September 19, 2014 3:56 pm

Loblaws, a grocery store? Not anymore

A shopper walks into a Loblaws flagship location in the old Maple Leafs Garden in Toronto in May.

CANADIAN PRESS/Aaron Vincent Elkaim
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And you thought Loblaw was just a grocery store.

Last year’s blockbuster deal between the food retailing giant and Shoppers Drug Mart helped transform the country’s largest grocery chain.

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But Loblaw was already well on its way to diversifying itself into a multitude of businesses well beyond selling food. Shoppers’ pharmacy business – not to mention its health and beauty products — has helped broaden out Loblaws’ bottom line even more.

So just how diversified is the Brampton, Ont.-based retailer? According to a new estimate published Friday from investment experts at Desjardins Securities, Loblaws’ food business accounts for only about half of pre-tax earnings now.

“We estimate that non-food businesses such as pharmacy, health and beauty, Joe [Fresh] apparel and accessories, gas bars and financial services represent an estimated 50 per cent of [pre-tax profit],” Desjardins said in a note to clients.

That’s a positive for Loblaw, says Desjardins, because Canadian supermarkets have come under substantial pressure as U.S. giants Walmart, Target and Costco expand their footprints in Canada this year.

MORE: Walmart slashes prices to win more Canadians’ grocery business

Walmart Canada is throwing half a billion dollars at expanding hundreds of locations into “supercentres” this year that offer a full complement of groceries on top of the thousands of products it already sells.

The world’s largest retailer said in August it continues to steal business from the likes of Loblaw, Safeway, Metro and Sobeys.

Sales across Walmart’s more than 380 Canadian locations jumped nearly three per cent in the three months ending June 30, even though the chain saw a dip of 1.1 per cent in the number of people walking through the door.

New store openings helped. But a big driver was the increase in how much customers spent at Walmart as it introduced food aisles at existing locations.

“We’re encouraged by our performance in food and consumables, driven by supercentre expansions,” Walmart said in an Aug. 14 statement.

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