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Epidemics

Loblaw Passes on Inflation to Shoppers, Impacts Buying Behaviours

Strategic Insights

— 2 min read

As consumers become increasingly price-sensitive, Loblaw's efforts to pass on the impact of inflation to shoppers are having a noticeable effect on their buying behaviours. The Toronto-based retailer reported that its internal food inflation is slightly higher than the 4.8-per-cent increase in the Consumer Price Index in the fourth quarter. This price sensitivity is leading to a surge in traffic at discount stores, such as No Frills, and an increase in private-label sales of Loblaw's No Name discount brand.

Key Takeaways:

  • Loblaw's internal food inflation is slightly higher than the 4.8-per-cent increase in the Consumer Price Index in the fourth quarter.
  • Consumers are becoming increasingly price-sensitive, with evidence of this in the surge in traffic at discount stores and an increase in private-label sales of Loblaw's No Name discount brand.
  • Discount stores represent 60 per cent of Loblaw's store network, which includes Loblaws, No Frills, Provigo, Valu-Mart, and Real Canadian Superstore.
  • Loblaw employs a team to deconstruct the component costs of every item on the shelf to analyze requests for price hikes.
  • Grocery same-store sales rose by 1.1 per cent in the fourth quarter, keeping pace with strong demand seen in 2020.
  • E-commerce demand softened slightly in the quarter, dropping 8.4 per cent compared to the unusual surge of 158 per cent at the same time the prior year.
  • For the full year, Loblaw's online sales grew by 13.9 per cent to $3.1-billion.
  • Loblaw benefited from pharmacy services, which more than doubled in the quarter as the stores continued to provide COVID-19 vaccines and testing.

Statistics:

  • Revenue grew to $12.8-billion in the 12 weeks ended Jan. 1, 2022, up 2.8 per cent compared to the same period the prior year.
  • Grocery same-store sales rose by 1.1 per cent in the fourth quarter.
  • E-commerce demand softened slightly in the quarter, dropping 8.4 per cent compared to the unusual surge of 158 per cent at the same time the prior year.
  • For the full year, Loblaw's online sales grew by 13.9 per cent to $3.1-billion.
  • Loblaw reported that fourth-quarter net earnings grew to $719-million or $2.23 a share, compared to $394-million or 98 cents a share in the 13-week period the prior year.
  • The company reported that the earnings included a one-time contribution of $301-million recorded in the quarter, resulting from a favourable decision by the Supreme Court of Canada in a tax matter.

Sources:

  • Susan Krashinsky Robertson, Staff, Loblaw Cos. Ltd.
  • Loblaw Cos. Ltd. annual report
  • Loblaw Cos. Ltd. quarterly financial results

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