BRAMPTON, ON, Nov. 15,
2023 /CNW/ - Loblaw Companies Limited (TSX: L)
("Loblaw" or the "Company") announced today its unaudited financial
results for the third quarter ended October
7, 2023(1).
Loblaw delivered another quarter of strong operational and
financial results as it continued to execute on retail excellence.
The Company's focus on providing value across its Food and Drug
Retail businesses led to sales growth, increased market share, and
higher unit sales. Drug Retail sales reflected ongoing strength in
front store beauty products and increased prescription sales. In
Food Retail, the Company's discount stores benefited from increased
traffic from customers seeking quality and value from its private
label brands and personalized PC Optimum™ offers. The Company
continued to invest in opening new discount stores, including its
150th discount Maxi location in the community of
Ville-des-Laurentides, which celebrated its first full-shop
discount grocery store. Retail gross margin declined in both Food
and Drug as a result of targeted promotional investments and
increased shrink. Increased investments to lower food prices were
reflected in the Company's internal food inflation, which was lower
than Canada's food CPI. Higher
sales and ongoing cost control initiatives drove adjusted net
earnings growth in the quarter.
"Our stores are delivering more value, including deeper
discounts on essentials, and customers are responding positively,"
said Galen G. Weston, Chairman,
Loblaw Companies Limited. "We remain focused on doing what we can
to fight inflation and deliver lower prices for Canadians, while
continuing to invest for the future."
2023 THIRD QUARTER HIGHLIGHTS
- Revenue was $18,265 million, an
increase of $877 million, or
5.0%.
- Retail segment sales were $17,982
million, an increase of $852
million, or 5.0%.
- Food Retail (Loblaw) same-stores sales increased by 4.5%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
4.6%, with front store same-store sales growth of 1.8% and pharmacy
same-store sales growth of 7.4%.
- E-commerce sales increased by 13.6%.
- Operating income was $1,065
million, an increase of $74
million, or 7.5%.
- Adjusted EBITDA(2) was $1,926
million, an increase of $80
million, or 4.3%.
- Retail segment adjusted gross profit percentage(2)
was 30.6%, a decrease of 20 basis points.
- Net earnings available to common shareholders of the Company
were $621 million, an increase of
$65 million or 11.7%. Diluted net
earnings per common share were $1.95,
an increase of $0.26, or 15.4%.
- Adjusted net earnings available to common shareholders of the
Company(2) were $719
million, an increase of $56
million, or 8.4%.
- Adjusted diluted net earnings per common share(2)
were $2.26, an increase of
$0.25 or 12.4%.
- Repurchased for cancellation 2.9 million common shares at a
cost of $341 million and invested
$676 million in capital expenditures,
net of proceeds from property disposals. Free cash
flow(2) used in the Retail segment was $663 million.
See "News Release
Endnotes" at the end of this News Release.
|
CONSOLIDATED AND SEGMENT RESULTS OF OPERATIONS
The following table provides key performance metrics for the
Company by segment.
|
|
|
2023
|
|
|
2022
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
Revenue
|
|
|
$
17,982
|
$
379
|
$
(96)
|
$
18,265
|
|
|
$ 17,130
|
$ 350
|
$ (92)
|
$ 17,388
|
Adjusted gross
profit(2)
|
|
|
$
5,502
|
$
325
|
$ (96)
|
$
5,731
|
|
|
$
5,272
|
$
294
|
$ (92)
|
$
5,474
|
Adjusted gross profit
%(2)
|
|
|
30.6 %
|
N/A
|
— %
|
31.4 %
|
|
|
30.8 %
|
N/A
|
— %
|
31.5 %
|
Operating
income
|
|
|
$
1,006
|
$ 59
|
$
—
|
$
1,065
|
|
|
$
949
|
$ 42
|
$
