BRAMPTON, ON, May 2, 2012 /CNW/ - Loblaw Companies Limited
("Loblaw" or the "Company") today announced its unaudited financial
results for the first quarter ended March 24, 2012. The Company's
first quarter report will be available in the Investor Centre
section of the Company's website at loblaw.ca and will be filed
with SEDAR and available at sedar.com. 2012 First Quarter
Summary((1)) -- Basic net earnings per common share of $0.45, down
22.4% compared to the first quarter of 2011. -- EBITDA margin(2) of
5.9% compared to 6.6% in the first quarter of 2011. -- Revenue of
$6,937 million, an increase of 0.9% over the first quarter of 2011.
-- Retail sales growth of 0.8% and a same-store sales decline of
0.7%, negatively impacted by one less day of store operations
compared to the first quarter of 2011. "In the first quarter, we
executed on our plan," said Galen G. Weston, Executive Chairman,
Loblaw Companies Limited. "Despite a decline in year-over-year
earnings, store conditions are improved, we made steady progress on
our IT implementation and we took a disciplined approach to
improving our customer proposition. Our outlook for 2012 remains
unchanged - we expect full-year net earnings to be down, with more
pressure in the first half. We are confident that our ongoing
investments in infrastructure will enable efficiencies and expense
leverage, setting the stage for future earnings growth."
Consolidated Quarterly Results of Operations For the periods ended
March 24, 2012 and March 26, 2011 (unaudited) (millions of Canadian
dollars except where otherwise 2012 2011 $ % indicated) (12 weeks)
(12 weeks) Change Change Revenue $ 6,937 $ 6,872 $ 0.9% 65
Operating 239 303 (64) (21.1%) income Net 126 162 (36) (22.2%)
earnings Basic net 0.45 0.58 (0.13) (22.4%) earnings per common
share ($) Operating 3.4% 4.4% margin EBITDA(2) $ 409 $ 455 $
(10.1%) (46) EBITDA 5.9% 6.6% margin(2) (1) This News Release
contains forward-looking information. See Forward-Looking
Statements in this News Release for a discussion of material
factors that could cause actual results to differ materially from
the conclusions, 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 Non-GAAP Financial Measures in this News
Release. -- The $65 million increase in revenue compared to the
first quarter of 2011 was driven by increases in the Company's
Retail and Financial Services operating segments, as described
below. -- As previously disclosed, for full-year 2012, the Company
expects an incremental investment of $40 million in its customer
proposition that is not expected to be covered by operations. In
the first quarter of 2012, the Company invested an estimated $10
million entirely in gross profit related to its customer
proposition. -- Operating income decreased by $64 million compared
to the first quarter of 2011 as a result of a decrease in Retail
operating income of $60 million and a decrease in Financial
Services operating income of $4 million. Operating margin was 3.4%
for the first quarter of 2012 compared to 4.4% in the same quarter
in 2011. The $60 million decrease in Retail operating income was
mainly driven by a decline in gross profit, the notable items as
described below and changes in the value of the Company's
investments in its franchise business. -- Consolidated operating
income included the following notable items: o A $12 million charge
(2011 - income of $7 million) related to the effect of share-based
compensation net of equity forwards; o A $15 million charge (2011 -
nil) related to the transition of certain Ontario conventional
stores to the more cost effective and efficient operating terms
under collective agreements ratified in the third quarter of 2010;
o Reduction in costs of $5 million related to investments in
information technology ("IT") and supply chain, including the
following charges: # $71 million (2011 - $61 million) related to IT
costs; # $46 million (2011 - $36 million) related to depreciation
and amortization; # $3 million (2011 - $21 million) related to
changes in the distribution network; # $3 million (2011 - $10
million) related to other supply chain projects costs; and o A nil
charge (2011 - $8 million) related to an internal re-alignment of
the Retail segment into a two division structure: conventional and
discount. -- The decrease in net earnings of $36 million compared
to the first quarter of 2011 was primarily due to the decrease in
operating income partially offset by a decline in the Company's
effective income tax rate. -- Basic net earnings per common share
were impacted by the following notable items: o A $0.04 charge
(2011 - income of $0.01) related to the effect of share-based
compensation net of equity forwards; o A $0.04 charge (2011 - nil)
related to the transition of certain Ontario conventional stores to
the operating terms under collective agreements ratified in 2010; o
$0.01 reduction in costs related to incremental investments in IT
and supply chain; and o A nil charge (2011 - $0.02) related to the
re-alignment of the Retail segment. -- In the first quarter of
2012, the Company invested $134 million in capital expenditures.
