Earnings call transcript: Loblaw Q2 2025 beats expectations with strong growth

Loblaw Companies Limited reported robust Q2 2025 earnings, surpassing analyst expectations with an EPS of $2.40 against a forecast of $2.32, marking a 3.45% surprise. The company’s revenue reached $14.67 billion, exceeding forecasts and contributing to a 0.99% rise in its stock price in pre-market trading. According to InvestingPro analysis, Loblaw maintains a "GOOD" overall financial health score of 2.95, with particularly strong performance in relative value and price momentum metrics.

Key Takeaways

• EPS of $2.40 beat forecasts, with a 3.45% surprise.
• Revenue increased to $14.67 billion, exceeding expectations.
• Stock price rose 0.99% in pre-market trading.
• Successful expansion with 20 new stores and AI-driven initiatives.
• Positive outlook with plans for a 4-for-1 stock split in August.

Company Performance

Loblaw demonstrated strong performance in Q2 2025, with revenue rising 5.2% year-over-year to $14.5 billion. The company’s strategic focus on discount stores and digital innovation has driven growth, even as the conventional grocery sector trends slightly negative. Loblaw’s market share gains and expansion efforts underscore its leadership in the hard discount retail segment.

Financial Highlights

• Revenue: $14.5 billion, up 5.2% year-over-year
• Adjusted EBITDA: $1.8 billion, increased 7.4%
• Adjusted diluted EPS: $2.40, grew 11.6%
• GAAP net earnings per share increased 60%
• Free cash flow from Retail: $640 million

Earnings vs. Forecast

Loblaw’s EPS of $2.40 exceeded the forecast of $2.32, delivering a 3.45% surprise. Revenue also surpassed expectations, coming in at $14.67 billion against a forecast of $14.62 billion. This performance highlights Loblaw’s effective execution and strategic initiatives.

Market Reaction

Following the earnings announcement, Loblaw’s stock increased by 0.99%, reflecting investor confidence in its strong financial results and strategic direction. The stock remains near its 52-week high, indicating sustained positive sentiment. Based on InvestingPro’s Fair Value analysis, Loblaw currently appears slightly undervalued, trading at a P/E ratio of 15.03x while maintaining strong profitability metrics with a gross margin of 36.3%.

Outlook & Guidance

Loblaw maintains its full-year guidance, with plans to open approximately 80 stores in 2026. The company is focused on expanding its discount, Shoppers Drug Mart, and TNT store formats. A 4-for-1 stock split is scheduled for August 18, 2025, signaling confidence in continued growth. As a prominent player in the Consumer Staples Distribution & Retail industry, the company’s liquid assets exceed short-term obligations, demonstrating strong financial positioning. These are just two of the numerous insights available through InvestingPro, which offers comprehensive analysis of 1,400+ US equities through its Pro Research Reports.

Executive Commentary

"Our responsibility is to deliver value, quality, service, and convenience across every corner of our business," stated CEO Per Banque. CFO Richard Dufresne highlighted the underestimated sales of TNT stores, reflecting strong consumer demand.

Risks and Challenges

• Slowing consumer spending growth could impact revenue.
• The conventional grocery sector’s negative trend poses challenges.
• Potential effects of GLP-1 drug patent expiration on the market.
• Supply chain disruptions could affect operations.
• Tariff impacts on product pricing and consumer behavior.

Q&A

During the earnings call, analysts inquired about the potential impact of GLP-1 drug patent expiration, TNT store expansion in the U.S., and promotional intensity. Executives addressed these concerns, emphasizing strategic initiatives and market adaptation.

Full transcript - Loblaw Companies Limited (L) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Loblaws Inc. Second Quarter twenty twenty five Results. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 07/24/2025.

I would now like to turn the conference over to Roy McDonald, Vice President, Investor Relations. Please go ahead.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited: Great. Thank you very much, Joelle, and good morning, everybody. Welcome to the Loblaw Companies Limited second quarter twenty twenty five results call. As usual, I’m joined here this morning by Per Banque, our President and Chief Executive Officer and by Richard Dufresne, our Chief Financial Officer. And before I begin the call, I’ll remind you that today’s discussion will include forward looking statements, which may include, but are not limited to, statements with respect to Loblaw’s anticipated future results.

These statements are based on assumptions and reflect management’s current expectations, as such, are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations. These risks and uncertainties are discussed in the company’s materials filed with the Canadian Securities Regulator. Any forward looking statements speak only as of the date they’re made. The company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, other than what’s required by law. Also, non GAAP financial measures may be discussed or referred to today, So please refer to our annual report and other materials filed with the Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure.

And with that, I’ll turn the call over to Richard.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Thank you, Roy, good morning, everyone. I’m pleased to report that we continue to deliver consistent financial and operational performance in the second quarter with strong revenue growth fueling solid performance against our plan. Our ongoing focus on delivering value, quality, service and convenience to Canadians continues to resonate with customers and has resulted in strong market share performance across our businesses. Top line growth is a theme this quarter and is becoming the norm as we open new stores. On a consolidated basis, revenue growth was 5.2%, reaching $14,500,000,000 an increase of $725,000,000 over last year.