—
|
$
991
|
Adjusted operating
income(2)
|
|
|
1,141
|
59
|
—
|
1,200
|
|
|
1,091
|
42
|
—
|
1,133
|
Adjusted
EBITDA(2)
|
|
|
$
1,852
|
$
74
|
$ —
|
$
1,926
|
|
|
$
1,791
|
$ 55
|
$
—
|
$
1,846
|
Adjusted EBITDA
margin(2)
|
|
|
10.3 %
|
N/A
|
— %
|
10.5 %
|
|
|
10.5 %
|
N/A
|
— %
|
10.6 %
|
Net interest expense
and other financing charges
|
|
|
$
197
|
$
37
|
$
—
|
$
234
|
|
|
$
194
|
$ 23
|
$
—
|
$
217
|
Adjusted net interest
expense and other financing charges(2)
|
|
|
197
|
37
|
—
|
234
|
|
|
194
|
23
|
—
|
217
|
Earnings before
income taxes
|
|
|
$
809
|
$ 22
|
$
—
|
$
831
|
|
|
$
755
|
$
19
|
$
—
|
$
774
|
Income taxes
|
|
|
|
|
|
$
182
|
|
|
|
|
|
$
199
|
Adjusted income
taxes(2)
|
|
|
|
|
|
219
|
|
|
|
|
|
234
|
Net earnings
attributable to non-controlling interests
|
|
|
|
|
|
$
25
|
|
|
|
|
|
$
16
|
Prescribed dividends on
preferred shares in share capital
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
Net earnings
available to common shareholders of the Company
|
|
|
|
|
|
$
621
|
|
|
|
|
|
$
556
|
Adjusted net earnings
available to common shareholders of the
Company(2)
|
|
|
|
|
|
719
|
|
|
|
|
|
663
|
Diluted net earnings
per common share ($)
|
|
|
|
|
|
$
1.95
|
|
|
|
|
|
$
1.69
|
Adjusted diluted net
earnings per common share(2) ($)
|
|
|
|
|
|
$
2.26
|
|
|
|
|
|
$
2.01
|
Diluted weighted
average common shares outstanding (in millions)
|
|
|
|
|
|
318.4
|
|
|
|
|
|
329.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a breakdown of the Company's total
and same-store sales for the Retail segment.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
|
Sales
|
Same-store
sales
|
|
|
Sales
|
Same-store
sales
|
Food retail
|
|
|
$
12,843
|
4.5 %
|
|
|
$
12,221
|
6.9 %
|
Drug retail
|
|
|
5,139
|
4.6 %
|
|
|
4,909
|
7.7 %
|
Pharmacy and
healthcare services
|
|
|
2,635
|
7.4 %
|
|
|
2,466
|
4.7 %
|
Front store
|
|
|
2,504
|
1.8 %
|
|
|
2,443
|
10.7 %
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $17,982
million, an increase of $852
million, or 5.0%.
- Food Retail (Loblaw) sales were $12,843
million and Food Retail same-store sales grew by 4.5% (2022
– 6.9%).
- The Consumer Price Index ("CPI") as measured by The Consumer
Price Index for Food Purchased From Stores was 7.1% (2022 – 10.7%)
which was higher than the Company's internal food inflation;
and
- Food Retail traffic increased and basket size decreased.
- Drug Retail (Shoppers Drug Mart) sales were $5,139 million, and Drug Retail same-store sales
grew by 4.6% (2022 – 7.7%), with pharmacy and healthcare services
same-store sales growth of 7.4% (2022 – 4.7%) and front store
same-store sales growth of 1.8% (2022 – 10.7%).
- On a same-store basis, the number of prescriptions dispensed
increased by 0.9% (2022 – 0.9%) and the average prescription value
increased by 5.1% (2022 – 3.3%).
- Operating income was $1,006
million, an increase of $57
million, or 6.0%.
- Adjusted gross profit(2) was $5,502 million, an increase of $230 million, or 4.4%. The adjusted gross profit
percentage(2) of 30.6% decreased by 20 basis points
(2022 – 10 basis points). Retail margins declined slightly,
primarily driven by higher shrink.
- Adjusted EBITDA(2) was $1,852
million, an increase of $61
million, or 3.4%. The increase was driven by an increase in
adjusted gross profit(2), partially offset by an
increase in selling, general and administrative expenses
("SG&A"). SG&A as a percentage of sales was 20.3%, which
remained constant when compared to 2022 as operating leverage from
higher sales was partially offset by higher in-quarter investments
in network optimization and process and efficiency initiatives
totaling approximately $50
million.
