BRAMPTON, ON, Feb. 25, 2021 /CNW/ - Loblaw Companies Limited
(TSX: L) ("Loblaw" or the "Company") announced today its unaudited
financial results for the fourth quarter ended January 2, 2021 and the release of its 2020
Annual Report - Financial Review ("Annual Report"). The report
includes the Company's audited financial statements and
Management's Discussion and Analysis ("MD&A") for the fiscal
year ended January 2, 2021. The
Company's 2020 Annual Report will be available in the Investors
section of the Company's website at loblaw.ca and will be filed on
SEDAR and available at sedar.com.
Unless otherwise indicated, all comparisons of results for the
fourth quarter of 2020 (13 weeks ended January 2, 2021) are against results for the
fourth quarter of 2019 (12 weeks ended December 28, 2019) and all comparisons of results
for the full year of 2020 (53 weeks ended January 2, 2021) are against the results for the
full year of 2019 (52 weeks ended December
28, 2019).
"In stores and online, our network met the challenge of outsized
sales growth, keeping Canadians fed and well," said Galen G. Weston, Executive Chairman, Loblaw
Companies Limited. "Our purpose – helping Canadians live life well
– has inspired ongoing commitments to colleague safety, lower
prices, and strategic services that matter to customers. Looking
ahead, we have financial momentum, our strategy has advanced, and
our core business is well positioned."
The COVID-19 pandemic impacted the Company's operations. In the
fourth quarter, sales in the Food Retail business were positively
impacted, however costs remained elevated to ensure the safety and
security of customers and colleagues. Loblaw continued to deliver
value in the categories that mean most to consumers, maintaining
conventional, drug and beauty market share improvements earned over
the course of the pandemic, and improving its trajectory in
discount. In Drug Retail, strength in convenience categories
supported front store sales while the pandemic negatively impacted
higher margin categories. Looking ahead, the COVID-19 pandemic has
accelerated certain longer-term trends, enabling the Company to
advance its strategic growth areas of Everyday Digital Retail,
Connected Healthcare Network, and Payments and Rewards.
2020 FOURTH QUARTER HIGHLIGHTS
Unless otherwise indicated, the following fourth quarter
highlights include the impacts of the consolidation of franchises,
and COVID-19 and are presented on a comparable(4) 12
week basis.
- Revenue was $12,408 million. This
represented an increase of $818
million, or 7.1% when compared to the fourth quarter of
2019.
- Retail segment sales were $12,165
million. This represented an increase of $844 million, or 7.5% when compared to the fourth
quarter of 2019.
-
- Food Retail (Loblaw) same-stores sales growth(4) was
8.6%, continuing at elevated levels, with the Company's Market
division delivering strong growth of 10.6% and the Discount
division delivering 7.4% growth.
- Drug Retail (Shoppers Drug Mart) same-store sales
growth(4) was 3.7%, with pharmacy same-store sales
growth of 5.0% and front store same-store sales
growth(4) of 2.8%.
- The Company's e-commerce sales increased 160% compared to the
fourth quarter of 2019.
- The Company incurred approximately $42
million in COVID-19 related costs to ensure the safety and
security of customers and colleagues.
- Operating income was $635
million. This represented an increase of $94 million, or 17.4% when compared to the fourth
quarter of 2019.
- Adjusted EBITDA(2) was $1,265
million. This represented an increase of $60 million, or 5.0% when compared to the fourth
quarter of 2019.
- Adjusted EBITDA margin(2) was 10.2%. This
represented a decrease of 20 bps when compared to the fourth
quarter of 2019.
- Net earnings available to common shareholders of the Company
were $310 million. This represented
an increase of $56 million, or 22.0%
when compared to the fourth quarter of 2019. Diluted net earnings
per common share were $0.88. This
represented an increase of $0.18, or
25.7% when compared to the fourth quarter of 2019.
- Adjusted net earnings available to common shareholders of the
Company(2) were $410
million. This represented an increase of $15 million, or 3.8% when compared to the fourth
quarter of 2019.
- Adjusted diluted net earnings per common share(2)
were $1.16. This represented an
increase of $0.07, or 6.4% when
compared to the fourth quarter of 2019.
- The Company repurchased, for cancellation, 5.5 million common
shares at a cost of $350
million.
- The Company invested $418 million
in capital expenditures and generated $606
million of free cash flow(2).
- The Company recorded approximately $10
million of restructuring and other related charges,
primarily related to Process and Efficiency initiatives.
The following table provides the Company's fourth quarter
highlights both including and excluding the approximate impact
of the 53rd week:
|
|
|
|
|
|
For the periods ended
January 2, 2021 and December 28, 2019
|
2020 (13 weeks)
|
2020(4) (12 weeks)
|
2019 (12
weeks)
|
(13 week vs.
12 week)
|
(12 week vs. 12
week)
|
(millions of Canadian
dollars except where otherwise indicated)
|
$ Change
|
% Change
|
$ Change
|
% Change
|
Revenue
|
$
|
13,286
|
$
|
12,408
|
$
|
11,590
|
$
|
1,696
|
14.6%
|
$
|
818
|
7.1%
|
Operating
income
|
702
|
635
|
541
|
161
|
29.8%
|
94
|
17.4%
|
Adjusted
EBITDA(2)
|
1,332
|
1,265
|
1,205
|
127
|
10.5%
|
60
|
5.0%
|
Adjusted EBITDA
margin(2)
|
10.0%
|
10.2%
|
10.4%
|
|
|
|
|
Depreciation and
amortization
|
$
|
609
|
$
|
609
|
$
|
589
|
$
|
20
|
3.4%
|
$
|
20
|
3.4%
|
Diluted net earnings
per common share ($)
|
$
|
0.98
|
$
|
0.88
|
$
|
0.70
|
$
|
0.28
|
40.0%
|
$
|
0.18
|
25.7%
|
Adjusted diluted net
earnings per common share(2) ($)
|
$
|
1.26
|
$
|
1.16
|
$
|
1.09
|
$
|
0.17
|
15.6%
|
$
|
0.07
|
6.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides the approximate impact of the 53rd
week on the Retail segment and consolidated results of the Company
in the fourth quarter of 2020. The 53rd week does not impact the
Financial Services segment.
