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Originally Posted by Slava
Well I can see that on my system, and I've posted about it here before. I just think that people love to have someone to blame for this and it falls on deaf ears. But, regardless, the reality is they're not making a killing on grocery items...it's pharmacy and of course that entire other half of a Superstore that is where the margins are.
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I'd be quite interested in the underlying source of that data. I just pulled Loblaws quarterly financials from Sedar. They report 2 segments: Retail and Financial Services, with retail producing $1.39 billion of adjusted EBITDA in the quarter compared to financial services at $58 MM. So financial services basically doesn't matter.
They do separately report sales for their food retail and drugstore operations, and drugstore sales were up more than grocery sales. But they don't report costs or margins separately since they don't formally segment the financials. I'm generally pro-business and qualified to review financial statements, and imo they don't report enough detail to determine where the increases in profits are coming from, so I don't really see where those claims are coming from. It seems to me the other half of superstore is included in food retail sales, so there really isn't a way to isolate food specifically.
I do think this line in the MD&A is somewhat telling: "the improvement in underlying operating performance of $63 million was primarily from an increase in adjusted gross profit, partially offset by an increase in SG&A and depreciation and amortization"
Finally, I think it's extremely borderline that they don't report Shoppers as a separate segment. I'm not an accountant, but IFRS 8 has the following requirements for segment reporting.
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-that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
-whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and
-for which discrete financial information is available
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Shoppers clearly meets the first criteria of being a business. it has a separate President, so I think it's very likely they budget it separately internally, although obviously I can't prove that, which would meet criteria 2. And they obviously have separate financials since they report sales, so it definitely meets criteria 3.