- Depreciation and amortization was $865
million, an increase of $14
million or 1.6%, primarily driven by an increase in
depreciation of fixed assets related to conversions of retail
locations, information technology ("IT") assets and leased assets,
and accelerated depreciation of $2
million as a result of network optimization, partially
offset by the impact of prior year accelerated depreciation due to
the reassessment of the estimated useful life of certain IT assets.
Included in depreciation and amortization was the amortization of
intangible assets related to the acquisitions of Shoppers Drug Mart
Corporation ("Shoppers Drug Mart") and Lifemark Health Group
("Lifemark") of $154 million (2022 –
$151 million).
- The Company recorded charges of $13
million associated with network optimization, which include
accelerated depreciation of $2
million as described above, and other charges. The Company
now expects to record total charges related to network optimization
of approximately $60 million to
$70 million during 2023, an increase
from $50 million to $60 million, as a result of incremental network
optimization activity.
- Seven food and drug stores were opened, and one store was
closed, resulting in a net increase in Retail square footage of 0.3
million square feet, or 0.4%.
FINANCIAL SERVICES SEGMENT
- Revenue was $379 million, an
increase of $29 million or 8.3%. The
increase was primarily driven by higher interest income from growth
in credit card receivables, higher interchange income and other
credit card related revenue from an increase in customer spending,
partially offset by lower sales attributable to The Mobile
Shop™.
- Earnings before income taxes were $22
million, an increase of $3
million or 15.8%. The improvement was mainly driven by
higher revenue as described above, partially offset by higher
funding costs from an increase in interest rates and growth in the
credit card portfolio, higher contractual charge-offs, and the
year-over-year impact of the expected credit loss provision.
OUTLOOK(3)
Loblaw will continue to execute on retail excellence while
advancing its growth initiatives in 2023. The Company's businesses
remain well placed to service the everyday needs of Canadians.
However, the Company cannot predict the precise impacts of global
economic uncertainties, including the inflationary environment, on
its 2023 financial results.
For the full-year 2023, the Company continues to
expect:
- its Retail business to grow earnings faster than sales;
- adjusted net earnings per common share(2) growth in
the low double digits;
- to increase investments in our store network and distribution
centres by investing a net amount of $1.6
billion in capital expenditures, which reflects gross
capital investments of approximately $2.1
billion offset by approximately $500
million of proceeds from real estate dispositions; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
In the third quarter, the Company made meaningful progress
relative to its two ESG pillars:
- Fighting Climate Change: The Company has a goal to
convert all control brand and in-store plastic packaging to
recyclable or reusable materials by 2025. In the quarter, the
business passed a milestone of 50% of this sustainability goal,
with a plan to reach full compliance by the 2025 stated deadline.
The Company also made meaningful progress in reducing its scope 1
and 2 emissions in the quarter, through the successful
implementation of LED lighting and refrigerant conversions in over
120 stores. Collectively, these initiatives contributed to an
estimated annual reduction in carbon emissions equivalent to taking
4,200 cars off the road; and
- Advancing Social Equity: The Company demonstrated its
support for President's Choice Children's Charity, and their
mission to feed one million kids annually by 2025, with the launch
of the inaugural Get to Give Day. On September 7, 2023, Loblaw pledged to donate
$1 for each purchase made in store
and online, up to $2 million,
bringing the Company's total donation for 2023 to $4 million. Joe
Fresh, Loblaw's fashion brand, showcased diversity and
inclusion in its spring activewear campaign, earning the 2023
Canadian Grocer Impact Award for DEI. Finally, the Shoppers
Foundation for Women's Health™ launched its Giving Shelter campaign
with a $1 million donation,
allocating $500,000 to both Women's
Shelters Canada and the Canadian Women's Foundation for
gender-based violence initiatives.
NORMAL COURSE ISSUER BID PROGRAM ("NCIB")
On a year-to-date basis, the Company repurchased
10.4 million common shares for cancellation at a cost of
$1,235 million.
From time to time, the Company participates in an automatic
share purchase plan ("ASPP") with a broker in order to facilitate
the repurchase of the Company's common shares under its NCIB.
During the effective period of the ASPP, the Company's broker may
purchase common shares at times when the Company would not be
active in the market.