|
|
|
For the period ended
January 2, 2021
|
|
53rd Week
Impact
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
2020
|
Revenue
|
|
$
|
878
|
Operating
income
|
|
67
|
Adjusted
EBITDA(2)
|
|
67
|
Adjusted EBITDA
margin(2)
|
|
7.6%
|
Diluted net earnings
per common share ($)
|
|
$
|
0.10
|
Adjusted Diluted net
earnings per common share(2) ($)
|
|
$
|
0.10
|
|
|
|
|
2020 SELECT ANNUAL HIGHLIGHTS
On a comparable 52 week basis, the Company:
- Delivered Food Retail same-store sales growth(4) of
8.6% and Drug Retail same-store sales growth(4) of
4.9%.
- Delivered adjusted net earnings available to common
shareholders of the Company(2) of $1,492 million. When compared to 2019, this
represented a decrease of 1.6%.
- Delivered adjusted diluted net earnings per common
share(2) of $4.17. When
compared to 2019, this represented an increase of 1.2%.
- Invested approximately $1,148
million in capital expenditures, net of proceeds from
property disposals.
- Returned capital to shareholders by allocating a significant
portion of the Company's Retail free cash flow of approximately
$1,595 million to share repurchases.
In 2020, the Company repurchased, for cancellation, 13.3 million
common shares at a cost of $888
million.
On a full-year (53 weeks) comparative basis:
- The Company's e-commerce sales grew by 178%.
- The growth in e-commerce had a dilutive impact of approximately
$100 million in operating income, or
$0.20 in diluted net earnings per
common share(2).
- The Company incurred approximately $445
million in COVID-19 related costs year-to-date of which
$180 million related to compensation
costs, inclusive of the one-time bonus for store and DC colleagues
of $25 million.
The following table provides the Company's full year highlights
both including and excluding the approximate impact of the 53rd
week:
|
|
|
|
|
|
For the years ended
January 2, 2021 and December 28, 2019
|
2020
(53
weeks)
|
2020(4)
(52 weeks)
|
2019
(52 weeks)
|
(53 week vs. 52
week)
|
(52 week vs. 52
week)
|
(millions of Canadian
dollars except where otherwise indicated)
|
$ Change
|
% Change
|
$ Change
|
% Change
|
Revenue
|
$
|
52,714
|
$
|
51,836
|
$
|
48,037
|
$
|
4,677
|
9.7%
|
$
|
3,799
|
7.9%
|
Operating
income
|
2,365
|
2,298
|
2,270
|
95
|
4.2%
|
28
|
1.2%
|
Adjusted
EBITDA(2)
|
5,041
|
4,974
|
4,912
|
129
|
2.6%
|
62
|
1.3%
|
Adjusted EBITDA
margin(2)
|
9.6%
|
9.6%
|
10.2%
|
|
|
|
|
Depreciation and
amortization
|
$
|
2,596
|
$
|
2,596
|
$
|
2,524
|
$
|
72
|
2.9%
|
$
|
72
|
2.9%
|
Diluted net earnings
per common share ($)
|
$
|
3.06
|
$
|
2.96
|
$
|
2.90
|
$
|
0.16
|
5.5%
|
$
|
0.06
|
2.1%
|
Adjusted diluted net
earnings per common share(2) ($)
|
$
|
4.26
|
$
|
4.17
|
$
|
4.12
|
$
|
0.14
|
3.4%
|
$
|
0.05
|
1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See "News Release
Endnotes" at the end of this News
Release.
|
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, all financial information includes
the impacts of the consolidation of franchises and COVID-19.
|
|
|
|
|
|
|
|
|
For the periods ended
January 2, 2021
and December 28, 2019
|
2020
|
2019
|
|
|
2020
|
2019
|
|
|
(millions of Canadian
dollars except
where otherwise indicated)
|
(13
weeks)
|
(12 weeks)
|
$ Change
|
% Change
|
(53
weeks)
|
(52 weeks)
|
$ Change
|
% Change
|
Revenue
|
$
|
13,286
|
$
|
11,590
|
$
|
1,696
|
14.6%
|
$
|
52,714
|
$
|
48,037
|
$
|
4,677
|
9.7%
|
Operating
income
|
702
|
541
|
161
|
29.8%
|
2,365
|
2,270
|
95
|
4.2%
|
Adjusted
EBITDA(2)
|
1,332
|
1,205
|
127
|
10.5%
|
5,041
|
4,912
|
129
|
2.6%
|
Adjusted EBITDA
margin(2)
|
10.0%
|
10.4%
|
|
|
9.6%
|
10.2%
|
|
|
Net earnings
attributable to
shareholders of the
Company
|
$
|
348
|
$
|
257
|
$
|
91
|
35.4%
|
$
|
1,108
|
$
|
1,081
|
$
|
27
|
2.5%
|
Net earnings
available to
common shareholders of the
Company(i)
|
345
|
254
|
91
|
35.8%
|
1,096
|
1,069
|
27
|
2.5%
|
Adjusted net earnings
available to
common shareholders of the
Company(2)
|
445
|
395
|
50
|
12.7%
|
1,527
|
1,516
|
11
|
0.7%
|
Diluted net
earnings per
common share ($)
|
$
|
0.98
|
$
|
0.70
|
$
|
0.28
|
40.0%
|
$
|
3.06
|
$
|
2.90
|
$
|
0.16
|
5.5%
|
Adjusted diluted net
earnings per
common share(2) ($)
|
$
|
1.26
|
$
|
1.09
|
$
|
0.17
|
15.6%
|
$
|
4.26
|
$
|
4.12
|
$
|
0.14
|
3.4%
|
Diluted weighted
average
common shares outstanding
(in millions)
|
353.8
|
363.7
|
|
|
358.2
|
368.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Net earnings
available to common shareholders of the Company are net earnings
attributable to shareholders of the Company net of dividends
declared on the Company's Second Preferred Shares, Series
B.