If we exclude the divestiture of our WellWise stores last quarter, revenue growth would have been even higher at 5.4%. Our new stores are performing well and are reaffirming our strategy. Adjusted EBITDA increased by 7.4% to $1,800,000,000 Adjusted diluted net earnings per share grew by 11.6% to $2.4 and on a GAAP basis, our net earnings per share increased by 60%. You will notice that we have now completed the bulk of the amortization related to our 2014 acquisition of Shoppers Drug Mart. Completing the amortization was a significant driver of $106,000,000 benefit to GAAP earnings in Q2.

Going forward, GAAP earnings growth will be positively impacted by these lower charges through Q1 of next year. In Food Retail, we delivered higher sales, tonnage and basket growth, driving significant tonnage market share gains. Absolute sales outpaced same store sales by two thirty basis points at 5.8%, reflecting our new store growth while our food same store sales momentum continues increasing 3.5%. Our Q2 internal CPI like food inflation was lower than Canada’s grocery CPI of 3.3%. Looking at our average article price data, which reflects the full basket mix bought by our customers across our network, our internal inflation rate continues to be much lower than CPI.

Opening more discount stores is helping to maintain low prices for Canadians. Higher than normal cost increase requests from larger global vendors continue to be a concern. Only a third of the supplier cost submission we have received over the last months have been tariff related. In response, we are pushing back harder than ever to ensure that any increases we accept are fair and reasonable and are partnering with our vendor community to mitigate price increases. Our hard discount banner sales continue to deliver strong growth based on the ongoing consumer focus on value.

We are seeing strong momentum across the hard discount stores we added to our network last year, and our recent openings in 2025 are continuing this trend. Many more are coming over the coming months. We’re also pleased with the momentum and strong performance in our conventional stores, which also grew tonnage market share within their sector. South of the border, our Seattle TNT store remains strong with sales volume that have significantly outpaced our expectations. Our next store opens in November.

We now have a total of six confirmed locations in The U. S. And more are planned. In Drug Retail, absolute sales increased 4.8%, excluding the impact of the sale of WellWise, while same store sales grew 4.1%. Pharmacy and healthcare services grew same store sales by 6.2% this quarter, driven by broad strength in prescription and new healthcare services.

Our specialty prescription growth continued to lead our pharmacy numbers. Patients continue to respond very positively to the convenience and expanded level of primary care we offer to our 1,800 pharmacies across the country, including our 174 clinics. Our front store same store sales continue to improve growing 1.7% and reflecting the ongoing strength of our beauty category. This was partially offset by the previous exit of certain items in the electronics category. We remain pleased by the underlying strength, profitability and sales momentum of Shoppers Drug Mart’s front store business.

Online sales in the quarter increased by 17.5% across our retail businesses. Delivery continues to lead growth in the online grocery channel and we remain pleased with our online sales penetration in both food and pharmacy. Our retail gross margin was stable at 32%, primarily driven by improvements in shrink offset by changes in sales mix. I’m particularly pleased with the shrink improvement at Shoppers Drug Mart. Our SG and A rate as a percentage of sales improved by 10 basis points with operating leverage from higher sales partially offset by incremental costs related to the opening of new stores and the ramp up of our new automated distribution facility in East Willambury.

The transition to our new DC is progressing very well and is ahead of plan. We have completed the deployment of frozen categories and the first phase of fresh. Our ramp up of this new DC is proceeding better than planned. We will ship significantly more cases than planned this year and our costs are actually running lower than budgeted. Because of this faster ramp up, we have made the decision to bring our ambient section online a full quarter ahead of plan, which will allow us to realize benefits earlier than expected.

Speaking of supply chain logistics, I would like to share an example of the significant progress we’ve achieved in integrating AI solutions into our everyday supply chain operations. AI driven initiatives are already yielding tangible improvements across key areas of our business. We are streamlining our supply chain operations using AI enabled tools that help us proactively manage inventory replenishment with vendors, optimize load building and manage our transport scheduling and communication. Another AI initiative that I’m really excited about is currently being rolled out across our store network. Nicknamed Robin, we are leveraging AgenTeq AI in a custom built tool to save time and enhance decision making in our stores using conversational action focused insights based on real time data.

Robin provides a dashboard of KPIs, presents AI generated insights and recommend solutions, then tracks and executes to do lists. Managers will spend less time on back end logistics and more time with their customers and staff while improving store level profitability. The success of this initiative has spawned a second version of the app that is now being tested with district managers to help them better manage their store networks. By the way, the speed at which we are developing and launching these new initiatives is impressive. These developments are actively driving efficiencies, which will translate directly into cost savings today and the open opportunities for future applications.

