Briefing

Loblaw stock drops on flat second-quarter profits it blames on algorithms

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The company posted net earnings of $286 million in the three months ending June 31, down slightly from $293 million for the same period in 2018. Same-store sales at its grocery chains increased by 0.6 per cent, compared to 0.8 per cent in 2018’s second quarter. Subsidiary Shoppers Drug Mart grew the same metric by four per cent, its best quarter in three years. (Canadian Press)

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Talking point: Loblaw president Sarah Davis said the flat profits were caused by “overzealous” application of algorithms designed to increase margins on the products it sells, which led to fewer items being discounted in promotional flyers. Customers did spend more, but there were fewer of them—the average bill rose, while traffic to the stores fell. Loblaw started using data analytics in its discount division in the third quarter of 2018. Loblaw has been an early adopter of data analytics in Canada’s grocery sector. The company launched an online version of its previous PC Plus points program in 2013, a year before Canadian Tire created an app for its Canadian Tire money. And, Loblaw is now using data from its current PC Optimum program to deliver targeted ads for members who opt in.