Loblaw is reporting robust Q2 revenue and retail segment sales.

The grocer is delivering total second-quarter revenue of $12.85 billion, an increase of $356 million, or 2.9%. That’s a slight miss on analyst expectations of $12.98 billion.

Operating income was $811 million, an increase of $103 million, or 14.5%, while adjusted gross profit was $3.9 billion, an increase of $169 million, or 4.5%.

In grocery, same-stores sales increased by only 0.9%, as basket size decreased and traffic increased. In its drug store segment, same-store sales increased by 5.6%, with the number of prescriptions dispensed increasing by 2.3% and the average prescription value increased by 3.6%. Richard Dufresne CFO says it’s seeing an acceleration in OTC and cosmetics, back to pre-COVID levels. The company says its Lifemark therapy and rehab clinics acquisition from May adds to Loblaw’s role as a healthcare service provider, with a network of health and wellness solutions, accessible in-person and digitally.

The company says its conventional stores performed well relative to peers and sales growth in its discount banners, heightened by the strength of its discount No Frills and Maxi banners and Loblaw’s value focused control and investment in its brand no name. Five stores have converted from market format to discount.

In Wednesday morning’s earnings call, chairman and CEO Galen Weston says earnings growth was linked principally to the drug store business, however that the consumer shift to discount, has substantially benefited its discount formats. He boasts that PC Optimum loyalty program will deliver $1 billion in savings this year.

Ecommerce sales, however, decreased by 17.5%, lapping elevated online sales due to lockdowns from last year. Digital sales are retreating off pandemic highs, Weston says, but he remains bullish about Loblaw’s ecommerce prospects.

Dufresne says sales for market stores have been “solid,” while food retail numbers are “stable,” and its businesses are doing well and are profitable. Increased pandemic costs “are slowly going away.”

Inflation will soon peak and moderate in the second half of the year, Dufresne says, and that supply challenges are normalizing.

On a full-year basis, Loblaw says it continues to anticipate that its its Retail business will grow earnings faster than sales, and that it will invest approximately $1.4 billion in capital expenditures.