In the quarter, retail adjusted EBITDA grew 6.7% and EBITDA margin increased by 10 basis points to 12.2%. PC Financials revenue increased 2.7% driven by higher sales in our mobile shop and higher insurance commission income. Our PC money spending and savings account are performing very well. Deposits are ahead of plan and now exceed $700,000,000 enhancing customer engagement and lowering our bank’s funding costs. The bank’s adjusted earnings before tax increased by $14,000,000 or 87.5%, primarily driven by higher revenue, lower operating costs and lower credit card receivable charge offs.

We remain very comfortable with the risk profile of the bank’s portfolio. We continue to take a conservative position in our provisioning with a strong and well very well capitalized balance sheet. On a consolidated basis, adjusted EBITDA increased by 7.4% to $1,800,000,000 Free cash flow from the Retail segment increased by $165,000,000 to $640,000,000 And in the quarter, we repurchased $445,000,000 worth of common share. Our balance sheet remains strong and we continue to improve key return metrics. Our return on equity sits at 24.7% and our return on capital at 11.9%.

Both metrics continue to improve. Looking ahead to the second half of the year, we remain confident in our ability to deliver our outlook. Our third quarter is off to a good start, carrying on the momentum from the first half of the year. New stores will continue to drive top line growth and the second half of the year will see the bulk of our new store activity. Our relentless focus on retail excellence and on the execution of our strategic initiatives will allow us to keep delivering value to our customers and strong performance to our shareholders.

Today, we announced a four for one stock split effective at market close on 08/18/2025, with shareholders of record at close of business on 08/14/2025, receiving three additional shares for each common share held. Essentially, our number of shares will be multiplied by four post split. I will now turn the call over to Bernd.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Thanks, Richard, and good morning, everyone. So I’m really pleased with our second quarter performance. Our very strong revenue growth reflects both our continued momentum in same store sales performance and the absolute growth, and that’s driven by our strategic investments in new stores and banner conversions. This top line growth will help accelerate future same store sales and support our long term earnings growth. And our adjusted EPS growth of 11.6 was accomplished while we supported the opening and ramp up of 61 new stores since quarter two last year, plus the ongoing transition to our new 1,000,000 square foot DC in East Grillingbury.

Most importantly, our offers are resonating so well with more Canadians every single day. We remain focused on helping Canadians get the most of their budgets in a challenging economic environment. Our responsibility is to deliver value, quality, service and convenience across every corner of our business, whether that’s through competitive pricing, meaningful promotions or personalized rewards through our PC Optimum program. By being responsive to customer needs and innovating across our banners, we are reinforcing our position as a trusted partner for households across the country. As a result, more Canadians are shopping in our stores.

Actually, is up, unit sales are up and basket growth was positive in the quarter. This drove tonnage market share gains overall. And both our hard discount and supermarket banners grew market shares within their market segments. This success reflects not only on the strength of our strategy, but also the incredible work of our teams from coast to coast. Another highlight this quarter is continued success of our new stores.

This quarter, we opened another 10 new stores. That was nine new Maxi and No Fill stores and one Shoppers Drug Mart store. We have now opened 20 out of our planned 80 new stores for the year, and we are really pleased with the performance out of the gate, and we are excited about our continued sales growth momentum. The global shift toward discount retail is a long term trend, and we are leading it here in Canada. In May, we celebrated the opening of our five hundredth hard discount store with the community of Pincher Creek in Alberta.

By expanding our reach into communities where affordability matters most, we are meeting customers where they are and delivering exactly what they need. Our supermarket banners also had a strong quarter. Fatinos and TNT continued to perform very well, but our real Canadian superstores led with very strong comps growth in quarter two. We rolled out our right hand side refresh in three more SuperStores, and we remain pleased with customer actions and our ability to transfer these learnings to our general merchandise offers in our smaller stores as well. We’ve continued our leadership in supporting Canadian products and vendors.

We have doubled down on our effort and have on board another 100 new Canadian vendors. Adding 130 new Canadian vendors into our ecosystem this year do strengthen our local supply chain and brings even more choice to our shelves. Further strengthening our base of Canadian suppliers, that remains so important to us. There’s some misconception that the tariffs are no longer a factor in grocery. Nothing could actually be further from the truth.

The reality is that the tariffs countermeasures remain in place and about onethree of all supplier cost submissions have been tariff related. We continue to do our best to help customers navigate the impact of tariffs, including our T symbol program. This initiative, unique to us, identifies the important items that are directly subject to retaliatory tariffs with a T symbol on shelf. It has been successful on several levels. As intended, it has helped our customers by clearly identifying tariff items, supporting Canada and saving money.

Behind the scenes, it has also incented suppliers to mitigate the tariff impact to avoid the key label designations. Sales volume on key items declined in the quarter. The trend is accelerating. We are now seeing weeks with a declining by more than 15%. Our data shows that Canadians are responding positively to these initiatives.

Shifting gears. So, in our drug business, we delivered continued positive momentum in our front store. Our prestige cosmetics continued to be very strong, supported by fragrance and derm categories. In pharmacy and health care services, our specialty drug and new prescribing services categories are delivering strong double digit growth, showing continued strength in acute and chronic scripts. We have opened 23 new pharmacy led clinics this year, and we remain on track to have two fifty clinics providing expanded scope of care services to Canadians by year end.

