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    Supply Chain Woes Bring Loblaws' Q1 Earnings Down Slightly

    TORONTO -- Citing ongoing supply chain problems related to its wide-ranging restructuring program, leading Canadian supermarket operator Loblaw Cos., Ltd. posted first-quarter profit of C$140 million (U.S. $126 million), or 51 Canadian cents a share, for the quarter ended March 25, vs. a profit of C$142 million, or 52 Canadian cents a share, in the year-ago period.

    TORONTO -- Citing ongoing supply chain problems related to its wide-ranging restructuring program, leading Canadian supermarket operator Loblaw Cos., Ltd. posted first-quarter profit of C$140 million (U.S. $126 million), or 51 Canadian cents a share, for the quarter ended March 25, vs. a profit of C$142 million, or 52 Canadian cents a share, in the year-ago period.

    Loblaws said in a statement that it anticipated the first-quarter results. "This decline was attributable, in large part, to the continuing effects from challenges encountered during the execution of planned changes to its systems, supply chain and general merchandise and drug store areas which commenced in 2005," the company noted. "The emphasis in the early part of 2006 continues to be on improving service levels, particularly in the general merchandise area, and ensuring that product is available at the store level to support merchandising programs. Service to the food business, which was adversely impacted as attention and resources were diverted to the resolution of these challenges, has now returned to normal levels. Improvements continue to be made in resolving issues affecting the performance of the general merchandise supply chain as the company works towards achieving anticipated performance levels in this area."

    Sales for the first quarter of 2006 grew 1.4 percent, or C$87 million, to $6.1 billion, while Same-store sales during the quarter decreased 2.5 percent. The company primarily attributed the sales and same-store sales declines in the quarter to the timing of Easter, which occurred three weeks later in 2006, resulting in a shift in holiday sales into the second quarter of 2006.

    In its statement Loblaws said it expects that "the impact of the supply chain restructuring and other transformative measures will have stabilized by the end of the second quarter, and that quarterly adjusted basic net earnings per common share performance will improve on a year-over-year basis during the remainder of the year." The company added that its restructuring strategy is necessary to its continued success.

    Also in line with its strategy, Loblaws said that during and after the first quarter it made "a number of significant appointments to and within its already strong management leadership team," bringing additional expertise and focus to areas such as food, general merchandise, retail operations, supply chain, and employee development.

    A subsidiary of Canadian company George Weston, Ltd., Loblaws is also Canada's largest food distributor and a provider of general merchandise products, drugstore and financial products and services. The company operates a variety of store formats across the country.

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