The consolidated quarterly results by reportable operating segments
were as follows: Retail Results of Operations For the 2012 2011
periods ended March 24, 2012 and March 26, 2011 (unaudited)
(millions of (12 weeks) (12 weeks) $ Change % Change Canadian
dollars except where otherwise indicated) Sales $ 6,808 $ 6,757 $
51 0.8% Gross profit 1,529 1,554 (25) (1.6%) Operating 225 285 (60)
(21.1%) income Same-store (0.7%) (0.1%) sales decline Gross profit
22.5% 23.0% percentage Operating 3.3% 4.2% margin -- In the first
quarter of 2012, the increase of $51 million, or 0.8%, in Retail
sales over the same period in the prior year was impacted by the
following factors: o One less day of store operations estimated to
have a negative effect of 0.8% to 1.0% on sales and same-store
sales; o Same-store sales declined by 0.7% (2011 - 0.1%); o Sales
in food were flat; o Sales in drugstore were flat; o Gas bar sales
growth was strong as a result of higher retail gas prices,
partially offset by a marginal volume decline; o Sales in general
merchandise, excluding apparel, were flat; o Sales growth in
apparel was strong, partially driven by increased apparel square
footage; o The Company experienced modest average quarterly
internal food price inflation during the first quarters of 2012 and
2011, which was lower than the average quarterly national food
price inflation of 3.7% (2011 - 2.5%) as measured by "The Consumer
Price Index for Food Purchased from Stores" ("CPI"). CPI does not
necessarily reflect the effect of inflation on the specific mix of
goods sold in Loblaw stores; and o 25 corporate and franchise
stores were opened and five corporate and franchise stores were
closed since the first quarter of 2011, resulting in a net increase
of 0.6 million square feet, or 1.2%. -- In the first quarter of
2012, gross profit decreased by $25 million compared to the first
quarter of 2011 and gross profit percentage was 22.5%, a decline
from 23.0% in the first quarter of 2011. These declines were
primarily driven by increased transportation costs and higher input
costs outpacing internal food price inflation, partially offset by
improved shrink. Higher input costs that were not entirely passed
on to the consumer included an estimated $10 million incremental
investment in the Company's customer proposition. The decline in
gross profit percentage was also attributable to a higher
proportion of lower margin gas bar sales. -- Operating income
decreased by $60 million compared to the first quarter of 2011 and
operating margin was 3.3% for the first quarter of 2012 compared to
4.2% in the same period in 2011. In addition to the notable items
described in the Consolidated Quarterly Results of Operations
above, operating income and operating margin were negatively
impacted by the decrease in gross profit and changes in the value
of the Company's investments in its franchise business, partially
offset by other operating cost efficiencies. Financial Services
Results of Operations For the 2012 2011 $ % periods ended (12
weeks) (12 weeks) Change Change March 24, 2012 and March 26, 2011
(unaudited) (millions of Canadian dollars except where otherwise
indicated) Revenue $ 129 $ 115 $ 14 12.2% Operating 14 18 (4)
(22.2%) income Earnings 4 5 (1) (20.0%) before income taxes As at
At as (millions of March 24, March 26, $ % Canadian 2012 2011
Change Change dollars except where otherwise indicated) (unaudited)
Average $ 2,004 $ 1,942 $ 62 3.2% quarterly net credit card
receivables Credit card 1,987 1,887 100 5.3% receivables Allowance
for 37 33 4 12.1% credit card receivables Annualized 13.1% 12.6%
yield on average quarterly gross credit card receivables Annualized
4.5% 4.6% credit loss rate on average quarterly gross credit card
receivables -- The 12.2% increase in Financial Services revenue
compared to the first quarter of 2011 was primarily driven by
increased credit card transaction values and receivable balances,
resulting in higher interchange fee and interest income. Higher PC
Telecom revenues resulting from the 2011 launch of the new Mobile
Shop kiosks also contributed to the increase. -- Operating income
decreased by $4 million in the first quarter of 2012 compared to
the first quarter of 2011. Increases in revenue were offset by
higher customer acquisition costs and operational costs, which
ramped up in the latter half of 2011, consistent with the Company's
continued investment in the growth of its Financial Services
segment. Increased PC Points loyalty costs and investments in the
launch of the Mobile Shop kiosks also contributed to the decrease
in operating income. -- Earnings before income taxes decreased by
$1 million in the first quarter of 2012 compared to the first
quarter of 2011, primarily driven by the decline in operating
income, partially offset by lower net interest expense.
