Loblaw expanding online grocery business across the country, raising dividend

Canada’s largest grocer plans to “blanket the country” with online grocery services this year.

Loblaw Companies Ltd., which launched home delivery services in its first market late last year, will expand the offering to five more areas this year. Shoppers in Montreal, Halifax and Regina will be among those who can try the new service. The company said the other two new regions are still being determined. The service is currently available in 11 markets, including Toronto and Vancouver.

The retailer also plans to expand its click-and-collect program, which allows customers to order groceries online and pick them up, with 500 new pick-up sites this year. By the end of 2018, the retailer aims to have more than 700 pick-up locations. These will include additional grocery stores and Go Train stations in Ontario, as well as several Shoppers Drug Mart locations — with the first several expected in the coming weeks.

The company is looking for ultra-convenient pick-up spots for customers, CEO Galen G. Weston said on a conference call with analysts after the company released its first-quarter earnings report.

By the end of the year, 70 per cent of Canadians will have access to the company’s click-and-collect and home delivery services, the company said.

Canadian grocers have recently started to focus heavily on their e-commerce offerings, including home delivery options, after tech titan Amazon acquired Whole Foods Market, including its 14 Canadian locations last year.

Metro Inc. announced in November that it would bolster its e-commerce options, including launching services in Ontario.

Sobeys Inc. made its plans public about two months later, saying it signed a partnership deal with British company Ocado Group to help build its online shopping business. It plans to build a customer fulfillment centre, which will store food and automate the process of picking groceries, in the GTA and launch the service in about two years.

Some experts have questioned whether a two-year wait is too long and will result in the grocer losing some customers to other chains able to fill the gap in the interim.

Loblaw is relying on a different model. It is partnering with California-based Instacart, whose employees pick out groceries and sort them into delivery boxes for customers, to provide delivery services already rather than wait to build a distribution centre. Shoppers use the Instacart website or app to order food from participating Loblaws and other chains. Instacart picks up and delivers the orders.

Loblaw also looked at a central fulfillment model, Weston said, but feels very confident on the path it’s on.

“The thing is, none of us can really predict, you know, where things are going to end up,” he said.

The announcement came as Loblaw raised its quarterly dividend to 29.5 cents per share from 27 cents per share and reported improved quarterly earnings.

Loblaw earned a profit attributable to common shareholders of $377 million or 98 cents per diluted share on $10.37 billion in revenue for the quarter ended March 24. That compared with a profit of $232 million or 58 cents per share on $10.40 billion in revenue in the same quarter last year.

Adjusted earnings per share amounted to 94 cents per share, beating analysts’ expectations of 91 cents per share, according to data compiled by Thomson Reuters.

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