Loblaw ‘ready’ for price war on strong profit

and warehouse club Costco.

“Price wars are generally not something that we look forward to, but we will certainly be ready if the marketplace heats up,” Weston said. “We are in a low-inflation environment and we don’t expect that to change.” In order to be successful in deflationary periods, retailers need to find ways to drive up customer traffic and sales volume, he added “because volume is the only thing that will make sure that your sales stay in positive territory.”

Net income was $158 million or 39 cents per share, down from $185 million (44 cents), largely due to higher interest expenses and financing charges.

Adjusted earnings rose to $412 million ($1.01) from $350 million (84 cents) in last year’s second quarter. That beat analysts’ mean estimates of 94 cents, according to Thomson Reuters.

Retail analyst Peter Sklar of BMO Capital Markets said one upside of the quarter was Loblaw’s turnaround on the amount of food being shipped to its stores.

“The earnings beat, driven by the reversal of a negative tonnage trend in the grocery business, continued solid sales growth at Shoppers, lower-than-expected expenses and higher-than-expected synergies, demonstrates a solid quarter for the company,” Sklar wrote in a note to clients.

Revenue rose 1.9 per cent to $10.7 million. Food retail same-store sales growth was 0.7 per cent, excluding gas bar sales. Shoppers Drug Mart was the strongest performer, with samestore sales climbing four per cent. Weston said Shoppers has benefited strongly from the addition of Loblaw’s President Choice food brand into its stores, delivering higher sales and margins than Shoppers’ now-discontinued food brands.