Loblaw Companies Q2 Earnings Call Highlights

Key Points

• Loblaw delivered solid Q2 growth: Revenue rose 4.1% to C$15.3 billion, adjusted EBITDA increased 5.1% to C$1.9 billion, and adjusted diluted EPS climbed 11.9% to C$0.66.
• Discount grocery, pharmacy and e-commerce led momentum. Hard-discount comparable sales grew nearly 4%, drug retail sales increased 6.1%, and online sales rose 19.3%; management also sees significant longer-term growth potential from generic GLP-1 medications.
• Management maintained an upbeat outlook and boosted shareholder returns. Loblaw reaffirmed high-single-digit adjusted EPS growth for 2026, raised expected share repurchases to C$2.1 billion, and expects store expansion and distribution-center costs to ease in the second half.

Loblaw Companies TSE: L reported second-quarter revenue growth and double-digit adjusted earnings-per-share growth as its discount grocery banners, pharmacy operations and e-commerce business continued to gain momentum.

Chief Financial Officer Richard Dufresne said revenue including PC Financial rose 4.1% to C$15.3 billion in the quarter, while adjusted EBITDA increased 5.1% to C$1.9 billion. Adjusted EBITDA margin improved by 10 basis points, and adjusted diluted earnings per share rose 11.9% to C$0.66. On a GAAP basis, revenue was C$15 billion, up 4.1%, while diluted earnings per share increased 8.5% to C$0.64.

Dufresne said the results reflected solid sales growth, stable gross margin and a flat selling, general and administrative expense rate, even as the company invested in store openings, pharmacies and distribution-network upgrades.

Discount banners lead food retail growth

Food retail sales increased 3.3%, supported by new locations, while same-store sales rose 1.6%. The comparable-sales result included a 20-basis-point drag that Dufresne referred to as “the right-hand side.”

Loblaw’s hard-discount banners recorded comparable sales growth of nearly 4%, with Maxi and No Frills benefiting from consumers’ continued focus on value. Dufresne said recently opened locations that have entered the comparable-store base are producing double-digit same-store sales growth.

President and Chief Executive Officer Per Bank said customers remain promotional-focused, are increasingly purchasing private-label products and are making changes across their baskets to manage household budgets. He cited frozen vegetables as one example, saying the category has posted more than 500 basis points of growth at the company’s hard-discount banners.

“Customers, they stay conscious. They stay focused on value,” Bank said, adding that consumer behavior was broadly consistent with the prior quarter.

The company opened 11 food stores during the quarter, including seven Maxi and No Frills stores, one T&T location in Canada and one T&T store in the United States. It also opened three Shoppers Drug Mart locations. The additions produced a net increase in grocery square footage of about 1.5% and pharmacy square footage of 2.6%.

Loblaw remains on track to open about 75 stores this year and expects a similar pace next year, according to Dufresne. The company said it is seeing better-than-expected performance relative to internal assumptions for sales erosion from new store openings.

Bank highlighted T&T’s expansion into the U.S., saying its first California store, which opened in San Jose in June, produced the highest first-week sales of any Loblaw store opening. The company plans to open two additional California T&T stores in 2026.

Management said conventional-banner performance remains healthy despite a difficult year-over-year comparison. Dufresne noted that conventional-banner comparable sales had exceeded discount-banner comparable sales in the second quarter of 2025. Bank also cited the timing of Easter, lower tobacco and liquor sales, and a temporary year-over-year effect related to tariffs on directly imported U.S. products as factors affecting current comparable sales.

Pharmacy sales and generic GLP-1 opportunity

Drug retail sales rose 6.1%, while same-store sales increased 4.6%. Pharmacy and healthcare services comparable sales increased 7.5%, driven by specialty and chronic prescriptions. Same-store prescription volumes rose 3.4%, while average prescription value increased 5.5%.

Management said GLP-1 medications were a major contributor to pharmacy growth. Bank said growth in the category was running at approximately the same pace as the 40% year-to-date growth referenced in the previous quarter.

As generic alternatives emerge in the GLP-1 category, Loblaw expects lower prices to be offset by higher volumes. Dufresne said preliminary planning data indicate GLP-1 sales could rise at a double-digit rate in dollar terms in 2027 despite price declines. He said gross-profit dollars and gross-margin rate are expected to grow faster than the top line in that category.

Lifemark delivered double-digit sales growth, supported by rising patient visits, while front-store same-store sales rose 1.3%. Prestige Cosmetics, over-the-counter products and baby products were strong, although the timing of Easter weighed on front-store sales.

Bank said Shoppers Drug Mart has returned shrink levels to pre-COVID levels, though management continues to seek further reductions. The company is also testing a food assortment refresh at select Shoppers locations, featuring additional SKUs and lower prices. It has completed the test in 17 stores and has 11 more locations underway.

E-commerce, supply chain and capital allocation

Online sales grew 19.3%, driven by PC Express Delivery, PC Express Pass, third-party marketplace partnerships and expanded pick-and-deliver availability. Bank said PC Express delivery sales increased by more than 40%, while click-and-collect sales remained stable. He added that the company is seeing improved efficiencies and profitability in its third-party pick-and-delivery operations.

Retail gross margin rose 10 basis points, while retail SG&A held steady at 20% of sales. Dufresne said operating leverage from higher sales was offset by costs associated with new stores, the ramp-up of Loblaw’s automated East Gwillimbury distribution center and certain real estate activities. He said the company expects costs related to the distribution-center ramp-up and store openings to begin easing in the second half.

The company also continues construction of a second new distribution center in South Caledon.

Following the quarter, Loblaw completed the sale of PC Financial to EQ Bank. Loblaw owns approximately 19.9% of EQB’s common shares at closing and expects to increase that ownership to about 25% over time. Dufresne said the company currently estimates it could reach that ownership level by November 2027.

Loblaw received C$625 million in cash in connection with the transaction. Starting in the third quarter, it will no longer report PC Financial results and instead will recognize its proportionate share of EQB’s net income. The company expects to recognize only one month of EQB earnings in the third quarter because of differing reporting calendars.

Loblaw repurchased C$552 million of shares during the quarter, bringing year-to-date repurchases to C$1.2 billion. It raised its expected 2026 share repurchases by C$200 million to C$2.1 billion. Management reaffirmed its expectation for high-single-digit adjusted earnings-per-share growth for the year, despite the timing-related impact from the EQB transition.

About Loblaw Companies (TSE:L)

Loblaw is one of Canada's largest grocery, pharmacy, and general merchandise retailers, operating the most expansive store footprint in Ontario and maintaining sizable presences in provinces like Quebec and British Columbia. Key grocery banners include Loblaw, No Frills, and Maxi, while its pharmaceutical operations are the product of its 2014 acquisition of Shoppers Drug Mart. The firm carries a robust private-label assortment, with top sellers like President's Choice and No Name. In addition to its retail operations, Loblaw oversees a financial-services business, which provides credit card services and guaranteed investment certificates, and also operates its PC Optimum loyalty program.

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