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 ("IT") systems
implementations. These specific forward-looking statements are
contained throughout this News Release including, without
limitation, in the "Consolidated and Segment Results of Operations"
and "Outlook" 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 estimates, beliefs and
assumptions are inherently subject to significant business,
economic, competitive and other uncertainties and contingencies
regarding future events 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 the Company's MD&A in the Company's 2022 Annual
Report - Financial Review and Section 4 "Risks" of the Company's
2022 Annual Information Form for the year ended December 31, 2022.
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.
DECLARATION OF DIVIDENDS
Subsequent to the end of the third quarter of 2023, the Board of
Directors declared a quarterly dividend on Common Shares and
Second Preferred Shares, Series B.
Common
Shares
|
$0.446 per common
share, payable on December 30, 2023 to shareholders of record on
December 15, 2023.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125 per share,
payable on December 31, 2023 to shareholders of record on
December 15, 2023.
|
EXCERPT OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures, as
reconciled and fully described in Appendix 1 "Non-GAAP and Other
Financial Measures" of this News Release.
These measures do not have a standardized meaning prescribed by
International Financial Reporting Standards ("IFRS" or "GAAP") as
issued by the International Accounting Standards Board ("IASB"),
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.
The following table provides a summary of the differences
between the Company's consolidated GAAP and Non-GAAP and other
financial measures, which are reconciled and fully described in
Appendix 1.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
EBITDA
|
|
|
$
1,945
|
$
(19)
|
$
1,926
|
|
|
$
1,855
|
$
(9)
|
$
1,846
|
Operating
income
|
|
|
$
1,065
|
$
135
|
$
1,200
|
|
|
$
991
|
$
142
|
$
1,133
|
Net interest expense
and other financing charges
|
|
|
234
|
—
|
234
|
|
|
217
|
—
|
217
|
Earnings before
income taxes
|
|
|
$ 831
|
$
135
|
$
966
|
|
|
$
774
|
$ 142
|
$
916
|
Deduct the
following:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
182
|
37
|
219
|
|
|
199
|
35
|
234
|
Non-controlling
interests
|
|
|
25
|
—
|
25
|
|
|
16
|
—
|
16
|
Prescribed dividends
on preferred shares
|
|
|
3
|
—
|
3
|
|
|
3
|
—
|
3
|
Net earnings
available to common shareholders of the
Company(i)
|
|
|
$ 621
|
$
98
|
$ 719
|
|
|
$ 556
|
$ 107
|
$
663
|
Diluted net earnings
per common share ($)
|
|
|
$ 1.95
|
$ 0.31
|
$
2.26
|
|
|
$
1.69
|
$ 0.32
|
$
2.01
|
Diluted weighted
average common shares (millions)
|
|
|
318.4
|
—
|
318.4
|
|
|
329.6
|
—
|
329.6
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
The following table provides a summary of the Company's
adjusting items which are reconciled and fully described in
Appendix 1.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
Operating
income
|
|
|
$
1,065
|
|
|
$
991
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
154
|
|
|
$
151
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
(6)
|
|
|
(6)
|
Gain on sale of
non-operating properties
|
|
|
(13)
|
|
|
(3)
|
Adjusting
items
|
|
|
$
135
|
|
|
$
142
|
Adjusted operating
income(2)
|
|
|
$
1,200
|
|
|
$
1,133
|
Net interest expense
and other financing charges
|
|
|
$
234
|
|
|
$
217
|
Adjusted net
interest expense and other financing
charge(2)
|
|
|
$
234
|
|
|
$
217
|
Income
taxes
|
|
|
$
182
|
|
|
$
199
|
Add the impact of the
following:
|
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before taxes
|
|
|
$
37
|
|
|
$
35
|
Adjusting
items
|
|
|
$
37
|
|
|
$
35
|
Adjusted income
taxes(2)
|
|
|
$
219
|
|
|
$
234
|
|
|
|
|
|
|
|
CORPORATE PROFILE
2022 Annual Report and 2023 Third Quarter Report
to Shareholders
The Company's 2022 Annual Report and 2023 Third Quarter Report
to Shareholders are available in the "Investors" section of the
Company's website at loblaw.ca and on sedarplus.ca.
Investor Relations
Additional financial information has been filed electronically
with various securities regulators in Canada through 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 November 15, 2023
at 10:00 a.m. (ET).
