Without mentioning boycott, Loblaw execs suggest it was a factor in weaker food sales

During the company's second quarter earnings call on Thursday morning, Loblaw executives fielded questions from analysts about the grocery giant'ssoft food retail sales and whether a boycott organized online had impacted the company's profits at all.

Some Canadians have been boycotting Loblawsince May, after the moderators of an online Reddit group called r/loblawsisoutofcontrolbeganencouraging its then-45,000 members to stop shopping at the store and its subsidiary brands.

During the company call, neither CEO Per Bank norchief financial officer Richard Dufresneused the word boycott. But they didn't deny that it was a factorin food retail sales that "came in a little soft" compared to the same time last year.

The company's earnings results note that food retail same-stores sales increased by 0.2 per cent in the second quarter of this year, compared to a 6.1 per cent increase during the same quarter last year.

'A bit of an impact' in certain stores in specific markets

Asking directly about whatshe called anunexpected weakness in food retail numbers, one RBC analyst noted that while inflation and multi-buy pricing were factors, "there was also the boycott."

She asked where the company was seeing gains and where it was seeing "pressure."

Dufresnespent part of his answer to the analyst saying that several factors impacted food retailsales,contrasting last May's hot weather which he said helped garden and suncare sales with the rainy and cold weather during May this year (the same categories that suffered, he said).

He then said, "regarding what you justmentioned in the last part of your question," that the company noticed "a bit of an impact" in certain stores in specific markets. He said that things had returned to normal by the end of the quarter.

Bank chimed in after Dufresne's response.

"The overall financial impact was minor. For us, every single customer is important to us. One customer lost is one too many,"he said.

"And I have spent a lot of time speaking to customers and different stakeholders," Bank went on. "And I do listen to them because their feedback is really, really helpful and we welcome it. It makes us better."

WATCH | Why some Canadians started boycotting Loblaw:

Frustrated shoppers boycott Loblaw stores for month of May

4 months ago

Duration 1:49

Canadians frustrated with rising groceries prices have pledged to boycott Loblaw-owned stores for the month of May. On the same day it was set to begin, Canada's largest grocer reported a nearly 10 per cent increase in profits.

Boycott organizer Emily Johnson, who lives in Milton, Ont., said news that the boycott had made a small dent was "great for the movement as a whole as well as for consumers."

"A big part of what we're doing is just continuing to keep that pressure on," Johnson said.

"We're going to be here and we're going to be pushing for food security, we're going to be pushing for fair markets [and] fairer treatment of customers."

Ken Wong, a retail analyst, told CBC News he doesn't get the sense that the boycott had a "material effect" on Loblaw'sperformance.

"After a $500 million class-action lawsuit, I think we can accept that if all they did was suffer a minor setback in earnings, it's not a big problem," he said.

However, the boycott successfully made it clear thatthe dissatisfaction with the major grocer was widespread, Wong added.

He also noted that Loblaw recently agreed to sign the grocery code of conduct, which was one of the demands made by boycott organizers. The code of conduct is meant to level the playing field between large retailers and suppliers.

"They drew government attention, [the] government put pressure, and Loblawresponded to the pressure not from the public but from the government."

Net earnings fell 10 per cent in Q2

Loblaw's net income fell 10 per cent in the second quarter from the same time last year, a decrease that the company attributed primarily to charges related to the settlement of class-action lawsuits.

Income in the second quarter fell to $457 million,or $1.48 per share, from $508 million, or $1.58 per share, compared with a year earlier.

The company announced Thursday that it and its parent company George Weston Ltd. have agreed to pay $500 million to settle a class-action lawsuit regarding their involvement in an alleged bread price-fixing scheme.

It also reported that it missed analysts' expectations for second-quarter revenue on Thursday, hurt by soft demand for some household items and non-essential products such as apparel.

The company's revenue rose 1.5 per cent to $13.95 billionbut fell short of analysts' average estimate of $14.17 billion, according to data fromLondon Stock Exchange Group.

The decline in front-store same-store sales was primarily driven by lower sales of food and household items and the decision to exit certain low-margin electronics categories, the company added.

Customers in Canada have been trimming expenses even on essential items as high housing and interest rates continued to eat into their income.

The country's retail sales fell in May mainly due to a drop in sales at supermarkets and grocery retailers, according to Statistics Canada.

But many deal-hunting consumers have helped boost food sales growth at Loblaw's discount banners such as No Frills and Maxi.