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For its third quarter of 2009, Canadian grocer Loblaw Cos., Ltd. posted basic net earnings per common share of 69 cents, an increase of 12 cent, or 21.1 percent, from the 57 cents reported last year; and net earnings of CAN $189 million (US $179.8 million), a rise of $32 million, or 20.4 percent, from the CAN $157 million (US $149,4 million) logged in the year-ago period. The company’s sales, however, declined 0.2 percent to CAN $9,473 million (US $9,014.1 million), while same-store sales fell 0.6 percent.
According to the company, sales and same-store sales were positively affected during the quarter by about 0.5 percent as a result of the shift of Canadian Thanksgiving holiday sales into the third quarter of 2009 from the fourth quarter of 2008, and grew 0.2 percent from the acquisition of T&T Supermarket Co., Canada’s largest Asian food retailer, but suffered by 0.2 percent following the sale of Loblaw’s foodservice business in the fourth quarter of 2008.
“As we progressed through the third quarter, our sales were increasingly impacted by the significant decline in inflation and the ramp-up of our pricing investments,” added Loblaw executive chairman Galen G. Weston. “Earnings benefited from cost containment and supply chain efficiencies. We expect that sales and margins will be challenged due to decreasing inflation, competitive intensity, and our ongoing renovation and infrastructure programs.”
The company noted that during the third quarter of 2009, sales growth in food and drugstore was modest; sales growth in apparel was moderate as sales of other general merchandise declined significantly; gas bar sales declined considerably as a result of lower retail gas prices, despite moderate volume growth; and internal retail food price inflation was below food price inflation, and significantly lower than during the second quarter of 2009.
Gross profit increased by CAN $68 million (US $65 million) to $2,165 million in the third quarter of 2009, compared with CAN $2,097 million (US $1,995.5 million)in 2008. Gross profit as a percentage of sales in the third quarter of 2009 was 22.9 percent, an increase of 80 basis points vs. 22.1 percent in the year-ago period. Loblaw attributed the lift to improved buying synergies, more disciplined vendor management, sales mix, lower fuel costs and efficient transportation operations. Increased investments in pricing partially offset the improvement.
Operating income was CAN $378 million (US $360 million) for the third quarter of 2009 vs. CAN $312 million (US $297 million) in the same period in 2008, a rise of 21.2 percent. Operating margin was 4.0 percent for the third quarter of 2009 vs. 3.3 percent in 2008. According to Loblaw, the increases in operating income and operating margin were due to improved gross profit, lower labor and supply chain costs, and lower net stock-based compensation charge, partially offset by an incremental investment in information technology and supply chain.
For the first three quarters of the year, sales increased by 1.6 percent, or CAN $367 million (US $349 million), to CAN $23,424 million (US $22,283 million) over the same period in the previous year. Sales growth in the first, second and third quarters of 2009 was adversely affected by 0.5 percent each because of the above-mentioned sale of Loblaw’s foodservice business, the company said. Quarterly same-store sales growth for the previous three quarters was 10.6 percent in the fourth quarter of 2008, 2.1 percent in the first quarter of 2009 and 2.5 percent in the second quarter of 2009, with the extra selling week in the fourth quarter of 2008 positively affecting sales and same-store sales growth by 7.9 percent.
Year-to-date gross profit increased by $297 million to CAN $5,468 million (US $5,202 million) compared with CAN $5,171 million (US $4,919 million) in 2008. Year-to-date gross profit as a percentage of sales was 23.3 percent vs. 22.4 percent in 2008. In the first three quarters of 2009, improved buying synergies, more disciplined vendor management, sales mix and the efficiency of transportation operations contributed to the increase in gross profit and gross profit as a percentage of sales. Lower fuel costs additionally contributed to the improvement in the third quarter of 2009, partially offset by increased investments in pricing.
Year-to-date operating income for 2009 increased by CAN $196 million (US $186 million), or 26.8 percent, to $928 million, and resulted in an operating margin of 4.0 percent vs. 3.2 percent in the comparable period in 2008. The increases in operating income and operating margin were primarily attributable to higher sales, the improvement in gross profit and lower stock-based compensation costs, partially offset by incremental costs of CAN $61 million (US $58 million) related to the investment in information technology and supply chain and a lower gain on the sale of financial investments by President’s Choice Bank, a wholly owned subsidiary of the company.
Year-to-date net earnings grew by CAN $131 million (US $125 million), or 36.4 percent, to $491 million, from the CAN $360 million (US $342 million) posted in 2008. Basic net earnings year-to-date rose by 48 cents, or 36.6 percent, to $1.79, compared with $1.31 for the same period last year.
During the quarter, 27 corporate and franchised Loblaw stores opened, including 17 acquired T&T stores, and 10 corporate and franchised stores closed, resulting in a net increase of 0.8 million square feet or 1.6 percent.
Capital investment for the third quarter came to CAN $284 million (US $270 million), from CAN $197 million (US $187 million) in the year-ago period, while year-to-date cap ex was CAN $606 million (US $576 million), from CAN $397 million (US $378 million) last year. Loblaw estimates that its capital investment in the fourth quarter of 2009 will be about CAN $400 million (US $381 million).
Brampton, Ontario-based Loblaw, Canada’s largest food distributor and a leading provider of drug store, general merchandise and financial products and services, has over 139,000 full-time and part-time employees at more than 1,000 corporate and franchised stores across the country.