BRAMPTON, ON, May 3, 2023
/CNW/ - Loblaw Companies Limited (TSX: L) ("Loblaw" or the
"Company") announced today its unaudited financial results for the
first quarter ended March 25,
2023(1).
Loblaw's sales and earnings growth continued to reflect its
focus on retail excellence. Drug Retail sales were led by continued
strength in higher margin beauty and cough and cold products. Drug
Retail sales growth rates were further magnified by lapping Omicron
related lockdowns last year. Food Retail sales growth accelerated
through the quarter, after lapping lockdown related benefits in the
first part of 2022. This was the case in both Market and Discount
stores, though the latter continued to outperform, benefiting from
the heightened consumer focus on price. Total Retail gross margin
increased due to higher sales growth in more profitable front-store
sales in drug stores, offsetting a slight decline in Food Retail
gross margin as costs continued to increase faster than prices.
Higher sales and cost control leverage drove earnings in the
quarter.
"In the face of ongoing inflation, we are working hard to
deliver the value and choice Canadians are looking for," said
Galen G. Weston, Chairman and
President, Loblaw Companies Limited. "I'm pleased that customers
are responding positively to the breadth of our offerings including
our diverse store formats, market leading prices, private label
brands, and loyalty offers."
2023 FIRST QUARTER HIGHLIGHTS
- Revenue was $12,995 million, an
increase of $733 million, or
6.0%.
- Retail segment sales were $12,735
million, an increase of $690
million, or 5.7%.
-
- Food Retail (Loblaw) same-stores sales increased by 3.1%,
including the negative impact of 1.1% related to the timing of New
Year's Day.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
7.4%, with front store same-store sales growth of 10.3% and
pharmacy same-store sales growth of 4.7%.
- E-commerce sales decreased by 1.1%, lapping elevated online
sales due to lockdowns last year.
- Operating income was $769
million, an increase of $31
million, or 4.2%.
- Adjusted EBITDA(2) was $1,448
million, an increase of $105
million, or 7.8%.
- Retail segment adjusted gross profit percentage(2)
was 31.3%, an increase of 20 basis points.
- Net earnings available to common shareholders of the Company
were $418 million, a decrease of
$19 million or 4.3%. Diluted net
earnings per common share were $1.29,
a decrease of $0.01, or 0.8%. The
decrease was primarily driven by a prior year gain related to a
favourable Court ruling.
- Adjusted net earnings available to common shareholders of the
Company(2) were $505
million, an increase of $46
million, or 10.0%.
- Adjusted diluted net earnings per common share(2)
were $1.55, an increase of
$0.19 or 14.0%.
- Repurchased for cancellation 3.3 million common shares at a
cost of $383 million and invested
$208 million in capital expenditures,
net of proceeds from property disposals. Free cash
flow(2) used in the Retail segment was $81 million.
- Twelfth consecutive annual increase to the quarterly common
share dividend from $0.405 per common
share to $0.446 per common share, an
increase of 10%.
- The Company just announced the release of its 2022
Environmental, Social and Governance ("ESG") Report.