Our digital business continued to generate double digit growth, driven by continued strength in our PCX delivery channel. And I’m happy to see our weekly engaged user growth continuing to be strong and customers are spending more time in the app. In digital, our focus remains on enhancing optionality and convenience across our business. In the quarter, we strengthened our collaboration with DoorDash, allowing customers to now earn PC points PCO points. Innovation remains core to how we improve operations, reduce costs and enhance the customer experience at Loblaws.

Our enhanced MyShop functions within the PCA Express is just another great example. Improving our customer experience means personalization is increasingly important. We’re using advanced AI models to analyze each customer’s behavior and preferences and deliver the right products, content and promotions at the right time on an individual level. For example, our PCO app and websites are increasingly being powered by algorithms that present customized deals, product recommendations and content unique to each shopper’s needs. We have even now like meal suggestions based on customers’ dietary profile and purchase history with relevant ingredients also added to the cart.

We’re excited about the opportunities ahead. These innovations represent an exciting step forward in how technology can transform how we work and how efficiently and effectively we serve Canadians. In closing, I would like to thank all members of the Loblaw team for their tremendous effort during this quarter. Your passion, hard work is what allows us to consistently deliver the value, quality and service that Canadians have rely on every day. As Richard mentioned, our third quarter is off to a good start.

And we enter the second half of the year with confidence in our strategy and in our ability to deliver on our full year plan. With that said, I’ll now open the floor for your questions. Thank you so much.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Irene Nattel with RBC Capital Markets. Your line is now open.

Irene Nattel, Analyst, RBC Capital Markets: Thank you and good morning everyone. It looks as though the momentum is, in the top line is continuing to accelerate. And I was wondering if you could talk about, what you’re seeing across the banners in terms magnitude? And also to what degree is the step up both in same store sales and revenue growth due to the new stores versus the rest of the network?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: If I can start. So the new stores, we just started to ramp up. So I believe you will see more in the future, more and more this year, more next year, more and more the following year. So it’s not a significant part, but of course, it’s contributing as we are adding more stores. Remember, we added 50 new stores last year.

We’re adding 80 new stores this year. And the second year comp of new stores are doing a really, really good job But so far, that’s not the main. The main part is that we are doing well and customers, they like the offer that we’re giving them. And that’s both, as I mentioned, Canadian superstores doing really well for us.

Our hard discount, both on a comp level and on an absolute level is doing well. TNT, as Richard mentioned, The U. S. Store is just a success story. We are taking so much sales and much more than we expected.

So, lovely. Basically, it’s not just one part of our group in quarter two. Everything delivered some nice sales momentum for us.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes. I agree. Nothing to add, Hyrie.

Irene Nattel, Analyst, RBC Capital Markets: Thanks. And then just as a follow-up. Given the strong momentum that you’re having year to date, can you walk us through why you chose not to revise upward your guidance for the year?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes Irene, I guess two points, guess. First, it’s early, okay? It’s early in the year to upgrade our guidance. And also, there’s still a lot of uncertainty out there. So we thought it’d be more prudent to wait.

So we’ll update guidance when we release Q3.

Irene Nattel, Analyst, RBC Capital Markets: Understood. Thank you.

Conference Operator: Your next question comes from Mark Carden with UBS. Your line is now open.

Mark Carden, Analyst, UBS: Thanks so much for taking the questions. I want to just start out with the broader health to consumer, just what you’re seeing on that front, any shifts in buying patterns or trade across categories? And then just related, any changes you guys are seeing in the underlying competitive environment just from a pricing standpoint? Thank you.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Thanks for the question. And I think that’s more relevant than ever. So, we’re seeing more of the same compared to the past quarter. Customers, are increasingly seeking values. And value, can get that in many ways.

Of course, our hard discount stores, they’re doing well, and they’re still leading and doing better compared to rest of the portfolio. So, their comp sales is better, and that’s also what we are seeing here in the beginning of quarter three. But also, the rest of our portfolio is doing well. So customers, they are increasingly seeking to buy more on promotions, buy more on the private label. And then, of course, they’re also shipping.

I think probably a good way to look at it is on our tea products. So, customers, probably like a lot of their brands coming from The U. S. But now that we are seeing that in some weeks, more than 15% decline in volume for those products means that price matters to our customers. So, they’re shifting into other categories.

So, they’re looking out for value more than we have ever seen. So, I’m not very I think customers, they are acting in a good way. They’re not trading a lot down, but it’s probably much more the same as we have seen before. And what we just say, there are some macro uncertainty out there. There are some uncertainty with tariffs, but it’s not probably one of the businesses that are least impacted by that.

Do have anything to add? Yes. The only thing

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: I would add is like if you look at credit card industry data, you would note that the spend the growth in spend in Canada slowed quite significantly. And we have our own credit card data that also corroborates that information. So clearly customers are more hesitant to spend and so that’s been reflected in the growth we’re seeing in our discount stores.

