Loblaw Reports Lower Q4 Profit Amid High PC Optimum Redemptions and Discount Store Expansion

Loblaw Companies Limited, Canada’s largest retailer, reported a decline in its fourth-quarter profit, attributing the drop to increased redemptions in its PC Optimum loyalty program. As inflation drives Canadians to seek savings, participation in the program surged, leading to a non-cash charge of $129 million related to outstanding loyalty points.

Fourth-Quarter Financial Highlights

For the quarter ending December 28, 2024, Loblaw’s net earnings available to common shareholders fell to $462 million ($1.52 per diluted share) from $541 million ($1.72 per diluted share) a year earlier. However, when excluding the PC Optimum charge and other adjustments, adjusted net earnings rose to $669 million ($2.20 per share), up from $630 million ($2 per share) in the same period last year.

Revenue increased by 2.9% to $14.9 billion, supported by steady grocery sales and higher e-commerce activity. Notably, online sales climbed 18.4% year-over-year, reflecting evolving consumer shopping habits.

Retail Segment Performance

Food Retail Growth

Loblaw’s food retail same-store sales grew 2.5% in the fourth quarter. However, adjusting for the timing shift of Thanksgiving, growth was closer to 1.5%. Loblaw’s higher percentage of discount stores—including No Frills and Maxi—played a key role in attracting budget-conscious shoppers.

To meet this demand, Loblaw plans to open 50 new discount grocery stores in 2025, a significant increase from the 38 stores converted to discount banners last year.

Pharmacy Sales and Health Services

Pharmacy and healthcare services within Shoppers Drug Mart continued to perform well, with same-store sales up 6.3%. The growth stemmed from expanded services, including vaccinations and health consultations at pharmacy care clinics. Conversely, front-store sales dipped 3.1%, affected by the company’s decision to exit certain electronics categories and by postal service disruptions from the Canada Post strike.

Full-Year 2024 Financial Overview

For the full fiscal year, Loblaw’s revenue rose by 2.5% to $61 billion. Net earnings available to common shareholders reached $2.2 billion ($6.99 per diluted share), up from $2.1 billion ($6.52 per share) in 2023. Adjusted net earnings grew 6.3% to $2.6 billion ($8.55 per share).

The retailer’s food retail same-store sales increased by 1.5%, while drug retail sales rose 2.4% over the year. E-commerce growth remained strong, with annual online sales increasing 16.9%.

Strategic Initiatives for 2025

Discount Store Expansion

With inflation continuing to influence consumer spending, Loblaw aims to capitalize on value-driven shopping by:

• Opening 80 new grocery and pharmacy locations, including 50 discount stores.
• Prioritizing expansion of No Frills and Maxi locations to reach more price-sensitive customers.

Health Services Expansion

Loblaw plans to:

• Launch 100 new pharmacy care clinics in 2025.
• Enhance access to healthcare services through expanded pharmacist consultations and vaccination offerings.

Supply Chain Modernization

The company is investing in modernizing its distribution network with:

• A new, fully automated 1.2 million-square-foot distribution center in East Gwillimbury, Ontario.
• Construction of another automated facility in Caledon, Ontario.

PC Optimum Loyalty Program Impact

Higher participation and redemption rates in the PC Optimum loyalty program led to the significant $129 million charge in Q4. While this affected short-term profits, the program’s popularity signals strong customer engagement and long-term loyalty.

2025 Outlook

Loblaw expects:

• High single-digit growth in adjusted earnings per share.
• Continued investment of $1.9 billion in capital projects.
• A focus on retail excellence and expanding value-driven offerings.

Management anticipates the 53rd week in fiscal 2025 will boost earnings growth by approximately 2%.

More…

• https://www.newswire.ca/news-releases/loblaw-reports-2024-fourth-quarter-results-and-fiscal-year-ended-december-28-2024-results-859040521.html
• https://www.theglobeandmail.com/business/article-loblaw-fourth-quarter-profit-dips-on-pc-optimum-charge
• https://www.ctvnews.ca/business/article/loblaw-reports-q4-profit-down-from-year-ago-as-it-takes-pc-optimum-charge