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
March 25, 2023 and
March 26, 2022
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Total
|
(millions of Canadian
dollars except where
otherwise indicated)
|
|
|
Revenue
|
|
|
$
12,735
|
$
326
|
$
(66)
|
$
12,995
|
|
|
$ 12,045
|
$
274
|
$ (57)
|
$ 12,262
|
Adjusted gross
profit(2)
|
|
|
$
3,980
|
$
293
|
$ (66)
|
$
4,207
|
|
|
$
3,743
|
$
241
|
$ (57)
|
$
3,927
|
Adjusted gross profit
%(2)
|
|
|
31.3 %
|
N/A
|
— %
|
32.4 %
|
|
|
31.1 %
|
N/A
|
— %
|
32.0 %
|
Operating
income
|
|
|
$
726
|
$ 43
|
$
—
|
$
769
|
|
|
$
690
|
$ 48
|
$ —
|
$
738
|
Adjusted operating
income(2)
|
|
|
844
|
43
|
—
|
887
|
|
|
781
|
48
|
—
|
829
|
Adjusted
EBITDA(2)
|
|
|
$
1,390
|
$
58
|
$ —
|
$
1,448
|
|
|
$
1,285
|
$ 58
|
$ —
|
$
1,343
|
Adjusted EBITDA
margin(2)
|
|
|
10.9 %
|
N/A
|
— %
|
11.1 %
|
|
|
10.7 %
|
N/A
|
— %
|
11.0 %
|
Net interest expense
and
other financing charges
|
|
|
$
150
|
$ 31
|
$
—
|
$
181
|
|
|
$
126
|
$ 16
|
$ —
|
$
142
|
Adjusted net interest
expense
and other financing charges(2)
|
|
|
150
|
31
|
—
|
181
|
|
|
137
|
16
|
—
|
153
|
Earnings before
income taxes
|
|
|
$
576
|
$ 12
|
$
—
|
$
588
|
|
|
$
564
|
$ 32
|
$ —
|
$
596
|
Income taxes
|
|
|
|
|
|
$ 151
|
|
|
|
|
|
$
123
|
Adjusted income
taxes(2)
|
|
|
|
|
|
182
|
|
|
|
|
|
181
|
Net earnings
attributable to non-
controlling interests
|
|
|
|
|
|
$
16
|
|
|
|
|
|
$
33
|
Prescribed dividends
on
preferred shares in
share capital
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
Net earnings
available to
common shareholders of
the Company
|
|
|
|
|
|
$
418
|
|
|
|
|
|
$
437
|
Adjusted net earnings
available
to common shareholders of
the Company(2)
|
|
|
|
|
|
505
|
|
|
|
|
|
459
|
Diluted net earnings
per common share ($)
|
|
|
|
|
|
$
1.29
|
|
|
|
|
|
$
1.30
|
Adjusted diluted net
earnings
per common share(2) ($)
|
|
|
|
|
|
$
1.55
|
|
|
|
|
|
$
1.36
|
Diluted weighted
average
common shares
outstanding (in millions)
|
|
|
|
|
|
324.8
|
|
|
|
|
|
336.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a breakdown of the Company's total
and same-store sales for the Retail segment.
For the periods ended
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
|
Sales
|
Same-store
sales
|
|
|
Sales
|
Same-store
sales
|
Food retail
|
|
|
$
9,011
|
3.1 %
|
|
|
$ 8,682
|
2.1 %
|
Drug retail
|
|
|
3,724
|
7.4 %
|
|
|
3,363
|
5.2 %
|
Pharmacy and
healthcare services
|
|
|
1,924
|
4.7 %
|
|
|
1,724
|
6.8 %
|
Front store
|
|
|
1,800
|
10.3 %
|
|
|
1,639
|
3.6 %
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $12,735
million, an increase of $690
million, or 5.7%.
-
- Food Retail (Loblaw) sales were $9,011
million and Food Retail same-store sales grew by 3.1% (2022
– grew by 2.1%), including the negative impact of 1.1% related to
the timing of New Year's Day. Food retail same-store sales were
also negatively impacted by higher than normal eat-at-home levels
in the prior year.
-
- The Consumer Price Index as measured by The Consumer Price
Index for Food Purchased From Stores was 10.5% (2022 – 7.5%) which
was generally in line with the Company's internal food inflation;
and
- Food Retail traffic increased and basket size decreased.
- Drug Retail (Shoppers Drug Mart) sales were $3,724 million, and Drug Retail same-store sales
grew by 7.4% (2022 – 5.2%), with pharmacy and healthcare services
same-store sales growth of 4.7% (2022 – 6.8%) and front store
same-store sales growth of 10.3% (2022 – 3.6%). Pharmacy and
healthcare services sales include Lifemark Health Group
("Lifemark") revenues of $118
million. Lifemark revenues are excluded from same-store
sales.
-
- On a same-store basis, the number of prescriptions dispensed
decreased by 1.9% (2022 – increased by 5.8%) and the average
prescription value increased by 6.0% (2022 – 0.4%).
- Operating income was $726
million, an increase of $36
million, or 5.2%.
- Adjusted gross profit(2) was $3,980 million, an increase of $237 million, or 6.3%. The adjusted gross profit
percentage(2) of 31.3% increased by 20 basis points
(2022 – increased by 80 basis points), primarily driven by growth
in higher margin Drug Retail front store categories, partially
offset by a slight decrease in Food Retail margins.