Mark Carden, Analyst, UBS: That’s great color. And then, your superstores contributed nicely to sales in the quarter. Would you say this is a broader reflection on just consumer behavior overall or more specific to some of your assortment changes? How are thinking about the balance about just essentially the contribution for the balance of the year? And then would you expect for it to remain an outsized contributor to your growth rate?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: No. I think we are positively surprised. And remember, the superstore business is a quarter of our total business at Loblaw. So that’s meaningful for us. But what the team under the leadership of Frank and Bioli have done, how they have been more close to the customers, how they are starting to do things on the right hand side, actually, that delivered another 35 bps plus to the growth.

It’s helping. Remember, we are really, really focusing on value. We’re making small tweaks to the business. And probably, that’s some of it what we’re seeing. I was with the Board yesterday walking our Milton store, and that was the best superstore walk I’ve ever had.

I really, really felt optimistic after that walk. The store was heaving, lots of customers engaging in our deals. We’re testing some things like the PCO Go where customers can do like the spin and win on certain categories, certain products, which gets them around our entire store. I think what we do is starting to help in our superstores and also as well.

Mark Carden, Analyst, UBS: Great. Thanks so much. Good luck, guys.

Conference Operator: Your next question comes from Michael Van East with TD Cowen. Your line is now open.

Michael Van East, Analyst, TD Cowen: Hi there. So just looking at your food revenues up, they’re up 5.8%, and I think you’re and your same store sales are up three and

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: a half, so there’s a

Michael Van East, Analyst, TD Cowen: 2.3% delta there. But your square footage growth is only at 1.9. So is is the performance of these new stores better than the average?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. It’s difficult to say whether it’s better than the average, but it’s doing at least as well as we expected when we are making the business cases for each of them. And of course, the store in The U. S, the TNT store there is also in the mix and contributing well, which is also something we will see when we open the six stores that Richard talked about, and we have planned to open to add a few more to the test. So, yes, they’re doing well.

One example would be that it’s a small store that we opened at Richmond Street Downtown Toronto. It’s doing twice as much as we expected, and that’s only on 9,000, 9,000 square feet, just showing how much our customers they love the great offers that they can get at a high discount. And customers are looking to get that cheaper offer. So, I think, overall, yes, it’s doing as expected, and some stores even much better.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes. We’re very happy with our 20 new stores opened to date. Like I just need to mention one tool. We’ve opened a Maxi in Saint Adelaide last week, and the store is already doing 50% higher than our planned sales. Definitely, we see discount resonating with customers and it’s showing up in not insignificant sales growth.

Michael Van East, Analyst, TD Cowen: Okay. Thank you. That helps a lot. And you had an improvement in your OpEx rate despite the ramp up in store count. As you add another 60 stores in the back half of this year and accelerate it, do see Loblaw being able to maintain the OpEx rate as it is?

If so, how would you where are the other areas or what are the other levels or levers you’re pulling on?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes, the answer to that is yes. Like we’ve mentioned that our outlook was to have stability in SG and A rate for the year and that’s what we’re seeing despite the ramp up that’s coming over the coming months.

Michael Van East, Analyst, TD Cowen: Okay and what are some of the offsets Richard to help prevent that from going up with the new stores?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: As we’ve discussed over the years, we always put in place plans to be relentless on costs and those plans implemented last year are allowing us to cover the increased costs that we’re seeing on new stores and the ramp up of our new DC.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. And so, have plans in place for next year as well. So, cost is a part of our strategy. So, remember, our strategy is to grow with HarteSound, to grow with Chubbars, to grow with TNT and then really be hard focused on costs. Over time, that cost can be diluted.

But of course, opening a bit of new stores and the DC adds a little bit of extra cost, and that’s why we deploying those initiatives.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Our plan, as we’ve discussed, is to showcase stability in gross margin, stability in SG and A rate and have our top line be the driver of earnings. And so that’s what you saw in Q1, that’s what you saw in Q2 and that’s what we see for the rest of the year.

Michael Van East, Analyst, TD Cowen: Great. Thank you.

Conference Operator: Your next question comes from Tami Chen with BMO Capital Markets. Your line is now open.

Tami Chen, Analyst, BMO Capital Markets: Hi. Good morning. Thanks for the question. I guess I just wanted to revisit the broader consumer dynamic and how you’re performing in there. You know, I noticed you’re saying your conventional banners have been improving.

Doesn’t seem to be taking anything away from the momentum in your discount banners. So, specifically, I’m wondering about the the buy Canadian dynamic there. How would you characterize that trend now versus Q1, both preference for local products, but also Canadian retailers?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: So, Q2 compared to Q1 is a big step up. And when we look at the facts, which is the Nielsen data, and compare our sales of Canadian products compared to the rest of the industry, we are several percentage points higher than average. And then, of course, it’s not for me to judge who are doing better and who are doing worse. But at least we are doing much better than the industry. So we feel very good on the buy Canadian sentiment.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: One thing I want to add, Tammy, like if you remember last year in Q2, we had some weakness in same store sales, particularly in our conventional business. So we’re obviously comping that. And so that is helping our comp in conventional. But despite that, our absolute performance has been better than planned.

