Loblaw says financial impact of May boycott 'minor', as sales grow and profit slips
Loblaw (L.TO) executives said on Thursday that the boycott campaign in May had a "minor" financial impact, as the company reported an increase in sales and a decline in profit which it attributed to its $500 million bread price-fixing settlement.
Without saying the word boycott, Loblaw chief financial officer Richard Dufresne acknowledged on a conference call with analysts that the company "did notice a bit of an impact in certain markets." However, he said that sales had returned to normal by the end of the second quarter, which closed June 15.
"The overall financial impact was minor for us," Loblaw CEO Per Bank told analysts.
"Every single customer is important to us, and one customer lost is one too many."
The month-long boycott of Canada's largest grocery chain took place in May. The grassroots effort, which started on a Reddit group called “Loblaws is out of control”, was in response to higher prices and record earnings.
Loblaw pushed back on the boycott, with chairman Galen Weston calling it "misguided criticism." He said at the company's annual shareholder meeting in May that Loblaw is "not responsible for higher food prices" and that "allegations of profiteering on the back of inflation by grocers are untrue."
On Thursday, the company reported its second-quarter results, which include the month of May, and said total sales increased 1.5 per cent from $13.74 billion last year to $13.95 billion. Net profit fell 10 per cent in the quarter, from $508 million last year to $457 million. The company says "the decrease was primarily driven by charges related to the settlement of class-action lawsuits."
Loblaw announced on Thursday that it and parent company George Weston have agreed to pay $500 million to settle a pair of class-action lawsuits regarding their involvement in an alleged bread price-fixing scheme. George Weston says it would pay $247.5 million in cash, while Loblaw would pay $252.5 million, made up of $156.5 million in cash and credit for $96 million previously paid to customers by Loblaw under the Loblaw Card program.
Loblaw's food retail same-store sales, a key metric in the retail industry that excludes sales at newly opened stores, increased 0.2 per cent in the quarter, a significant drop from last year's gain of 6.1 per cent. Dufresne notes that the company was lapping strong same-store sales from last year, making year-over-year comparisons "look softer than they actually are." He also says last year had more favourable weather in the quarter, driving strong sales for garden centre products and other items like sun-care and allergy medicine.
"This year was very rainy and cold, and so those categories suffered significantly. That was definitely a factor," he said.
Canadian grocery retailers have faced significant public pressure and scrutiny over soaring food prices as they reported higher earnings. On Thursday, Dufresne said the post-pandemic period of high global inflation is "now behind us." He says the company's internal measure of inflation was in line with CPI in the quarter, with food price growth remaining lower than headline inflation.
"At the start of 2023, food inflation was over 11 per cent," Dufresne said. "It's now back to normal."
With files from The Canadian Press
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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