|
REPORTABLE OPERATING SEGMENTS
The Company has two reportable operating segments with all
material operations carried out in Canada:
- The Retail segment consists primarily of corporate and
franchise-owned retail food and Associate-owned drug stores. The
Retail segment also includes in-store pharmacies and other health
and beauty products and apparel and other general merchandise;
and
- The Financial Services segment provides credit card and
everyday banking services, the PC Optimum™ Program, insurance
brokerage services, and telecommunication services.
|
|
|
|
2020
|
2019(5)
|
|
(13
weeks)
|
(12 weeks)
|
For the periods ended
January 2, 2021 and
December 28, 2019
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Total
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Total
|
(millions of Canadian
dollars)
|
Revenue
|
$
|
13,043
|
$
|
320
|
$
|
(77)
|
$
|
13,286
|
$
|
11,321
|
$
|
337
|
$
|
(68)
|
$
|
11,590
|
Adjusted gross
profit(2)
|
$
|
3,832
|
$
|
253
|
$
|
(77)
|
$
|
4,008
|
$
|
3,376
|
$
|
273
|
$
|
(68)
|
$
|
3,581
|
Adjusted gross profit
%(2)
|
29.4%
|
N/A
|
—%
|
30.2%
|
29.8%
|
N/A
|
—%
|
30.9%
|
Operating
income
|
$
|
649
|
$
|
53
|
$
|
—
|
$
|
702
|
$
|
480
|
$
|
61
|
$
|
—
|
$
|
541
|
Net interest expense
and other
financing charges
|
146
|
20
|
—
|
166
|
155
|
21
|
—
|
176
|
Earnings before
income taxes
|
$
|
503
|
$
|
33
|
$
|
—
|
$
|
536
|
$
|
325
|
$
|
40
|
$
|
—
|
$
|
365
|
Depreciation and
amortization
|
$
|
600
|
$
|
9
|
$
|
—
|
$
|
609
|
$
|
581
|
$
|
8
|
$
|
—
|
$
|
589
|
Adjusted
EBITDA(2)
|
1,270
|
62
|
—
|
1,332
|
1,135
|
70
|
—
|
1,205
|
Adjusted EBITDA
margin(2)
|
9.7%
|
N/A
|
—%
|
10.0%
|
10.0%
|
N/A
|
—%
|
10.4%
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Eliminations include
the reclassification of revenue related to President's Choice
Financial® Mastercard® loyalty
awards in the Financial Services segment.
|
|
|
|
|
|
|
2020
|
2019(5)
|
|
(53
weeks)
|
(52 weeks)
|
For the years ended
January 2, 2021 and
December 28, 2019
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Total
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Total
|
(millions of
Canadian dollars)
|
Revenue
|
$
|
51,859
|
$
|
1,097
|
$
|
(242)
|
$
|
52,714
|
$
|
47,099
|
$
|
1,196
|
$
|
(258)
|
$
|
48,037
|
Adjusted gross
profit(2)
|
$
|
15,300
|
$
|
931
|
$
|
(242)
|
$
|
15,989
|
$
|
13,998
|
$
|
1,015
|
$
|
(258)
|
$
|
14,755
|
Adjusted gross profit
%(2)
|
29.5%
|
N/A
|
—%
|
30.3%
|
29.7%
|
N/A
|
—%
|
30.7%
|
Operating
income
|
$
|
2,231
|
$
|
134
|
$
|
—
|
$
|
2,365
|
$
|
2,082
|
$
|
188
|
$
|
—
|
$
|
2,270
|
Net interest expense
and other financing charges
|
655
|
87
|
—
|
742
|
666
|
81
|
—
|
747
|
Earnings before
income taxes
|
$
|
1,576
|
$
|
47
|
$
|
—
|
$
|
1,623
|
$
|
1,416
|
$
|
107
|
$
|
—
|
$
|
1,523
|
Depreciation and
amortization
|
$
|
2,571
|
$
|
25
|
$
|
—
|
$
|
2,596
|
$
|
2,502
|
$
|
22
|
$
|
—
|
$
|
2,524
|
Adjusted
EBITDA(2)
|
4,882
|
159
|
—
|
5,041
|
4,700
|
212
|
—
|
4,912
|
Adjusted EBITDA
margin(2)
|
9.4%
|
N/A
|
—%
|
9.6%
|
10.0%
|
N/A
|
—%
|
10.2%
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Eliminations include
the reclassification of revenue related to President's Choice
Financial® Mastercard® loyalty
awards in the Financial Services segment.
|
RETAIL SEGMENT
Unless otherwise indicated, the following financial information
includes the impacts of the consolidation of franchises, COVID-19
and the 53rd week.
- Retail segment sales in the fourth quarter of 2020 were
$13,043 million. This represented an
increase of $1,722 million, or 15.2%
when compared to the fourth quarter of 2019, which included the
impact of the 53rd week of $878
million. After excluding the consolidation of franchises,
Retail segment sales increased by $1,601
million or 14.6%, which included the impact of the 53rd week
of $845 million.
-
- Food Retail (Loblaw) sales were $9,302
million and Food Retail same-store sales
growth(4) was 8.6% (2019 – 1.9%). Food same-store sales
growth(4) was positively impacted by COVID-19.
-
- The Company's Food Retail average article price was higher by
3.9% (2019 – 0.8%), which reflects the year over year growth in
Food Retail revenue over the average number of articles sold in the
Company's stores in the quarter. The increase in average article
price was due to sales mix; and,
- On a comparable week basis Food Retail basket size increased
and traffic decreased in the quarter.