Tami Chen, Analyst, BMO Capital Markets: Okay. Got it. And my follow-up is, are you seeing any change or any slight uptick in promotional intensity in the industry? I think we have recently seen a bit more price rollbacks by competitors. So just wondering if that’s them trying to regain some lost tonnage during this whole buy Canadian aspect?

Thank you.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: The promo pen is more or less the same as it has been for some time now. And, of course, different players in the industry have different tactics. Some do more everyday low price, some do more promotions. But what we do, like having a great combination of good shelf price and good promotions, that’s what we believe will resonate well with customers. And over the quarter, we have invested more bag in shelf price.

And that’s why our that’s also why our margin is stable, and we will continue to be sharp on our prices. So, we can compete both on shelf and on promotions.

Tami Chen, Analyst, BMO Capital Markets: Thank you.

Conference Operator: Your next question comes from John Zamparo with Scotiabank. Your line is now open.

John Zamparo, Analyst, Scotiabank: Thank you very much. Good morning. I wanted to move to the drug side, and wonder if you can address the recent loss of patent protection for Ozempic and Wegovy and what the implications are for Loblaw. And obviously, there’s lots of unknowns here, but historically, this has been these types of transitions have been positive for EBITDA dollar generation. And I wonder if you’re confident that that’s the case here as well?

And are there any other relevant metrics you can share?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. It’s a very relevant question. And for us, it’s a little bit too early to say because we are in the middle of it, and we are trying now to discover how that’s going to play out. We don’t know yet. But one thing we know is that this is great news customers.

I think when prices come down, which we believe they will, I think we will have more customers that will be able to utilize this GLP-one drop, more customers who need it and also more customers who can’t afford to stay on it today. So, good news for customers. And I believe good news for us as well.

John Zamparo, Analyst, Scotiabank: Okay, understood. And then sticking with the pharmacy, on the clinics, we get an update on how these are performing in terms of revenue generation? You saw a meaningful acceleration in script count in the quarter on a same store basis. I wonder if you think the clinics are contributing to that and traffic results at Shoppers.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes, they are. The clinics, they’re helping, and they’re building more scripts than the stores with our clinics. And they’re also giving a little bit more sales to the entire store, so helping the trips and helping the basket size, but that’s minimal. But within the pharmacy care, they are helping, and they are delivering up to the plans that we have. And by the end of the year, we’re still planning on adding another, I think, 76.

So we will be just over two fifty at the end of the year. But it’s also worth to remember that in all our 1,800 pharmacies, we are providing primary care. But in the clinics, customers feel more confident that they have more privacy, and they are just doing the job that we expected So we feel really, really pleased with that, and we will continue building more clinics.

John Zamparo, Analyst, Scotiabank: Okay. That’s great. I’ll pass it on. Thank you.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Thanks.

Conference Operator: Your next question comes from Vishal Shreedhar with National Bank. Your line is now open.

Vishal Shreedhar, Analyst, National Bank: Hi. Thanks for taking my questions. With respect to the Buy Canada and anniversarying some of the media comments last year relating to grocers, Are you able to isolate the benefit on your comp or give us some sense? And should we expect that benefit, you agree there is some, on a year over year basis, to fade as we go through the year?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Very hard to measure, Vishal. Like very hard to measure.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. We were up against a little bit of a weaker comp, as we said before, in quarter two, but that’s all we can say. And we still have good momentum in quarter two or Yes. Quarter

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: I think you look on an absolute basis, that’s what you should focus on. Like we were all of our businesses are doing well. That’s what we’re really focused on. And the noise and comp like is it’s a bit noisy, but the business is definitely heading in the right direction here.

Vishal Shreedhar, Analyst, National Bank: Okay. With respect to East Quilenberry, you said it in the preliminary comments that it was ahead of schedule. So is 40% still the target by end of year in terms of capacity utilization?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: I don’t have that number off hand, but the number I do have on hand is like we’re going to be shipping over 6,000,000 more cases than planned by year end based on the trend we’re in. And our budgeted costs are going to be down from budget by some millions of dollars. Just to cite our vendor, Vetron has told us that this has been the smoothest and fastest ramp up that they’ve seen in any of their facilities globally. So all of that and the way it’s ramping up is giving us confidence to launch Ambient earlier than expected. And so, I suspect, yes, the number you have in your head is definitely going to be higher.

But the beauty of this is because the faster we ramp up, the more the faster we realize benefits. So we’re excited because that’s going to help us in 2026 as this facility will be processing more and more volume than expected.

Vishal Shreedhar, Analyst, National Bank: Okay. And with respect to the real estate growth and the and and the pressure associated with East William Barry, I I know in the past, you you know, people have asked about quantifying those pressures and and and you you sidestep those questions. So maybe another way to ask it is, when should we anniversary that pressure and expect the real estate growth to start contributing on a p and l basis, on an earnings basis, and the and the DC pressure to to also inflect?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: For sure. Once we cycle that, it’s definitely going to help because opening 80 stores brings drag. Ramping up a DC brings drag. So the drag of that DC will be over sometime next year. The drag from new store will no longer be a drag because we’re opening more or less the same number of stores next year.