- Adjusted EBITDA(2) was $1,390
million, an increase of $105
million, or 8.2%. The increase was driven by an increase in
adjusted gross profit(2), partially offset by an
increase in SG&A. SG&A as a percentage of sales was 20.3%,
a favourable decrease of 10 basis points. The favourable decrease
of 10 basis points was primarily due to operating leverage from
higher sales.
- Depreciation and amortization was $660
million, an increase of $39
million or 6.3%, primarily driven by an increase in
depreciation of IT assets, leased assets, accelerated depreciation
of $10 million (2022 – nil) due to
the reassessment of the estimated useful life of certain IT assets
and accelerated depreciation of $7
million (2022 – nil) as a result of network optimization.
Included in depreciation and amortization was and the amortization
of intangible assets related to the acquisitions of Shoppers Drug
Mart Corporation ("Shoppers Drug Mart") and Lifemark of
$114 million (2022 – $117 million).
- The Company recorded charges of $15
million associated with network optimization, which include
accelerated depreciation of $7
million as described above, and other charges.
- In the first quarter of 2023, the Company disposed of sixteen
real estate properties for proceeds of $87
million (2022 – $13 million).
Real estate disposition proceeds will be used to partially fund
increased capital investments.
FINANCIAL SERVICES SEGMENT
- Revenue was $326 million, an
increase of $52 million or 19.0%. 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.
- Earnings before income taxes were $12
million, a decrease of $20
million. The decrease in earnings was mainly driven by the
year-over-year impact of the expected credit loss provision from
lapping the prior year release of $5
million versus the current quarter increase of $6 million, higher costs from an increase in
customer spending and the growth in credit card portfolio which
includes an increase in funding costs, partially offset by the
higher revenue as described above.
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")
The Company just issued its 2022 ESG Report. For the first time,
the report aligns with all three of the following: Global Reporting
Initiatives (GRI) standards, Sustainability Accounting Standards
Board (SASB) disclosures and the Taskforce for Climate-Related
Financial Disclosure (TCFD). The report highlights many significant
2022 achievements including reducing the carbon emissions of
enterprise operations by 8% since 2020, achieving multiple
inclusion and representation goals ahead of schedule, and
contributing more than $110 million
in community funds to support research, charities and
non-profits.
In the quarter, Loblaw collected and donated 7 million pounds of
food for local food banks in support of its new Feed More Families™
pledge, began the final phase of eliminating front-end single-use
bags, and launched the rebrand of LOVE YOU by Shoppers Drug Mart™
program to the Shoppers Foundation for Women's Health™, with a
strengthened focus on supporting women's health equity.
NORMAL COURSE ISSUER BID PROGRAM
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 first 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 July 1, 2023 to shareholders of record on June
15, 2023.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125 per share,
payable on July 1, 2023 to shareholders of record on June 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
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
EBITDA
|
|
|
$
1,444
|
$
4
|
$
1,448
|
|
|
$
1,369
|
$ (26)
|
$
1,343
|
Operating
income
|
|
|
$ 769
|
$ 118
|
$
887
|
|
|
$
738
|
$
91
|
$
829
|
Net interest expense
and other financing charges
|
|
|
181
|
—
|
181
|
|
|
142
|
11
|
153
|
Earnings before
income taxes
|
|
|
$ 588
|
$ 118
|
$
706
|
|
|
$
596
|
$ 80
|
$
676
|
Deduct (add) the
following:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
151
|
31
|
182
|
|
|
123
|
58
|
181
|
Non-controlling
interests
|
|
|
16
|
—
|
16
|
|
|
33
|
—
|
33
|
Prescribed dividends
on preferred shares
|
|
|
3
|
—
|
3
|
|
|
3
|
—
|
3
|
Net earnings
available to common
shareholders of the
Company(i)
|
|
|
$ 418
|
$
87
|
$
505
|
|
|
$
437
|
$ 22
|
$
459
|
Diluted net earnings
per common share ($)
|
|
|
$ 1.29
|
$
0.26
|
$ 1.55
|
|
|
$ 1.30
|
$
0.06
|
$ 1.36
|
Diluted weighted
average common shares (millions)
|
|
|
324.8
|
—
|
324.8
|
|
|
336.7
|
—
|
336.7
|
|
|
|
|
|
|
|
|
|
|
|
(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