- Drug Retail (Shoppers Drug Mart) sales were $3,741 million, and Drug Retail same-store sales
growth(4) was 3.7% (2019 – 3.9%), with pharmacy
same-store sales growth(4) of 5.0% (2019 – 6.1%) and
front store same-store sales growth(4) of 2.8% (2019 –
2.2%). Drug same-store sales growth(4) was positively
impacted by COVID-19.
-
- On a same-store basis, the number of prescriptions dispensed
increased(4) by 1.9% (2019 – 3.1%) and the average
prescription value increased by 2.0% (2019 – 2.4%).
- Operating income in the fourth quarter of 2020 was $649 million. This represented an increase of
$169 million, or 35.2% when compared
to the fourth quarter of 2019, which included the impact of the
53rd week of $67 million.
- Adjusted gross profit(2) in the fourth quarter of
2020 was $3,832 million. This
represented an increase of $456
million, or 13.5% when compared to the fourth quarter of
2019. Excluding the consolidation of franchises, adjusted gross
profit(2) increased by $349
million. Adjusted gross profit percentage(2) of
29.4% decreased by 40 basis points compared to the fourth quarter
of 2019. Adjusted gross profit percentage(2), excluding
the consolidation of franchises, was 26.9%. This represented a
decrease of 80 basis points compared to the fourth quarter of 2019.
Food margins were negatively impacted as a result of COVID-19
related changes in sales mix and competitive pricing. Drug retail
margins were negatively impacted as a result of COVID-19 related
changes in front store sales mix. Excluding the 53rd week, adjusted
gross profit percentage(2) decreased by 70 basis
points.
- Adjusted EBITDA(2) in the fourth quarter of 2020 was
$1,270 million. This represented an
increase of $135 million, or 11.9%
when compared to the fourth quarter of 2019. The increase included
the year-over-year favourable impact of the consolidation of
franchises of $37 million. Excluding
the consolidation of franchises, the increase was driven by an
increase in adjusted gross profit(2) of $349 million, partially offset by an increase in
SG&A of $251 million. SG&A as
a percentage of sales, excluding the consolidation of franchises,
was 17.4%, a decrease of 20 basis points compared to the fourth
quarter of 2019. The favourable decrease of 20 basis points was
primarily due to sales leverage as well as process and efficiency
gains which were partially offset by COVID-19 related costs and
incremental e-commerce labour costs as a result of increased
on-line sales.
- Depreciation and amortization in the fourth quarter of 2020 was
$600 million, an increase of
$19 million compared to the fourth
quarter of 2019, primarily driven by the consolidation of
franchises and an increase in IT assets. Included in depreciation
and amortization was the amortization of intangibles assets
related to the acquisition of Shoppers Drug Mart Corporation of
$117 million (2019 – $116 million).
- The Company recorded $10 million
of restructuring and other related charges, primarily related to
Process and Efficiency initiatives. Included in the restructuring
charges were approximately $10
million of charges related to the previously announced
closure of two distribution centres in Laval and Ottawa. The Company is investing to build a
modern and efficient expansion to its Cornwall distribution centre to serve its food
and drug retail businesses in Ontario and Quebec. Volumes from the distribution centres
in Laval and Ottawa will be transferred to Cornwall and the Company expects to incur
additional restructuring costs throughout 2021 and through to 2022
related to these closures.
- As at the end of the first quarter of 2020, the Company
consolidated all of its remaining franchisees. Consolidation of
franchises in the fourth quarter of 2020 resulted in a
year-over-year increase in revenue of $121
million, an increase in adjusted EBITDA(2) of
$37 million, an increase in
depreciation and amortization of $3
million and an increase in net earnings attributable to
non-controlling interests of $37
million.
FINANCIAL SERVICES SEGMENT
- Revenue in the fourth quarter of 2020 was $320 million. This represented a decrease of
$17 million when compared to the
fourth quarter of 2019. The decrease was primarily driven by lower
interest, interchange income and credit card related fees due to
lower customer spending, partially offset by higher sales
attributable to The Mobile ShopTM and by a prior year
reclassification between revenue and expense of approximately
$19 million with no impact to
earnings before income taxes.
- In the fourth quarter of 2020, earnings before income taxes
were $33 million. This represented a
decrease in earnings of $7 million
when compared to the fourth quarter of 2019. The decrease was
primarily driven by lower revenue, as described above partially
offset by lower credit losses and expected credit losses, and lower
customer acquisition costs.
COVID-19 UPDATE
The COVID-19 pandemic continued to have a significant impact on
various aspects of our business in the fourth quarter. In the four
weeks following the end of the quarter, Food Retail
same-store-sales growth remained elevated and Drug Retail
same-store-sales growth slowed in front store while remaining
consistent in pharmacy. For the balance of the first quarter, both
Food and Drug same-store-sales will lap consumer stockpiling that
began in the first quarter of 2020. COVID related costs are
trending in the range of $40 to
$50 million for the first quarter of
2021.
DECLARATION OF DIVIDENDS
Subsequent to the end of the fourth quarter of 2020, the Board
of Directors declared a quarterly dividend on Common Shares and
Second Preferred Shares, Series B.
Common
Shares
|
$0.335 per common
share, payable on April 1, 2021 to shareholders of record
on March 15, 2021
|
|
|
Second Preferred
Shares, Series B
|
$0.33125 per
share, payable on March 31, 2021 to shareholders of record
on March 15, 2021
|
STRATEGIC UPDATE AND OUTLOOK(3)
Strategic Update
In the transition from year one to year two of the COVID-19
pandemic, Loblaw's core businesses remain strong. The Company is
well positioned to meet changing consumer trends brought about by
the pandemic. Management is committed to growing the core business
of food and drug retail and everyday banking by leveraging Loblaw's
industry-leading assets and driving value through its process and
efficiency and data insights programs. Loblaw's strategy positions
it well to capitalize on the accelerating pace of change in global
food retail and wellness by focusing on three strategic growth
initiatives: Everyday Digital Retail; Payments & Loyalty
Rewards; and Connected Healthcare.
Process & Efficiencies and Data Driven
Insights A culture of continuous improvement underpins an
ambitious program that has delivered more than $1 billion in savings over the past three years.