And so that will help. But we’ll be opening a new DC in Caledon, we call it Tollamore. We started construction on that one. And so that will create another drag but that’s one is later, it’s more in ’28. So but before that, we’re going to start to see the benefits of that.

Vishal Shreedhar, Analyst, National Bank: Thank you.

Conference Operator: Your next question comes from Chris Lee with Desjardins. Your line is now open.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: Hi, good morning. When you said that Q3 is off to a good start, I’m just wondering for Food Retail, is it fair to say that the comp so far in Q3 is similar to Q2? Would that be a fair comment?

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Because of the ease that we had versus Q2 last year, comp in Q3 in food will be slightly lower than what we have in Q2, but still very healthy and our top line growth will also be very healthy.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: Got it. Okay. That’s helpful. Sorry if I missed it earlier, but the right hand side impact on comp this quarter, was it minimal or would you

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: say negligible? Negligible. Like it’s only six But stores like

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: overall, it’s 35 bps. So overall, it’s not the new six stores, but that’s the way that we treat and we trade the right hand side. So we’re not just waiting for those new stores. We’re also applying new trade mechanics to all of the stores. So, if we get some early learnings on, for example, toys, then we try to deploy that to all stores.

So, that’s some of that’s helping. So, we can’t wait three years or four years until we have finished all 180, 80 superstores. But what I think is very encouraging for us, still small numbers and it still takes some time for us to deploy, but that’s how we have managed to take some of the learnings from the first pilots in superstores and bring them back to the Loblaws and the Sears and the Yigs stores. And we’re seeing some really, really good numbers on the non food there in the first two, three stores. Again, early days, but it’s good to see.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes. Just to be precise, I was referring to like the impact of the new renovation on our six stores. If you look at the normal drag we get from right hand side, like it’s in the thirty, thirty five basis points. So, getting better than last year.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: Okay. That’s great. And then maybe just a quick follow-up on the early discussion around sort of what’s driving the tonnage growth in conventional. I remember attending a recent industry conference and I think it was discussed that there’s a lot of sort of blocking and tackling the enhancement you guys have made in fresh, multicultural, natural organic foods are all kind of contributing to growth. I was just wondering if you can elaborate a little bit more on sort of what’s driving the tonnage growth in conventional beyond the bike Canadian or

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: sort

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: of the industry factors that were already discussed?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Fresh and multicultural, that would be the two drivers. And of course, we’re still doing well with our control band across center stores. But except from that, it’s actually healthy and it’s all over the piece. It’s not one category. But multicultural and fresh specialty produce, that’s one of the areas where we’re doing very well.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Okay. I guess to be precise, Chris, like conventional as a sector is still trending a little bit negative. But our tonnage growth versus our peers is really, really good. And like the absolute tonnage growth is all coming from discount.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: Got it. Okay. That’s helpful. Maybe just a couple of quick ones on Shoppers. Your beauty category continues to be very strong.

And I think you made some investment in technology recently. Again, sort of what’s driving that growth? And is the Bay sort of exiting is that having any meaningful impact on that front?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. So, our investment in technology, I think we’re only in a few stores now, and that will help us over time, but it will take a little bit of time. So, that’s too early to judge. I think the Bay, we got some benefit last year. And of course, we are going to get some benefit this year as well.

And you are right, it is overall the prestige, the HAPA, beauty category that’s helping the growth in Shoppers. Food has also turned into be positive, but it’s still marginal positive. So it’s been driven by, luckily, the higher margin categories. And the market, in general, for beauty and prestige is just a good market to be in. It’s growing over and above the food.

And customers, it seems like they are not as price sensitive when they are buying fragrances compared when they are buying food. And I normally say that if we zero are one dollars off a loaf of bread, then customers, they won’t forgive us, but they don’t discuss fragrances. But that’s also because our offers, our redemption offers in shoppers, when they can go in and trade points, like 30 times a point or whatever, then we are the most competitive player in beauty in Canada. So, that’s resonating really well and continue to do so for our customers.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes. Over the last few months, Chris, like we’ve seen slowly building momentum in front store. And that momentum, we’re seeing it again in Q3.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: Okay. That’s great. And my very last question, just maybe a follow-up on the discussion around the GLP drugs becoming generic. Is it fair to say just the gross profit dollars that you earn on this generic version of those drugs should be higher than the patent drugs? Is that fair

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: to say? I think it’s probably what could happen, but we actually don’t know right now because we are still looking at it. We’re still negotiating. Still talking to. And we don’t know whether those players right now, whether they would want to lower their prices.

And it’s something that, of course, we are on top of, but it’s too early to tell.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited0: That’s great.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Thank you very much. Michel, I got your number to your question. 40% becomes 60% with advancing the volume in the East Colombo.

