Loblaw Companies (TSE:L) executives highlighted steady operating performance, continued store expansion, and growing digital sales during the company’s fourth-quarter and full-year 2025 earnings call. Management also discussed the planned sale of PC Financial to EQ Bank and provided expectations for 2026, including high single-digit adjusted EPS growth (excluding certain timing impacts) and a similar pace of shareholder returns.
Fourth-quarter results and full-year performance
Chief Financial Officer Richard Dufresne said the fourth quarter delivered “consistent financial and operational performance,” supported by new stores and continued focus on value, service, and convenience. On a 12-week basis (excluding the extra week), fourth-quarter revenue grew 3.5% to CAD 15.5 billion, aided by the opening of 30 stores in the final quarter.
For the full year, Loblaw reported consolidated revenue growth of 4.4% to CAD 63.7 billion, net earnings of CAD 2.8 billion, and EPS growth of 10.7%. The company said the 53rd week contributed an incremental 2.9% to EPS, bringing growth to 13.6%.
Food retail: market share gains, discount expansion, and category mix
In food retail, Dufresne said the company again delivered traffic and basket growth, resulting in tonnage market share gains. Absolute food sales grew 3.1%, outpacing same-store sales by 160 basis points, which management attributed to new store growth. Food same-store sales increased 1.5%, with Dufresne noting the company was lapping a strong fourth quarter in the prior year that included higher promotional activity.
Management said food same-store sales growth accelerated through the quarter and that momentum continued into the first quarter of 2026. CEO Per Bank added that promotional penetration remained high and private label outperformed national brands in the quarter. He also cited examples of trade-down behavior in certain categories, such as organic berries declining while conventional berries rose.
Loblaw continued expanding hard discount, which executives positioned as a key response to consumers prioritizing value. The company opened 15 new hard discount stores in the quarter and 48 for the year, primarily in underserved communities. Bank said digital penetration in discount banners doubled versus last year, following investments to expand e-commerce services for discount customers. Management also noted that some hard discount stores opened in 2024 are already in comparable sales and are averaging “healthy double-digit” same-store sales.
Within “right-hand side” general merchandise categories in food stores, Loblaw reported continued growth in toy, apparel, and home and entertainment, though pressure in liquor, tobacco, and health and beauty aids contributed a 20 basis point headwind to food same-store sales. Bank highlighted strong performance in refreshed right-hand side layouts, saying 34 stores have been updated and are seeing high single-digit sales growth, led by apparel, cosmetics, and toys. He said toy sales increased “almost 50%” in the fourth quarter.
Bank also said the company added 267 new Canadian suppliers in 2025, emphasizing customer preference for local manufacturers.
Drug retail and healthcare: pharmacy growth, clinics, and category trends
In drug retail, Loblaw reported absolute sales growth of 4.4% and same-store sales growth of 3.9%. Pharmacy and healthcare services same-store sales grew 5.6%, driven by strength in prescriptions and new healthcare services, including specialty prescriptions. The company said it achieved its target of opening 250 in-store clinics during the year.
Front store same-store sales increased 2.2%, which management linked to strength in beauty and increased over-the-counter sales amid a heavy cold and flu season. Executives noted the flu season peaked in December, compared with the first quarter in the prior year, a timing shift that could affect quarter-to-quarter comparisons.
During Q&A, Bank said prestige beauty continued to grow at Shoppers. He also discussed GLP-1 medications, noting pricing has come down and that generic availability remains uncertain; later in the call, he said the company’s “best guess” for generic timing was August or September, while acknowledging it has moved and depends on approvals.
On clinics, Bank said the pace of new openings is slowing because Loblaw accelerated openings in provinces where the scope of care expanded (Alberta and Nova Scotia) and is now waiting for other provinces to broaden prescribing scope. He said performance is tracking to plan and that new stores are built with clinics.
Digital growth, supply chain automation, and AI initiatives
Loblaw said online sales exceeded CAD 4.5 billion in 2025, with fourth-quarter digital sales up 19.6%, the highest growth rate of the year. Delivery was described as a key driver, particularly for discount, and management said a new third-party delivery partnership launched in November across grocery banners is showing “very positive” early results.
Executives also discussed e-commerce profitability, noting that while it had previously been dilutive, it is “not diluting” anymore, attributing the improvement largely to the use of third parties for delivery. Bank added that in-store picking (rather than fulfillment centers) supports efficiency and can reduce waste, and he said online customers tend to buy deeper into the assortment, supporting store productivity.
On supply chain, Dufresne said the ramp-up of the automated distribution center in East Gwillimbury is progressing well, with cost and productivity improvements better than planned and the rollout of ambient sections occurring two months ahead of schedule. The company expects the facility to be fully ramped later in 2026. Construction of a second automated DC in South Caledon remains on plan, with automation installation expected to begin by year-end.
Bank also pointed to partnerships with OpenAI and Google, describing customer-facing use cases tied to meal solutions and product discovery, as well as internal tools such as “Robyn,” which he said helps district and store managers access data and address store issues faster.
PC Financial sale to EQ Bank, capital returns, and 2026 outlook
Investor Relations Vice President Roy MacDonald reminded listeners that following the announced sale of PC Financial to EQ Bank, PC Financial results are presented in discontinued operations. Dufresne said the company is “not getting out of financial services,” and that after the transaction closes, the discontinued operations results will be replaced by Loblaw’s proportional ownership share of EQ Bank profits.
In the quarter, PC Financial revenue increased 3.1%, and adjusted net earnings increased by CAD 12 million, or 36%, driven by higher revenue and lower expected credit loss provisions. Loblaw expects the transaction to close later in 2026.
On capital allocation, Dufresne said retail free cash flow was CAD 1.9 billion for the year. Loblaw repurchased CAD 592 million of shares in the quarter, totaling CAD 1.9 billion for 2025. Return on equity was 26.3% and return on capital was 12.4%.
For 2026, management said new store investments will be similar to last year, with an increase in Shoppers Drug Mart stores, grocery square footage growth in line with 2025, and the drug footprint expected to increase by three. Dufresne said the timing of the PC Financial sale closing and lapping the 53rd week will affect reported results, but excluding those impacts, the company expects retail earnings to grow faster than sales and adjusted EPS growth in the high single digits. Loblaw plans approximately CAD 2.4 billion in capital expenditures and said it expects to return most free cash flow to shareholders through dividends and buybacks, with buybacks planned at about CAD 1.9 billion in 2026.
Executives also discussed real estate, saying it remains “quite easy to find good sites in Canada,” with many underserved areas seeking discount offerings. Bank added that the pipeline for 2027 is “pretty much full” across food and drug. For T&T, management said there was no change to plans: 11 U.S. stores are approved, and in 2026 the company plans to open three stores in the U.S. and three in Canada, with U.S. locations cited as San José, San Francisco, and Los Angeles (with the last one scheduled for mid-December and potentially subject to timing).
About Loblaw Companies (TSE:L)
Loblaw is one of Canada’s largest grocery, pharmacy, and general merchandise retailers, operating the most expansive store footprint in Ontario and maintaining sizable presences in provinces like Quebec and British Columbia. Key grocery banners include Loblaw, No Frills, and Maxi, while its pharmaceutical operations are the product of its 2014 acquisition of Shoppers Drug Mart. The firm carries a robust private-label assortment, with top sellers like President’s Choice and No Name. In addition to its retail operations, Loblaw oversees a financial-services business, which provides credit card services and guaranteed investment certificates, and also operates its PC Optimum loyalty program.