To access via tele-conference, please dial (416) 764-8688 or
(888) 390-0546. The playback will be made available approximately
two hours after the event at (416) 764-8677 or (888) 390-0541,
access code: 688050#. To access via audio webcast, please go to the
"Investor" 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 2023
Third Quarter Report to Shareholders 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 sedarplus.ca and at
loblaw.ca.
|
(2)
|
See "Non-GAAP and Other
Financial Measures" section in Appendix 1 of this News Release,
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 2023 Third Quarter Report to
Shareholders.
|
APPENDIX 1: NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses the following non-GAAP and other financial
measures and ratios: Retail segment gross profit; Retail segment
adjusted gross profit; Retail segment adjusted gross profit
percentage; adjusted earnings before income taxes, net interest
expense and other financing charges and depreciation and
amortization ("adjusted EBITDA"); adjusted EBITDA margin; adjusted
operating income; adjusted net interest expense and other
financing charges; adjusted income taxes; adjusted effective tax
rate; adjusted net earnings available to common shareholders;
adjusted diluted net earnings per common share, free cash flow, and
same-store sales. The Company believes these non-GAAP and other
financial measures and ratios provide useful information to both
management and investors in measuring the financial performance and
financial condition of the Company for the reasons outlined
below.
Management uses these and other non-GAAP and other 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 adjusts for
these 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.
Retail Segment Gross Profit, Retail Segment Adjusted Gross
Profit and Retail Segment Adjusted Gross Profit
Percentage The following tables reconcile adjusted gross
profit by segment to gross profit by segment, which is reconciled
to revenue and cost of sales measures as reported in the
consolidated statements of earnings for the periods ended as
indicated. The Company believes that Retail segment gross profit
and Retail segment adjusted gross profit are useful in assessing
the Retail segment's underlying operating performance and in making
decisions regarding the ongoing operations of the
business.
Retail segment adjusted gross profit percentage is calculated as
Retail segment adjusted gross profit divided by Retail segment
revenue.
|
|
|
2023
|
|
|
2022
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
Revenue
|
|
|
$
17,982
|
$
379
|
|
$
(96)
|
$
18,265
|
|
|
$
17,130
|
$
350
|
|
$ (92)
|
$ 17,388
|
Cost of
sales
|
|
|
12,480
|
54
|
|
—
|
12,534
|
|
|
11,858
|
56
|
|
—
|
11,914
|
Gross profit
|
|
|
$
5,502
|
$
325
|
|
$
(96)
|
$
5,731
|
|
|
$
5,272
|
$
294
|
|
$ (92)
|
$
5,474
|
Adjusted gross
profit
|
|
|
$
5,502
|
$
325
|
|
$
(96)
|
$
5,731
|
|
|
$
5,272
|
$
294
|
|
$ (92)
|
$
5,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income, Adjusted EBITDA and Adjusted
EBITDA Margin The following tables reconcile adjusted
operating income and adjusted EBITDA to operating income, which is
reconciled to net earnings attributable to shareholders of the
Company as reported in the consolidated statements of earnings for
the periods ended as indicated. The Company believes that adjusted
EBITDA is useful in assessing the performance of its ongoing
operations and its ability to generate cash flows to fund its cash
requirements, including the Company's capital investment
program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided
by revenue.