Outlook((1)) For fiscal 2012, the
Company continues to expect: -- Capital expenditures to be
approximately $1.1 billion, with approximately 40% to be dedicated
to investing in the IT infrastructure and supply chain projects and
the remaining 60% to be spent on retail operations; -- Costs
associated with the transition of certain Ontario conventional
stores under collective agreements ratified in 2010 to range from
$30 million to $40 million; -- Incremental costs related to
investments in IT and supply chain to be approximately $70 million;
-- Incremental investments in its customer proposition to be
approximately $40 million; and -- Net earnings per share to be down
year-over-year, with more pressure in the first half of the year,
as a result of the Company's expectation that operations will not
cover the incremental costs related to the investments in IT and
supply chain and its customer proposition. (1) See Forward-Looking
Statements in this News Release. Forward-Looking Statements This
News Release for Loblaw Companies Limited contains forward-looking
statements about the Company's objectives, plans, goals,
aspirations, strategies, financial condition, results of
operations, cash flows, performance, prospects and opportunities.
These forward-looking statements are typically identified by words
such as "anticipate", "expect", "believe", "foresee", "could",
"estimate", "goal", "intend", "plan", "seek", "strive", "will",
"may" and "should" and similar expressions, as they relate to the
Company and its management. In this News Release, forward looking
statements include the Company's continued expectation that for
fiscal 2012: -- its capital expenditures will be approximately $1.1
billion; -- costs associated with the transition of certain Ontario
conventional stores under collective agreements ratified in 2010
will range from $30 million to $40 million; -- incremental costs
related to investments in information technology ("IT") and supply
chain will be approximately $70 million; -- incremental costs
associated with strengthening its customer proposition will be
approximately $40 million; and -- net earnings per share to be down
year-over-year, with more pressure in the first half of the year,
as a result of the Company's expectation that operations will not
cover the incremental costs related to the investments in IT and
supply chain and its customer proposition. These forward-looking
statements are not historical facts but reflect the Company's
current expectations concerning future results and events. They
also reflect management's current assumptions regarding the risks
and uncertainties referred to below and their respective impact on
the Company. In addition, the Company's expectation with regard to
its net earnings in 2012 is based in part on the assumptions that
tax rates will be similar to those in 2011, the Company achieves
its plan to increase net retail square footage by 1% and there are
no unexpected adverse events or costs related to the Company's
investments in IT and supply chain. These forward-looking
statements are subject to a number of risks and uncertainties that
could cause actual results or events to differ materially from
current expectations, including, but not limited to: -- failure to
realize revenue growth, anticipated cost savings or operating
efficiencies from the Company's major initiatives, including
investments in the Company's IT systems, including the Company's IT
systems implementation, or unanticipated results from these
initiatives; -- the inability of the Company's IT infrastructure to
support the requirements of the Company's business; -- heightened
competition, whether from current competitors or new entrants to
the marketplace; -- changes in economic conditions including the
rate of inflation or deflation, changes in interest and currency
exchange rates and derivative and commodity prices; -- public
health events including those related to food safety; -- failure to
achieve desired results in labour negotiations, including the terms
of future collective bargaining agreements, which could lead to
work stoppages; -- the inability of the Company to manage inventory
to minimize the impact of obsolete or excess inventory and to
control shrink; -- failure by the Company to maintain appropriate
records to support its compliance with accounting, tax or legal
rules, regulations and policies; -- failure of the Company's
franchise stores to perform as expected; -- reliance on the
performance and retention of third-party service providers