Investments in Data Driven Insights have established a data asset
that has long-term strategic value, creating opportunities to
improve the customer experience, build new revenue streams, and
lower operating costs. Going forward, these initiatives are
targeted to offset normal inflationary headwinds, generating
savings in excess of $200 million
annually.
Everyday Digital Retail Loblaw continues to
capitalize on its early investments and market leadership in
digital retail, delivering $2.8
billion in sales, including $2.0
billion in grocery in 2020. The Company believes that
in the long term, sustained leadership in digital retail will
enhance customer value through a comprehensive omnichannel
solution. The shift from in-store to online is expected to be a
headwind to profitability over the medium term. The Company is
focused on driving improvements in digital profitability over time
through operational efficiencies and technology, sales and margin
incrementality, and using its unique data set for more relevant and
measurable promotion and advertising opportunities.
Connected Healthcare Network Over the long-term,
Loblaw intends to leverage its unmatched network of pharmacies and
healthcare professionals, building on an expanded scope of pharmacy
practice and both on-site and virtual services to expand its
presence in the $265 billion Canadian
healthcare market. 2020 included encouraging trends and increases
in healthcare services, providing evidence of the longer-term
potential of the investments the Company has been making. In 2021,
Loblaw expects to invest approximately $20
million in incremental operational expenses to continue to
digitize its pharmacy operations, increase its pharmacy services
and expand the functionality and user base of its new PC Health
app, a consumer gateway for consumer healthcare products and
services.
Payments and Rewards Three years after the launch
of PC Optimum, the Company has continued to introduce more
ways for customers to earn and redeem everyday rewards to
strengthen the loyalty loop and increase share of wallet. In 2020,
PC Financial® successfully launched its new PC Money™
Account, offering Canadians convenience and PC Optimum
rewards for their everyday banking activities. Following a very
successful initial launch, Loblaw will continue the roll-out of the
PC Money app in 2021.
Outlook
The Company cannot predict the precise impacts of COVID-19 on
2021 financial results. However, Loblaw anticipates that grocery
sales will remain elevated in the first half due to continued
impact of the pandemic, including the impact of lockdown measures
in many jurisdictions. As economies reopen, revenue growth will be
challenged while lapping elevated 2020 sales. Costs are expected to
improve, as the Company laps elevated COVID-19 related expenses,
and as Process & Efficiencies and Data-Driven Insights programs
continue to deliver benefits. Moderate levels of regulatory reform
are anticipated.
The Company expects:
- its core Retail business to grow earnings faster than
sales;
- growth in PC Financial profitability;
- EPS growth in the low double digits, excluding the impact of
the 53rd week;
- to invest approximately $1.2
billion in capital expenditures, net of proceeds from
property disposals; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures as it believes
these measures provide useful information to both management and
investors with regard to accurately assessing the Company's
financial performance and financial condition.
Management uses these and other non-GAAP financial measures to
exclude the impact of certain expenses and income that must be
recognized under GAAP when analyzing underlying consolidated and
segment operating performance, as the excluded items are not
necessarily reflective of the Company's underlying operating
performance and make comparisons of underlying financial
performance between periods difficult. The Company excludes
additional items if it believes doing so would result in a more
effective analysis of underlying operating performance. The
exclusion of certain items does not imply that they are
non-recurring.
These measures do not have a standardized meaning prescribed by
GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies and should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
For reconciliation to, and description of, the Company's
non-GAAP financial measures and financial metrics, please refer
to Section 17 "Non-GAAP Financial Measures" of the Company's
2020 Annual Report.
Non-GAAP Financial Measures Policy Change Commencing Fiscal
2021
In 2020, management undertook a review of historical adjusting
items as part of an effort to reduce the number of items it
excludes from its non-GAAP financial measures. Management concluded
that, in order to present adjusting items in a manner more
consistent with that of its Canadian and U.S. peers, the Company
will no longer adjust for fixed asset and other related impairments
(net of recoveries), certain restructuring and other related costs,
pension settlement costs, statutory income tax rate changes or
other items.
Starting in the first quarter of 2021, restructuring and other
related costs will be considered an adjusting item only if
significant and if part of a publicly announced restructuring plan.
Other unusual items will be assessed on a case by case basis based
on their nature, magnitude and propensity to re-occur. This change
will take effect in the first quarter of 2021 with restatement of
comparative periods at that time.
