Loblaw links profit boost to health products, calls grocery margins 'stable'

Canada's largest grocery chain reported second-quarter gains in both revenue and profit as its new chain of clinics helped drive up sales.

The revenue for the quarter ended June 18 was more than three per cent higher than it was a year ago. The Lifemark Health Group contributed 49 million in revenue after it was acquired by the company.

Net earnings were down from a year ago. The charge was due to a federal tax ruling that was released earlier this month.

The profit available to common shareholders was up 22 percent over last year. Net earnings per share were up 25 percent. According to a report from Bank of Nova Scotia analyst, analysts were expecting earnings per share of 1.59

In the second quarter alone, the company spent $603 million on share purchases.

Since the worst inflation crisis in decades has been caused by steep rises in Canadian grocery bills, Canada's biggest grocer and its rivals have found themselves in the spotlight. Suppliers are asking for more money to offset increases in the cost of ingredients, transport, packaging, and labor. The decision was made whether to accept the cost increases and pass them onto the consumer or to absorb the extra costs.

The increase in gross profit margins was 60 basis points. It said the increase came from its drug stores.

The company said that food retail margins were stable.

The PC Financial banking wing is one of the banners that Loblaw has. The Lifemark chain of 300 physiotherapy clinics was bought for $832 million this year as part of its plan to turn Shopper's Drugmart into a health-care provider.

Consumers buying more high-margin items like cosmetics as they start going back to the office or to parties has helped the drugstore operations.

Same-store sales, a metric used in retail to capture a clearer picture of year-over-year performance by ignoring results from recently opened or closed stores, grew in the drug retail segment. The food retail segment did not grow as much as the rest of the segment.

The email address is jedmiston@postmedia.

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