Wednesday that Loblaw intends to “blanket the country” with e-commerce after seeing positive traction with its early efforts, which include pickup at about 200 grocery stores and commuter train stations and home delivery through Instacart. “Customers are responding very positively to our offers,” Weston said. “Not just in the urban markets, but also with a similar enthusiasm in some of the less dense rural markets.”
Loblaw announced it will expand the number of its click-and-collect “PC Express” pick up points to 700 outlets by the end of the year and will begin offering grocery pickup at Shoppers Drug Mart stores, starting with nine stores in the Toronto area in the coming weeks. The announcement covers items currently for sale at Loblaw online, including fresh food and household items such as diapers, some health and beauty items, and cleaning products, but it does not extend to Shoppers Drug Mart’s assortment, or to prescription drugs.
The company also said it will add home delivery to five more markets this year to include a total of 16 Canadian markets, including Montreal, Halifax and Regina. Last year, the company partnered with Californiabased Instacart to launch home delivery after executives said home delivery, though a costly option, was a service some consumers clearly want.
“More and more Canadians want to purchase goods online,” said grocery expert Sylvain Charlebois, dean of management at Dalhousie University.
“Loblaw is making a play to be the legitimate virtual player in Canada. It has the advantage of capitalizing on its bricks-and-mortar footprint and that is what it is doing with using the Shoppers Drug Mart network.”
Weston said that early results show click-and-collect customers are spending more money online than Instacart customers and management is seeing a high penetration of fresh food in the orders, suggesting customers are not worried about ordering perishables online.
Dalhousie and Nielsen estimates suggest online grocery sales account for about one per cent to two per cent of the overall grocery market, Charlebois said, compared with seven per cent to eight per cent for the U.S. “I am not sure Canada will catch up anytime soon but I do think it will catch up (to the U.S.),” he said.
The largest Canadian food players have ramped up their e-commerce rollouts significantly since online giant Amazon made its industry-shattering purchase of grocery chain Whole Foods last August.
Walmart has started select delivery of online fresh grocery orders to consumers directly from its closest stores, rather than a having a warehouse for e-commerce shipments, and Costco Canada is also looking at shipfrom-store fresh grocery ecommerce.
In January, Sobeys signed a partnership deal with British online grocer Ocado Group to use its e-commerce platform and build a Toronto-area warehouse over the next two years to fulfil fresh food orders. Metro delivers groceries in Montreal and Quebec City and will launch e-commerce in Ontario at the end of this fiscal year or in early fiscal 2019.
The announcement came as Loblaw revealed higherthan-expected earnings in a period when it began to dispense $25 bread-scandal gift cards to customers at the end of February.
Loblaw introduced the gift cards after admitting in December that it participated in an alleged 14-year industry-wide scheme between Canada’s biggest baked goods producers and retailers to fix the price of bread.
An investigation by the Competition Bureau is ongoing, and there was no discussion about bread pricefixing on the company’s conference call with analysts on Wednesday.
Customer redemptions from the cards totalled $17 million in the quarter and are averaging less than $4 million per week, chief financial officer Darren Myers told analysts.
The retailer reported revenue fell 0.4 per cent to $10.36 billion as the company disposed of gas bar operations. Excluding the gas bar figure, retail sales rose 2.9 per cent, with samestore sales at Loblaw rising 1.9 per cent and same-store sales at Shoppers Drug Mart rising 3.7 per cent.
Net earnings rose to $377 million, or 98 cents per share, up from $232 million, (58 cents) in the same period last year.
Adjusted net earnings were 94 cents, ahead of average analyst estimates of 91 cents and $10.36 billion in revenue from Thomson Reuters
Loblaw also raised its quarterly dividend to 29.5 cents per share from 27 cents.
Analyst Peter Sklar of BMO considers the earnings to be in line with expectations, because the bulk of the higher-than-anticipated earnings could be attributed to a lower-than-anticipated interest expense in the quarter.
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