The below summary is presented for informational purposes and
reconciles the non-GAAP financial measures as previously reported
in 2020 to those which will be reported under the new policy
beginning in 2021:
|
|
|
|
|
|
|
12 weeks
ended
March 21,
2020
|
12 weeks
ended
June 13,
2020
|
16 weeks ended
October 3, 2020
|
13 weeks ended
January 2, 2021
|
53 weeks ended
January 2, 2021
|
(millions of Canadian
dollars)
|
Retail
|
Financial
Services
|
Consolidated
|
Retail
|
Financial
Services
|
Consolidated
|
Retail
|
Financial
Services
|
Consolidated
|
Retail
|
Financial
Services
|
Consolidated
|
Retail
|
Financial
Services
|
Consolidated
|
Adjusted
Operating
income - previously
reported
|
$
|
691
|
$
|
3
|
$
|
694
|
$
|
502
|
$
|
34
|
$
|
536
|
$
|
840
|
$
|
44
|
$
|
884
|
$
|
787
|
$
|
53
|
$
|
840
|
$
|
2,820
|
$
|
134
|
$
|
2,954
|
Add (deduct)
impact
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset and
other related
Impairments,
net of
recoveries
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
(17)
|
—
|
(17)
|
$
|
(17)
|
$
|
—
|
$
|
(17)
|
Restructuring and
other
related costs
|
(4)
|
—
|
(4)
|
(8)
|
—
|
(8)
|
(6)
|
—
|
(6)
|
—
|
—
|
—
|
(18)
|
—
|
(18)
|
Adjusting
Items
|
$
|
(4)
|
$
|
—
|
$
|
(4)
|
$
|
(8)
|
$
|
—
|
$
|
(8)
|
$
|
(6)
|
$
|
—
|
$
|
(6)
|
$
|
(17)
|
$
|
—
|
$
|
(17)
|
$
|
(35)
|
$
|
—
|
$
|
(35)
|
Adjusted operating
income -
Restated
|
$
|
687
|
$
|
3
|
$
|
690
|
$
|
494
|
$
|
34
|
$
|
528
|
$
|
834
|
$
|
44
|
$
|
878
|
$
|
770
|
$
|
53
|
$
|
823
|
$
|
2,785
|
$
|
134
|
$
|
2,919
|
Depreciation and
amortization
|
589
|
5
|
594
|
593
|
5
|
598
|
789
|
6
|
795
|
600
|
9
|
609
|
2,571
|
25
|
2,596
|
Less: Amortization
of
intangible assets
acquired with
Shoppers Drug Mart
|
(119)
|
—
|
(119)
|
(118)
|
—
|
(118)
|
(155)
|
—
|
(155)
|
(117)
|
—
|
(117)
|
(509)
|
—
|
(509)
|
Adjusted EBITDA -
Restated
|
$
|
1,157
|
$
|
8
|
$
|
1,165
|
$
|
969
|
$
|
39
|
$
|
1,008
|
$
|
1,468
|
$
|
50
|
$
|
1,518
|
$
|
1,253
|
$
|
62
|
$
|
1,315
|
$
|
4,847
|
$
|
159
|
$
|
5,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Earnings Available to Common Shareholders and
Adjusted Diluted Net earnings per Common Share are presented
below:
|
|
|
|
|
|
|
12 weeks ended
March 21, 2020
|
12 weeks ended
June 13, 2020
|
16 weeks ended
October 3, 2020
|
13 weeks ended
January 2, 2021
|
53 weeks ended
January 2, 2021
|
(millions of Canadian
dollars/
Canadian dollars)
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
Per
Common
Share
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
Per
Common
Share
|
Net Earnings
to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
Per
Common
Share
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
Per
Common
Share
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
Per
Common
Share
|
Adjusted - As
previously
reported
|
$
|
352
|
$
|
0.97
|
$
|
266
|
$
|
0.74
|
$
|
464
|
$
|
1.30
|
$
|
445
|
$
|
1.26
|
$
|
1,527
|
$
|
4.26
|
Add (deduct) impact
of the
following:
|
|
|
|
|
|
|
|
|
|
|
Fixed asset and
other
related impairments, net
of recoveries
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
(13)
|
$
|
(0.04)
|
$
|
(13)
|
$
|
(0.04)
|
Restructuring and
other
related costs
|
(3)
|
(0.01)
|
(6)
|
(0.02)
|
(5)
|
(0.01)
|
—
|
—
|
(14)
|
(0.04)
|
Adjusting
items
|
$
|
(3)
|
$
|
(0.01)
|
$
|
(6)
|
$
|
(0.02)
|
$
|
(5)
|
$
|
(0.01)
|
$
|
(13)
|
$
|
(0.04)
|
$
|
(27)
|
$
|
(0.08)
|
Adjusted -
Restated
|
$
|
349
|
$
|
0.96
|
$
|
260
|
$
|
0.72
|
$
|
459
|
$
|
1.29
|
$
|
432
|
$
|
1.22
|
$
|
1,500
|
$
|
4.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This change would not have impacted previously reported Retail
segment gross profit, Retail segment adjusted gross profit and
Retail segment adjusted gross profit percentage or adjusted net
interest expense and other financing charges, as reported in the
Company's 2020 annual and interim MD&A.
SELECTED FINANCIAL INFORMATION
The following includes selected quarterly and annual financial
information, which is prepared by management in accordance
with International Financial Reporting Standards ("IFRS") and
is based on the Company's audited annual consolidated financial
statements for the year ended January 2,
2021. This financial information does not contain all
disclosures required by IFRS, and accordingly, should be read in
conjunction with the Company's 2020 Annual Report, which is
available in the Investors section of the Company's website at
loblaw.ca and on sedar.com.
Consolidated Statements of Earnings
|
|
|
|
|
|
January 2,
2021
|
December 28,
2019
|
January 2,
2021
|
December 28,
2019
|
|
(13
weeks)
|
(12 weeks)
|
(53
weeks)
|
(52 weeks)
|
(millions of Canadian
dollars except where otherwise indicated)
|
(unaudited)
|
(unaudited)
|
(audited)
|
(audited)
|
Revenue
|
$
|
13,286
|
$
|
11,590
|
$
|
52,714
|
$
|
48,037
|
Cost of
merchandise inventories sold
|
9,278
|
8,008
|
36,725
|
33,281
|
Selling, general
and administrative expenses
|
3,306
|
3,041
|
13,624
|
12,486
|
Operating
income
|
$
|
702
|
$
|
541
|
$
|
2,365
|
$
|
2,270
|
Net interest expense
and other financing charges
|
166
|
176
|
742
|
747
|
Earnings before
income taxes
|
$
|
536
|
$
|
365
|
$
|
1,623
|
$
|
1,523
|
Income
taxes
|
142
|
99
|
431
|
392
|
Net
earnings
|
$
|
394
|
$
|
266
|
$
|
1,192
|
$
|
1,131
|
Attributable
to:
|
|
|
|
|
Shareholders of the
Company
|
$
|
348
|
$
|
257
|
$
|
1,108
|
$
|
1,081
|
Non-controlling