|
|
|
2023
|
|
|
2022
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
Retail
|
Financial
Services
|
Total
|
|
|
Retail
|
Financial
Services
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
Net earnings
attributable to shareholders of the Company
|
|
|
|
|
$
624
|
|
|
|
|
$
559
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
25
|
|
|
|
|
16
|
Net interest expense
and other financing charges
|
|
|
|
|
234
|
|
|
|
|
217
|
Income
taxes
|
|
|
|
|
182
|
|
|
|
|
199
|
Operating
income
|
|
|
$
1,006
|
$ 59
|
$
1,065
|
|
|
$
949
|
$ 42
|
$
991
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
154
|
$
—
|
$
154
|
|
|
$
151
|
$
—
|
$
151
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
(6)
|
—
|
(6)
|
|
|
(6)
|
—
|
(6)
|
Gain on sale of
non-operating properties
|
|
|
(13)
|
—
|
(13)
|
|
|
(3)
|
—
|
(3)
|
Adjusting
items
|
|
|
$
135
|
$
—
|
$
135
|
|
|
$
142
|
$
—
|
$
142
|
Adjusted operating
income
|
|
|
$
1,141
|
$
59
|
$
1,200
|
|
|
$ 1,091
|
$
42
|
$ 1,133
|
Depreciation and
amortization
|
|
|
865
|
15
|
880
|
|
|
851
|
13
|
864
|
Less: Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
(154)
|
—
|
(154)
|
|
|
(151)
|
—
|
(151)
|
Adjusted
EBITDA
|
|
|
$
1,852
|
$
74
|
$
1,926
|
|
|
$ 1,791
|
$ 55
|
$ 1,846
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the items described in the Retail segment
adjusted gross profit section above, when applicable, adjusted
EBITDA was impacted by the following:
Amortization of intangible assets acquired with
Shoppers Drug Mart and Lifemark The
acquisition of Shoppers Drug Mart in 2014 included approximately
$6,050 million of definite life
intangible assets, which are being amortized over their estimated
useful lives. Annual amortization associated with the acquired
intangibles will be approximately $500 million until 2024 and
will decrease thereafter.
The acquisition of Lifemark in 2022 included approximately
$299 million of definite life
intangible assets, which are being amortized over their estimated
useful lives.
Fair value adjustment on fuel and foreign currency
contracts The Company is exposed to commodity price
and U.S. dollar exchange rate fluctuations. In accordance with the
Company's commodity risk management policy, the Company enters into
exchange traded futures contracts and forward contracts to minimize
cost volatility relating to fuel prices and the U.S. dollar
exchange rate. These derivatives are not acquired for trading or
speculative purposes. Pursuant to the Company's derivative
instruments accounting policy, changes in the fair value of these
instruments, which include realized and unrealized gains and
losses, are recorded in operating income. Despite the impact of
accounting for these commodity and foreign currency derivatives on
the Company's reported results, the derivatives have the economic
impact of largely mitigating the associated risks arising from
price and exchange rate fluctuations in the underlying commodities
and U.S. dollar commitments.
Gain on sale of non-operating properties In the
third quarter of 2023, the Company recorded a gain related to the
sale of non-operating properties of $13
million (2022 – $3
million).
Adjusted Net Interest Expense and Other Financing
Charges The following table reconciles adjusted net
interest expense and other financing charges to net interest
expense and other financing charges as reported in the consolidated
statements of earnings for the periods ended as indicated. The
Company believes that adjusted net interest expense and other
financing charges is useful in assessing the Company's underlying
financial performance and in making decisions regarding the
financial operations of the business.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
Net interest expense
and other financing charges
|
|
|
$
234
|
|
|
$
217
|
Adjusted net interest
expense and other financing charges
|
|
|
$
234
|
|
|
$
217
|
|
|
|
|
|
|
|
Adjusted Income Taxes and Adjusted Effective Tax
Rate The following table reconciles adjusted income taxes
to income taxes as reported in the consolidated statements of
earnings for the periods ended as indicated. The Company believes
that adjusted income taxes is useful in assessing the Company's
underlying operating performance and in making decisions regarding
the ongoing operations of its business.
Adjusted effective tax rate is calculated as adjusted income
taxes divided by the sum of adjusted operating income less adjusted
net interest expense and other financing charges.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
Adjusted operating
income(i)
|
|
|
$ 1,200
|
|
|
$
1,133
|
Adjusted net interest
expense and other financing charges(i)
|
|
|
234
|
|
|
217
|
Adjusted earnings
before taxes
|
|
|
$
966
|
|
|
$
916
|
Income taxes
|
|
|
$
182
|
|
|
$
199
|
Add: Tax impact of
items included in adjusted earnings before
taxes(ii)
|
|
|
37
|
|
|
35
|
Adjusted income
taxes
|
|
|
$
219
|
|
|
$
234
|
Effective tax
rate
|
|
|
21.9 %
|
|
|
25.7 %
|
Adjusted effective tax
rate
|
|
|
22.7 %
|
|
|
25.5 %
|
|
|
|
|
|
|
|
(i)
|
See reconciliations of adjusted operating income
and adjusted net interest expense and other financing charges in
the tables above.