including those associated with the Company's supply chain and
apparel business; -- supply and quality control issues with
vendors; -- changes to or failure to comply with laws and
regulations affecting the Company and its business, including
changes to the regulation of generic prescription drug prices and
the reduction of reimbursement under public drug benefit plans and
the elimination or reduction of professional allowances paid by
drug manufacturers; -- changes in the Company's income, commodity,
other tax and regulatory liabilities including changes in tax laws,
regulations or future assessments; -- any requirement of the
Company to make contributions to its registered funded defined
benefit pension plans or the multi-employer pension plans in which
it participates in excess of those currently contemplated; -- the
risk that the Company would experience a financial loss if its
counterparties fail to meet their obligations in accordance with
the terms and conditions of their contracts with the Company; and
-- the inability of the Company to collect on its credit card
receivables. This is not an exhaustive list of the factors that may
affect the Company's forward-looking statements. Other risks and
uncertainties not presently known to the Company or that the
Company presently believes are not material could also cause actual
results or events to differ materially from those expressed in its
forward-looking statements. Additional risks and uncertainties are
discussed in the Company's materials filed with the Canadian
securities regulatory authorities from time to time, including the
Enterprise Risks and Risk Management section of the Management's
Discussion and Analysis ("MD&A") and the MD&A included in
the Company's 2011 Annual Report - Financial Review. 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. The Company disclaims any intention or
obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. Non-GAAP Financial Measures The Company
uses the following non-GAAP financial measures: EBITDA and EBITDA
margin. The Company believes these non-GAAP financial measures
provide useful information to both management and investors in
measuring the financial performance of the Company for the reasons
outlined below. 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. EBITDA and
EBITDA Margin The following table reconciles earnings before income
taxes, net interest expense and other financing charges and
depreciation and amortization ("EBITDA") to operating income which
is reconciled to GAAP net earnings measures reported in the
consolidated statements of earnings for the 12 week periods ended
March 24, 2012 and March 26, 2011. EBITDA is useful to management
in assessing performance of its ongoing operations and its ability
to generate cash flows to fund its cash requirements, including the
Company's capital investment program. EBITDA margin is calculated
as EBITDA divided by revenue. 2012 2011 (millions of Canadian
dollars) (12 weeks) (12 weeks) (unaudited) Net earnings $ 126 $ 162
Add impact of the following: Income taxes 39 68 Net interest
expense and other 74 73 financing charges Operating income 239 303
Add impact of the following: Depreciation and amortization 170 152
EBITDA $ 409 $ 455 Selected Financial Information The following
includes selected quarterly financial information, which is
prepared by management in accordance with International Financial
Reporting Standards ("IFRS") and is based on the Company's 2012
First Quarter Report to Shareholders. This financial information
does not contain all interim period disclosures required by IFRS,
and accordingly, should be read in conjunction with the Company's
2011 Annual Report - Financial Review and 2012 First Quarter Report
to Shareholders which are available in the Investor Centre section
of the Company's website at www.loblaw.ca. Condensed Consolidated
Statements of Earnings March24, 2012 March 26, 2011 (millions of
Canadian dollars (12 Weeks) (12 Weeks) except where otherwise
indicated) (unaudited) Revenue $ 6,937 $ 6,872 Cost of Merchandise
Inventories 5,284 5,203 Sold Selling, General and 1,414 1,366
Administrative Expenses Operating Income 239 303 Net interest
expense and other 74 73 financing charges Earnings Before Income
Taxes 165 230 Income taxes 39 68 Net Earnings $ 126 $ 162 Net
Earnings perCommon Share ($) Basic $ 0.45 $ 0.58 Diluted $ 0.45 $
0.56 Condensed Consolidated Balance Sheets As at As at As at
(millions of Canadian March 24, 2012 March 26, 2011 December 31,
2011 dollars) (unaudited) Assets Current Assets Cash and cash $ 657
