A Loblaws supermarket in Ottawa, 2017. Loblaw Cos. Ltd., a Canadian retailer, missed second-quarter revenue expectations due to weak demand for household items and non-essential products like clothing. (Reuters)
During Loblaw's second-quarter earnings call on Thursday, executives addressed questions from analysts about the company's weak food retail sales and the possible impact of an online boycott. Since May, some Canadians have been boycotting Loblaw due to a campaign initiated by a Reddit group called r/loblawsisoutofcontrol, which had about 45,000 members at the time.
Neither CEO Per Bank nor CFO Richard Dufresne explicitly mentioned the boycott during the call. However, they did not dismiss its impact on food retail sales, which were "a little soft" compared to the previous year. The company's earnings report showed a 0.2 percent increase in same-store food retail sales for the second quarter, compared to a 6.1 percent increase in the same quarter last year.
An RBC analyst questioned the unexpected weakness in food retail numbers, attributing it partly to inflation and multi-buy pricing strategies, and mentioned the boycott. Dufresne acknowledged that several factors influenced the sales, contrasting last year's favourable weather in May with this year's rainy and cold conditions, which affected garden and suncare product sales. He admitted that certain stores in specific markets experienced "a bit of an impact" from the boycott, but noted that sales had returned to normal by the end of the quarter.
Bank emphasized that while the overall financial impact was minor, every customer is important to the company. He highlighted his efforts to engage with customers and stakeholders, valuing their feedback to improve the business.
The boycott, organized by Emily Johnson from Milton, Ontario, was seen as a success despite its minor impact on sales. Johnson expressed that the small dent made by the boycott was positive for the movement and consumers, reinforcing the group's commitment to pushing for food security and fair market practices.
Retail analyst Ken Wong told that he didn't believe the boycott had a significant effect on Loblaw's performance. He pointed out that after a $500 million class-action lawsuit, a minor setback in earnings was not a major issue. Wong added that the boycott demonstrated widespread dissatisfaction with Loblaw and noted that the company agreed to sign the grocery code of conduct, a demand from the boycott organizers. This code aims to create a fairer relationship between large retailers and suppliers.
Loblaw's net income fell by 10 percent in the second quarter compared to the same period last year, primarily due to charges related to class-action lawsuit settlements. The company reported a net income of $457 million, or $1.48 per share, down from $508 million, or $1.58 per share, a year earlier. Additionally, Loblaw and its parent company, George Weston Ltd., agreed to pay $500 million to settle a class-action lawsuit involving an alleged bread price-fixing scheme.
Loblaw's revenue rose by 1.5 percent to $13.95 billion, but it fell short of analysts' expectations of $14.17 billion. The decline in front-store same-store sales was mainly due to lower sales of food and household items and the exit from low-margin electronics categories. Many Canadians are reducing expenses on essential items due to high housing and interest rates, leading to a drop in retail sales at supermarkets and grocery retailers, as reported by Statistics Canada. However, Loblaw's discount banners, such as No Frills and Maxi, have seen a boost in food sales growth from deal-hunting consumers.