|
(ii)
|
See the adjusted
operating income, adjusted EBITDA and adjusted EBITDA margin table
and the adjusted net interest expense and other financing charges
table above for a complete list of items included in adjusted
earnings before taxes.
|
Adjusted Net Earnings Available to Common
Shareholders and Adjusted Diluted Net Earnings Per Common
Share The following table reconciles adjusted net earnings
available to common shareholders of the Company and adjusted net
earnings attributable to shareholders of the Company to net
earnings attributable to shareholders of the Company and then to
net earnings available to common shareholders of the Company for
the periods ended as indicated. The Company believes that adjusted
net earnings available to common shareholders and adjusted diluted
net earnings per common share are useful in assessing the Company's
underlying operating performance and in making decisions regarding
the ongoing operations of its business.
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
624
|
|
|
$
559
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Net earnings available
to common shareholders of the Company
|
|
|
$
621
|
|
|
$
556
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
624
|
|
|
$
559
|
Adjusting items (refer
to the following table)
|
|
|
98
|
|
|
107
|
Adjusted net earnings
attributable to shareholders of the Company
|
|
|
$
722
|
|
|
$
666
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Adjusted net earnings
available to common shareholders of the Company
|
|
|
$
719
|
|
|
$
663
|
Diluted weighted
average common shares outstanding (millions)
|
|
|
318.4
|
|
|
329.6
|
|
|
|
|
|
|
|
The following table reconciles adjusted net earnings available
to common shareholders of the Company and adjusted diluted net
earnings per common share to net earnings available to common
shareholders of the Company and diluted net earnings per common
share for the periods ended as indicated.
|
|
|
2023
|
|
|
2022
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 7, 2023 and October 8, 2022
(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
|
As
reported
|
|
|
$
621
|
$
1.95
|
|
|
$ 556
|
$
1.69
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart
and Lifemark
|
|
|
$
113
|
$
0.35
|
|
|
$ 112
|
$
0.34
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
(4)
|
(0.01)
|
|
|
(4)
|
(0.02)
|
Gain on sale of
non-operating properties
|
|
|
(11)
|
(0.03)
|
|
|
(1)
|
—
|
Adjusting
items
|
|
|
$
98
|
$
0.31
|
|
|
$ 107
|
$
0.32
|
Adjusted
|
|
|
$ 719
|
$
2.26
|
|
|
$
663
|
$
2.01
|
|
|
|
|
|
|
|
|
|
Free Cash Flow The following table reconciles, by
reportable operating segments, free cash flow to cash flows from
operating activities. The Company believes that free cash flow is
the appropriate measure in assessing the Company's cash available
for additional financing and investing activities.
|
|
|
2023
|
|
|
2022
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 7, 2023 and October 8, 2022
|
|
|
Retail
|
|
Financial
Services
|
|
Elimi-
nations(i)
|
|
Total
|
|
|
Retail
|
|
Financial
Services
|
|
Elimi-
nations(i)
|
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in) operating activities
|
|
|
$
1,898
|
|
$
107
|
|
$
40
|
|
$
2,045
|
|
|
$
1,496
|
|
$ (15)
|
|
$
18
|
|
$
1,499
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments(ii)
|
|
|
681
|
|
14
|
|
—
|
|
695
|
|
|
423
|
|
9
|
|
—
|
|
432
|
Interest
paid
|
|
|
82
|
|
—
|
|
40
|
|
122
|
|
|
76
|
|
—
|
|
18
|
|
94
|
Lease payments,
net
|
|
|
472
|
|
—
|
|
—
|
|
472
|
|
|
454
|
|
—
|
|
—
|
|
454
|
Free cash
flow(2)
|
|
|
$ 663
|
|
$ 93
|
|
$
—
|
|
$ 756
|
|
|
$ 543
|
|
$
(24)
|
|
$
—
|
|
$ 519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows from operating activities under the
Financial Services segment.
|
(ii)
|
Capital investments are
the sum of fixed asset additions and intangible asset additions as
presented in the Company's condensed consolidated statements of
cash flows.
|
Same-Store Sales Same-store sales are retail segment
sales for stores in operation in both comparable periods, including
relocated, converted, expanded, contracted or renovated
stores. The Company believes this metric is useful in
assessing sales trends excluding the effect of the opening and
closure of stores.
SOURCE Loblaw Companies Limited