Conference Operator: Your next question comes from Mark Petrie with CIBC. Your line is now open.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited1: Hey. Good morning. I just had one follow-up question actually. Just with regards to the square footage growth outlook, I think I heard Richard say that you expected about 80 stores again next year. Although I think I heard Per earlier in the call say something about accelerating impact, but maybe that was just from the ramp up on stores, the previously opened new stores.

If you could just clarify that. Then any commentary just about the mix of stores in 2026 or just generally going forward? And specifically wondering about discount and the mix of urban versus smaller market source? Thanks.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Okay. It’s still early days, though we have not like finalized the full numbers. So I was saying in the zone of, so we’ll come back to you later as to the specific of the number of store for next year. As to the makeup of it, I think it’s going to look a lot like this year, Shoppers Drug Mart and discount stores. There’s going be a few TNT stores and we might be able to slip one conventional or two in there.

But like that should be what you should expect to see in 2026. But we will get back to you in a few quarters.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. And the ramp up I was alluding to is just that I think previously when I’ve been talking is that I expected to see the second year comp sales to be much higher than the normal comp sales. And by measuring the first 60 stores that we have opened the past year, we are seeing that. We are seeing that those second year like for like, as I call it, they are doing very well. So that was what I was talking about.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited1: Understood. Okay. Thanks. And then maybe just to clarify, Richard, just with regards to or follow-up, the performance of this discount small format discount stores that you’ve opened so far, would that be relatively consistent for those urban markets versus those more rural markets that you’ve also been opening stores in?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: I would say that the urban stores, we are really, really pleased. We haven’t really tested rural stores yet. I think we have the first one opening very soon. And there are lots of potential to go into rural, but it takes a little bit longer time to plan, to build because we had many more options downtown, the big cities where we could just go into existing buildings. So it takes more time to test the rural.

But I do stay as optimistic as I have been when I came here a couple of years ago on going into rural. But we haven’t really tested enough yet to let you know.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: Yes. Suburban is one where we’re asking ourselves questions. So, we need to do some more work there. But like definitely urban where every site we can put our hands on we’re doing.

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. And suburban, we only ask ourselves question how big we’re going to build them. We’re not asking a question whether it works or not. So, where a 10,000 square foot store works well urban and probably also rural, then I think first indication is that we want to build them bigger in the suburban.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited1: Yes, understood. Okay. Thanks for all the comments. All the best.

Michael Van East, Analyst, TD Cowen: Thank you. Thanks.

Conference Operator: Your next question comes from Michael Van East with TD Cowen. Your line is now open.

Michael Van East, Analyst, TD Cowen: Yes, thanks. I just wanted to ask about TNT because it seems like every store you open seems to blow blow the top lid off of your expectations. And I know you have, I think, one coming this fall, and you you mentioned six confirmed locations in The US with more plan. But what what are the key indicators you’re looking for as you open up in The U. S.

To make you confident or to give you confidence that this is a banner that can actually be expanded more aggressively throughout The U. S?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: Yes. I think we are of course, we’re looking for absolute sales. And the first store is so good, and it’s better than far most of the supermarkets in The U. S. To our knowledge.

And what we are seeing that really is really, really encouraging is our offer in kitchen and bakery. So, with our commentary and the way that we have our recipes for TNT, What Tina tells me is that this a big, big part of sales and much more in The U. S. Than in Canada. So, that’s a big driver of footfall to our stores.

Sales and margin, and it’s all holding up and actually much better than we expected. So, we stay very bullish. But again, it’s early days. It’s one store only. But we are so happy with the first stores that, as Richard said, we have approved six, and we’re going to extend the trial with a few more stores, so we don’t lose time ramping up.

Yes.

Richard Dufresne, Chief Financial Officer, Loblaws Companies Limited: And I think we need to add that the Canadian business is also very healthy. If you were to look at the absolute sales growth of TNT Canada, it’s actually our most performing banner on the whole organization. And where we continue to fail miserably is in our ability to forecast the sales of these new stores. We systematically underestimate the sales of all the TNT we’ve opened so far.

Michael Van East, Analyst, TD Cowen: So I guess what I’m trying to figure out though is at what point, like how many success stories you have to have in these U. S. New store openings for you to get confidence that this is actually transferable to other parts of the country?

Per Banque, President and Chief Executive Officer, Loblaws Companies Limited: I think if we have if we’re seeing the first six works, then it will work everywhere. So, we are and if you ask Tina Niel, the CEO of TNT, she’s confident already now, but I think we need to see five or six, and then we can talk to you about our plan, how to accelerate.

Michael Van East, Analyst, TD Cowen: Perfect. Thank you.

Conference Operator: There are no further questions at this time. I will now turn the call over to Roy McDonald for closing remarks.

Roy McDonald, Vice President, Investor Relations, Loblaws Companies Limited: Thanks for your time this morning everybody. Let me know if you have any follow-up questions and put a circle on your calendar for Wednesday, November 12 when we will be releasing our Q2 results. Thanks very much and have a great day.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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