Loblaw hikes dividend by 11% as Canadians dining in boost profit

The largest grocery chain in Canada is increasing its dividend after making significant profit gains.

The 11th consecutive annual increase was announced by the company in an earnings update on May 4.

In the first quarter of this year, Loblaw made $473 million on revenues of $12.3 billion.

Net earnings increased by 41 per cent from the same period last year. The adjusted net earnings available to common shareholders were up 17 per cent from a year ago.

Retail revenues reached $12 billion in the quarter, an increase of $375 million, or 3.2 per cent, compared to last year. Same-store sales, a retail metric that gives a clear picture of year-over-year growth by ignoring results from new locations, increased by 2.1 per cent in the food division.

The news release said that food sales continued to benefit from higher than normal eat-at- home levels.

The earnings update comes in the middle of the worst food inflation in 13 years, with suppliers pushing hard to get Canadian grocery chains to pay more for their products. When retailers accept price increases, they have to decide whether to pass it onto the customer or absorb it in their margins to remain competitive.

In the first quarter of this year, the gross profit percentage for the food and drug retail business was 31.1 per cent, compared with 30.3 per cent in the first quarter of the previous year.

The company said that its internal food inflation was slightly higher than Statistics Canada's Consumer Price Index.

More shoppers are shopping at discount banners like No Frills because of inflation. No Frills saw strong growth, but it was impacted by the shift to discount.

Email: jedmiston@nationalpost.com