TORONTO — A 4% sales decline in its foodservice business in the third quarter ended Oct. 3 ranked as a bright spot for Weston Foods, a subsidiary of Toronto-based George Weston Ltd.

“We're very happy with the recovery that we're seeing in Q3 of our foodservice business,” said Luc Mongeau, president of Weston Foods (Canada) Inc., in a Nov. 17 earnings call. “To give you a bit more detail, our foodservice business was down minus 38% versus last year in Q2, and in Q3, we were minus 4%. That's driven by a very strong recovery in our quick-serve restaurants business where we're seeing very good performance from our artisan alternatives and donuts business.”

Food retailers began to reopen bakery display cases in the third quarter, and government-mandated restrictions for dine-in restaurants eased in several regions, according to Weston Foods. The business incurred C$4 million ($3.1 million) in costs for increasing health and safety measures because of COVID-19.

Operating income of C$16 million ($12.3 million) was down 30% from C$23 million in the previous year’s third quarter. Adjusted EBITDA fell 14% to C$62 million ($47.5 million) from C$72 million. Third-quarter revenue dropped 7% to C$592 million ($453.7 million) from C$638 million. In the second quarter revenue for Weston Foods declined 14% from the previous year’s second quarter.

Weston Foods in the third quarter won new business in the categories of artisan, donuts and bagels, said Richard Dufresne, president and chief financial officer for George Weston Ltd.

“Weston Foods' third-quarter results improved versus the second quarter,” he said. “However, we continue to be affected by COVID-19. I'm encouraged by the improved sales trend at Weston Foods in the quarter despite continued challenges in certain retail and foodservice categories.”

Mr. Mongeau said Weston Foods is having a solid Thanksgiving season in the United States with a strong performance in the pie category. He said the demand for baked foods overall remains strong.

“The big opportunity for us right now is really elevating, reinventing the bulk bin,” Mr. Mongeau said. “So the bulk of donuts display, for example, to ensure that we can get delicious donuts to consumers in this very changing environment.”

In the 40 weeks ended Oct. 3, Weston Foods reported an operating loss of C$32 million, which compared to operating income of C$45 million in the same time of the previous year. Adjusted EBITDA of C$121 million was down 28% from C$167 million, and revenue of C$39.43 billion was up 8% from C$36.45 billion.

George Weston Ltd. in the third quarter reported net earnings of C$317 million, or C$1.98 per share on the common stock, up more than three times from C$83 million, or C$0.45 per share, in the previous year’s third quarter. Adjusted net earnings fell 7% to C$362 million from C$391 million. Revenue in the quarter rose more than 6% to C$16.21 billion from C$15.23 billion.