interests
|
46
|
9
|
84
|
50
|
Net
earnings
|
$
|
394
|
$
|
266
|
$
|
1,192
|
$
|
1,131
|
Net earnings per
Common Share ($)
|
|
|
|
|
Basic
|
$
|
0.98
|
$
|
0.70
|
$
|
3.08
|
$
|
2.93
|
Diluted
|
$
|
0.98
|
$
|
0.70
|
$
|
3.06
|
$
|
2.90
|
Weighted average
Common Shares outstanding (millions)
|
|
|
|
|
Basic
|
351.3
|
360.8
|
355.5
|
365.4
|
Diluted
|
353.8
|
363.7
|
358.2
|
368.4
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
As
at
|
As at
|
(millions of Canadian
dollars)
|
January 2,
2021
|
December 28,
2019(1)
|
Assets
|
|
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
1,668
|
$
|
1,133
|
Short term
investments
|
269
|
57
|
Accounts
receivable
|
986
|
1,104
|
Credit card
receivables
|
3,109
|
3,624
|
Inventories
|
5,195
|
5,076
|
Prepaid expenses and
other assets
|
216
|
211
|
Assets held for
sale
|
108
|
105
|
Total current
assets
|
$
|
11,551
|
$
|
11,310
|
Fixed
assets
|
5,540
|
5,490
|
Right-of-use
assets
|
7,207
|
7,362
|
Investment
properties
|
128
|
172
|
Intangible
assets
|
6,870
|
7,322
|
Goodwill
|
3,948
|
3,946
|
Deferred income tax
assets
|
113
|
169
|
Franchise loans
receivable
|
—
|
19
|
Other
assets
|
513
|
519
|
Total
assets
|
$
|
35,870
|
$
|
36,309
|
Liabilities
|
|
|
Current
liabilities
|
|
|
Bank
indebtedness
|
$
|
86
|
$
|
18
|
Trade payables and
other liabilities
|
5,380
|
5,321
|
Loyalty
liability
|
194
|
191
|
Provisions
|
92
|
119
|
Income taxes
payable
|
83
|
27
|
Demand deposits from
customers
|
24
|
—
|
Short term
debt
|
575
|
725
|
Long term debt due
within one year
|
597
|
1,127
|
Lease liabilities due
within one year
|
1,379
|
1,419
|
Associate
interest
|
349
|
280
|
Total current
liabilities
|
$
|
8,759
|
$
|
9,227
|
Provisions
|
133
|
102
|
Long term
debt
|
6,449
|
5,971
|
Lease
liabilities
|
7,522
|
7,691
|
Deferred income tax
liabilities
|
1,380
|
1,539
|
Other
liabilities
|
508
|
458
|
Total
liabilities
|
$
|
24,751
|
$
|
24,988
|
Equity
|
|
|
Share
capital
|
$
|
7,045
|
$
|
7,265
|
Retained
earnings
|
3,813
|
3,822
|
Contributed
surplus
|
109
|
100
|
Accumulated other
comprehensive income
|
21
|
47
|
Total equity
attributable to shareholders of the Company
|
$
|
10,988
|
$
|
11,234
|
Non-controlling
interests
|
131
|
87
|
Total
equity
|
$
|
11,119
|
$
|
11,321
|
Total liabilities
and equity
|
$
|
35,870
|
$
|
36,309
|
|
|
|
|
|
(i)
|
Certain comparative
figures have been restated to conform with current year
presentation.
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
January 2,
2021
|
December 28,
2019(5)
|
January 2,
2021
|
December 28,
2019(5)
|
(millions of Canadian
dollars)
|
(13
weeks)
|
(12 weeks)
|
(53
weeks)
|
(52 weeks)
|
Operating
activities
|
|
|
|
|
Net
earnings
|
$
|
394
|
$
|
266
|
$
|
1,192
|
$
|
1,131
|
Add
(Deduct):
|
|
|
|
|
Income
taxes
|
142
|
99
|
431
|
392
|
Net interest expense
and other financing charges
|
166
|
176
|
742
|
747
|
Adjustment to fair
value of investment properties
|
9
|
(7)
|
9
|
(7)
|
Depreciation and
amortization
|
609
|
589
|
2,596
|
2,524
|
Asset impairments, net
of recoveries
|
19
|
80
|
33
|
84
|
Change in allowance
for credit card receivables
|
(10)
|
8
|
41
|
29
|
Change in
provisions
|
(8)
|
21
|
4
|
(41)
|
|
$
|
1,321
|
$
|
1,232
|
$
|
5,048
|
$
|
4,859
|
Change in non-cash
working capital
|
253
|
195
|
76
|
21
|
Change in gross credit
card receivables
|
(91)
|
(369)
|
474
|
(344)
|
Income taxes
paid
|
(105)
|
(106)
|
(452)
|
(630)
|
Interest
received
|
1
|
5
|
7
|
16
|
Interest received from
finance leases
|
1
|
1
|
4
|
5
|
Other
|
—
|
30
|
34
|
33
|
Cash flows from
operating activities
|
$
|
1,380
|
$
|
988
|
$
|
5,191
|
$
|
3,960
|
Investing
activities
|
|
|
|
|
Fixed asset
purchases
|
$
|
(350)
|
$
|
(317)
|
$
|
(820)
|
$
|
(817)
|
Intangible asset
additions
|
(68)
|
(96)
|
(338)
|
(376)
|
Cash assumed on
initial consolidation of franchises
|
—
|
5
|
14
|
20
|
Change in short term
investments
|
76
|
21
|
(212)
|
37
|
Change in security
deposits
|
—
|
—
|
—
|
800
|
Proceeds from disposal
of assets
|
25
|
22
|
76
|
113
|
Lease payments
received from finance leases
|
2
|
3
|
9
|
9
|
Other
|
40
|
24
|
(105)
|
(75)
|
Cash flows used in
investing activities
|
$
|
(275)
|
$
|
(338)
|
$
|
(1,376)
|
$
|
(289)
|
Financing
activities
|
|
|
|
|
Change in bank
indebtedness
|
$
|
(107)
|
$
|
(134)
|
$
|
68
|
$
|
(38)
|
Change in short term
debt
|
75
|
175
|
(150)
|
(190)
|
Change in demand
deposits from customers
|
24
|
—
|
24
|
—
|
Long term
debt
|
|
|
|
|
Issued
|
84
|
119
|
1,417
|
672
|
Retired
|
(261)
|
(131)
|
(1,486)
|
(1,083)
|
Interest
paid
|
(71)
|
(74)
|
(336)
|
(349)
|
Cash rent paid on
lease liabilities - Interest
|
(84)
|
(88)
|
(369)
|
(387)
|
Cash rent paid on
lease liabilities - Principal
|
(200)
|
(132)
|
(1,024)
|
(822)
|
Dividends paid on
common and preferred shares
|
(120)
|
—
|
(580)
|
(460)
|
Common share
capital
|
|
|
|
|
Issued
|
1
|
2
|
30
|
82
|
Purchased and held in
trust
|
—
|
(42)
|
(10)
|
(62)
|
Purchased and
cancelled
|
(350)
|
(163)
|
(888)
|
(937)
|
Proceeds from other
financing
|
46
|
—
|
46
|
—
|
Other
|
23
|
6
|
(24)
|
(32)
|
Cash flows used in
financing activities
|
$
|
(940)
|
$
|
(462)
|
$
|
(3,282)
|
$
|
(3,606)
|
Effect of foreign
currency exchange rate changes on cash
and cash equivalents
|
$
|
4
|
$
|
1
|
$
|
2
|
$
|
3
|
Change in cash and
cash equivalents
|
$
|
169
|
$
|
189
|
$
|
535
|
$
|
68
|
Cash and cash
equivalents, beginning of period
|