$ 427 $ 966 equivalents Short term 780 678 754 investments Accounts
receivable 432 367 467 Credit card 1,987 1,887 2,101 receivables
Inventories 1,926 1,928 2,025 Income taxes 5 - - recoverable
Prepaid expenses and 123 90 117 other assets Assets held for sale
18 68 32 Total Current Assets 5,928 5,445 6,462 Fixed Assets 8,694
8,384 8,725 Investment Properties 95 74 82 Goodwill &
Intangible 1,026 1,026 1,029 Assets Deferred Income Taxes 241 207
232 Security Deposits 249 184 266 Franchise Loans 352 315 331
Receivable Other Assets 293 400 301 Total Assets $ 16,878 $ 16,035
$ 17,428 Liabilities Current Liabilities Trade payables and 3,079
3,048 3,677 other liabilities Provisions 37 63 35 Income taxes
payable - 2 14 Short term debt 905 905 905 Long term debt due 82 52
87 within one year Total Current 4,103 4,070 4,718 Liabilities
Provisions 50 43 50 Long Term Debt 5,489 5,249 5,493 Deferred
Income Taxes 27 36 21 Capital Securities 222 221 222 Other
Liabilities 885 660 917 Total Liabilities 10,776 10,279 11,421
Shareholders' Equity Common Share Capital 1,542 1,478 1,540
Retained Earnings 4,504 4,229 4,414 Contributed Surplus 51 44 48
Accumulated Other 5 5 5 Comprehensive Income Total Shareholders'
6,102 5,756 6,007 Equity Total Liabilities and $ 16,878 $ 16,035 $
17,428 Shareholders' Equity Condensed Consolidated Statements of
Cash Flow March 24, 2012 March 26, (millions of Canadian (12 weeks)
2011 dollars) (unaudited) (12 weeks) Operating Activities Net
earnings $ 126 $ 162 Income taxes 39 68 Net interest expense 74 73
and other financing charges Depreciation and 170 152 amortization
Income taxes paid (69) (41) Interest received 7 10 Net decrease in
credit 114 110 card receivables Change in non-cash (533) (502)
working capital Fixed assets and other 3 4 related impairments
Other 12 (17) Cash Flows (used in) (57) 19 from Operating
Activities Investing Activities Fixed asset purchases (134) (155)
Change in short term (43) 64 investments Proceeds from fixed 1 5
asset sales Change in franchise (17) (1) investments and other
receivables Change in security 14 167 deposits Other - (7) Cash
Flows (used in) (179) 73 from Investing Activities Financing
Activities Change in bank - (10) indebtedness Change in short term
- 370 debt Long term debt: Issued 23 57 Retired (29) (858) Interest
paid (63) (82) Common shares: Issued 2 3 Purchased for (2) -
cancellation Cash Flows used (69) (520) inFinancing Activities
Effect of foreign (4) (2) currency exchange rate changes on cash
and cash equivalents Change in Cash and Cash (309) (430)
Equivalents Cash and Cash 966 857 Equivalents, Beginning of Period
Cash and Cash $ 657 $ 427 Equivalents, Endof Period 2011 Annual
Report and 2012 First Quarter Report to Shareholders The Company's
2011 Annual Report and 2012 First Quarter Report to Shareholders
are available in the Investor Centre section of the Company's
website at www.loblaw.ca or at www.sedar.com. Investor Relations
Shareholders, security analysts and investment professionals should
direct their requests to Kim Lee, Vice President, Investor
Relations at the Company's National Head Office or by e-mail at
investor@loblaw.ca. Additional 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. Conference Call and Webcast Loblaw
Companies Limited will host a conference call as well as an audio
webcast on May 2, 2012 at 11:00 a.m. (EST). To access via
tele-conference please dial (647) 427-7450. The playback will be
made available two hours after the event at (416) 849-0833, access
code: 65409659. To access via audio webcast please visit
www.loblaw.ca, go to Investor Centre and click on webcast.
Pre-registration will be available. Full details are available on
the Loblaw Companies Limited website at www.loblaw.ca. Annual and
Special Meeting of Shareholders The 2012 Annual and Special Meeting
of Shareholders of Loblaw Companies Limited will be held on
Thursday, May 3, 2012 at 11:00 a.m. (EST) at the Metro Toronto
Convention Centre, South Building, Meeting Room 701, 222 Bremner
Boulevard, Toronto, Ontario, Canada. To access via tele-conference,
please dial (647) 427-7450. The playback will be available two
hours after the event at (416) 849-0833, access code: 65429438. To
access via audio webcast please visit the Investor Centre section
of www.loblaw.ca. Pre-registration will be available.
Loblaw Companies Limited
CONTACT: Kim Lee, Vice President, Investor Relations at the
Company'sNationalHead Office or by e-mail at investor@loblaw.ca
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