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Operating
income
|
|
|
$
769
|
|
|
$
738
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
114
|
|
|
$
117
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
3
|
|
|
(14)
|
Loss on sale of
non-operating properties
|
|
|
1
|
|
|
—
|
Lifemark transaction
costs
|
|
|
—
|
|
|
3
|
Restructuring and
other related recoveries
|
|
|
—
|
|
|
(15)
|
Adjusting
items
|
|
|
$
118
|
|
|
$
91
|
Adjusted operating
income(2)
|
|
|
$
887
|
|
|
$
829
|
Net interest expense
and other financing charges
|
|
|
$
181
|
|
|
$
142
|
Add the impact of the
following:
|
|
|
|
|
|
|
Recovery related to
Glenhuron
|
|
|
—
|
|
|
11
|
Adjusted net
interest expense and other financing
charge(2)
|
|
|
$
181
|
|
|
$
153
|
Income
taxes
|
|
|
$
151
|
|
|
$
123
|
Add the impact of the
following:
|
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before taxes
|
|
|
$
31
|
|
|
$
25
|
Recovery related to
Glenhuron
|
|
|
—
|
|
|
33
|
Adjusting
items
|
|
|
$
31
|
|
|
$
58
|
Adjusted income
taxes(2)
|
|
|
$
182
|
|
|
$
181
|
|
|
|
|
|
|
|
CORPORATE PROFILE
2022 Annual Report and 2023 First Quarter Report
to Shareholders
The Company's 2022 Annual Report and 2023 First Quarter Report
to Shareholders are 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 May 3, 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: 498499#. 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.
Annual Meeting of Shareholders
The 2023 Annual Meeting of Shareholders of Loblaw Companies
Limited will be held on Thursday, May 4,
2023 at 11:00 a.m. (ET). This
year's meeting will be held as a virtual meeting, by way of a live
webcast. Shareholders will be able to listen, participate and vote
at the meeting in real time through a live webcast online at
https://web.lumiagm.com/290698688 (meeting password: loblaw2023).
See "How do I attend and participate
in the Meeting?" in the Management Proxy dated March 24, 2023, which can be viewed online at
www.loblaw.ca or under Loblaw's SEDAR profile at www.sedar.com, for
detailed instructions on how to attend and vote at the meeting.
Please refer to the "Events and Presentations" or "Shareholders
Services" page at loblaw.ca for additional details on the virtual
meeting.
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
First 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 sedar.com 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 First 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, and free cash flow.
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
March 25, 2023 and March 26, 2022
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
Revenue
|
|
|
$
12,735
|
$
326
|
|
$
(66)
|
$
12,995
|
|
|
$ 12,045
|
$
274
|
|
$ (57)
|
$ 12,262
|
Cost of
sales
|
|
|
8,755
|
33
|
|
—
|
8,788
|
|
|
8,302
|
33
|
|
—
|
8,335
|
Gross profit
|
|
|
$
3,980
|
$
293
|
|
$
(66)
|
$
4,207
|
|
|
$
3,743
|
$
241
|
|
$ (57)
|
$
3,927
|
Adjusted gross
profit
|
|
|
$
3,980
|
$
293
|
|
$
(66)
|
$
4,207
|
|
|
$
3,743
|
$
241
|
|
$ (57)
|
$
3,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
March 25, 2023 and March 26, 2022
|
|
|
Retail
|
Financial
Services
|
Total
|
|
|
Retail
|
Financial
Services
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
Net earnings
attributable to shareholders of the Company
|
|
|
|
|
$
421
|
|
|
|
|
$
440
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
16
|
|
|
|
|
33
|
Net interest expense
and other financing charges
|
|
|
|
|
181
|
|
|
|
|
142
|
Income
taxes
|
|
|
|
|
151
|
|
|
|
|
123
|
Operating
income
|
|
|
$
726
|
$
43
|
$
769
|
|
|
$
690
|
$
48
|
$
738
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
114
|
$
—
|
$ 114
|
|
|
$ 117
|
$ —
|
$ 117
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
3
|
—
|
3
|
|
|
(14)
|
—
|
(14)
|
Loss on sale of
non-operating properties
|
|
|
1
|
—
|
1
|
|
|
—
|
—
|
—
|
Lifemark transaction
costs
|
|
|
—
|
—
|
—
|
|
|
3
|
—
|
3
|
Restructuring and
other related recoveries
|
|
|
—
|
—
|
—
|
|
|
(15)
|
—
|
(15)
|
Adjusting
items
|
|
|
$
118
|
$
—
|
$ 118
|
|
|
$
91
|
$ —
|
$
91
|
Adjusted operating
income
|
|
|
$
844
|
$
43
|
$
887
|
|
|
$
781
|
$
48
|
$
829
|
Depreciation and
amortization
|
|
|
660
|
15
|
675
|
|
|
621
|
10
|
631
|
Less: Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
(114)
|
—
|
(114)
|
|
|
(117)
|
—
|
(117)
|
Adjusted
EBITDA
|
|
|
$
1,390
|
$ 58
|
$
1,448
|
|
|
$
1,285
|
$
58
|
$
1,343
|
|
|
|
|
|
|
|
|
|
|
|
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.