1,499
|
944
|
1,133
|
1,065
|
Cash and cash
equivalents, end of Period
|
$
|
1,668
|
$
|
1,133
|
$
|
1,668
|
$
|
1,133
|
|
|
|
|
|
|
|
|
|
FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the
Company's objectives, plans, goals, aspirations, strategies,
financial condition, results of operations, cash flows,
performance, prospects, opportunities and legal and regulatory
matters. Specific forward-looking statements in this News Release
include, but are not limited to, statements with respect to the
Company's anticipated future results, events and plans, strategic
initiatives and restructuring, regulatory changes including further
healthcare reform, future liquidity, planned capital investments,
and the status and impact of Information Technology systems
implementations. These specific forward-looking statements are
contained throughout this News Release including, without
limitation, in the "Consolidated Results of Operations" Other
Business Matters section and "COVID-19 Update" section of this News
Release. Forward-looking statements are typically identified by
words such as "expect", "anticipate", "believe", "foresee",
"could", "estimate", "goal", "intend", "plan", "seek", "strive",
"will", "may", "should" and similar expressions, as they relate to
the Company and its management.
Forward-looking statements reflect the Company's estimates,
beliefs and assumptions, which are based on management's perception
of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate
in the circumstances. The Company's expectation of operating and
financial performance in 2021 is based on certain assumptions
including assumptions about the COVID-19 pandemic, healthcare
reform impacts, anticipated cost savings and operating efficiencies
and anticipated benefits from strategic initiatives. The Company's
estimates, beliefs and assumptions are inherently subject to
significant business, economic, competitive and other uncertainties
and contingencies regarding future events, including the COVID-19
pandemic and as such, are subject to change. The Company can give
no assurance that such estimates, beliefs and assumptions will
prove to be correct.
Numerous risks and uncertainties could cause the Company's
actual results to differ materially from those expressed, implied
or projected in the forward-looking statements, including those
described in Section 12 "Enterprise Risks and Risk Management" of
the MD&A in the 2020 Annual Report and Section 4 "Risks" of the
Company's 2020 Annual Information Form (for the year ended
January 2, 2021), which include
detailed risks and disclosure regarding COVID-19 and its impact on
the Company.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect the Company's
expectations only as of the date of this News Release. Except as
required by law, the Company does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
CORPORATE PROFILE
2020 Annual Report
The Company's 2020 Annual Report is available in the "Investors"
section of the Company's website at loblaw.ca and on sedar.com.
Additional financial information has been filed electronically
with various securities regulators in Canada through the System for Electronic
Document Analysis and Retrieval (SEDAR) and with the Office of the
Superintendent of Financial Institutions (OSFI) as the primary
regulator for the Company's subsidiary, President's Choice Bank.
The Company holds an analyst call shortly following the release of
its quarterly results. These calls are archived in the "Investors"
section of the Company's website at loblaw.ca.
Conference Call and Webcast
Loblaw Companies Limited will host a conference call as well as
an audio webcast on February 25, 2021
at 10:00 a.m. (ET).
To access via tele-conference, please dial (647) 427-7450 or
(888) 231-8191. The playback will be made available approximately
two hours after the event at (416) 849-0833 or (855) 859-2056,
access code: 8866677. To access via audio webcast, please go to the
"Investors" section of loblaw.ca. Pre-registration will be
available.
Full details about the conference call and webcast are available
on the Loblaw Companies Limited website at loblaw.ca.
|
News Release
Endnotes
|
(1)
|
This News Release
contains forward-looking information. See "Forward-Looking
Statements" section of this News Release and the Company's 2020
Annual Report for a discussion of material factors that could cause
actual results to differ materially from the forecasts and
projections herein and of the material factors and assumptions that
were used when making these statements. This News Release should be
read in conjunction with Loblaw Companies Limited's filings with
securities regulators made from time to time, all of which can be
found at sedar.com and at loblaw.ca.
|
(2)
|
See Section 17
"Non-GAAP Financial Measures" of the Company's 2020 Annual Report,
which includes the reconciliation of such non-GAAP measures to the
most directly comparable GAAP measures.
|
(3)
|
To be read in
conjunction with the "Forward-Looking Statements" section of this
News Release and the Company's 2020 Annual Report to
Shareholders.
|
(4)
|
Results are presented
on a comparable number of week basis. Comparable number of weeks
would be 12 weeks versus 12 weeks or 52 weeks versus 52
weeks.
|
(5)
|
Certain figures have
been restated to conform with current year presentation.
|
|
|
SOURCE Loblaw Companies Limited