Loss on sale of non-operating properties In the
first quarter of 2023, the Company recorded a loss related to the
sale of non-operating properties of $1
million (2022 – nil).
Lifemark transaction costs In connection with
the acquisition of Lifemark during 2022, the Company recorded
acquisition costs of $3 million in operating income in the
first quarter of 2022.
Restructuring and other related (recoveries)
costs The Company continuously evaluates strategic and
cost reduction initiatives related to its store infrastructure,
distribution networks and administrative infrastructure with the
objective of ensuring a low cost operating structure. Only
restructuring activities that are publicly announced related to
these initiatives are considered adjusting items.
In the first quarter of 2023, the Company did not record any
restructuring and other related recoveries or charges (2022 –
recovery of $15 million). The
recoveries recognized in 2022 were mainly in connection to the
previously announced closure of two distribution centres in
Laval and Ottawa. The Company invested to build a modern
and efficient expansion to its Cornwall distribution centre to serve its food
and drug retail businesses in Ontario and Quebec and volumes have been transferred.
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
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Net interest expense
and other financing charges
|
|
|
$
181
|
|
|
$
142
|
Add: Recovery related
to Glenhuron
|
|
|
—
|
|
|
11
|
Adjusted net interest
expense and other financing charges
|
|
|
$
181
|
|
|
$
153
|
|
|
|
|
|
|
|
Recovery related to Glenhuron Bank Limited
("Glenhuron") In 2021, the Supreme Court ruled in
favour of the Company on the Glenhuron matter. As a result of
related reassessments received during the first quarter of 2022,
the Company reversed $35 million of previously recorded
charges, of which $2 million was recorded as interest income
and $33 million was recorded as an income tax recovery, and an
additional $9 million, before taxes, was recorded in respect
of interest income earned on expected cash tax refunds.
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
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Adjusted operating
income(i)
|
|
|
$
887
|
|
|
$
829
|
Adjusted net interest
expense and other financing charges(i)
|
|
|
181
|
|
|
153
|
Adjusted earnings
before taxes
|
|
|
$
706
|
|
|
$
676
|
Income taxes
|
|
|
$
151
|
|
|
$
123
|
Add impact of the
following:
|
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before
taxes(ii)
|
|
|
31
|
|
|
25
|
Recovery related to
Glenhuron
|
|
|
—
|
|
|
33
|
Adjusted income
taxes
|
|
|
$
182
|
|
|
$
181
|
Effective tax
rate
|
|
|
25.7 %
|
|
|
20.6 %
|
Adjusted effective tax
rate
|
|
|
25.8 %
|
|
|
26.8 %
|
|
|
|
|
|
|
|
(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
March 25, 2023 and March 26, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
421
|
|
|
$
440
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Net earnings available
to common shareholders of the Company
|
|
|
$
418
|
|
|
$
437
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
421
|
|
|
$
440
|
Adjusting items (refer
to the following table)
|
|
|
87
|
|
|
22
|
Adjusted net earnings
attributable to shareholders of the Company
|
|
|
$
508
|
|
|
$
462
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Adjusted net earnings
available to common shareholders of the Company
|
|
|
$
505
|
|
|
$
459
|
Diluted weighted
average common shares outstanding (millions)
|
|
|
324.8
|
|
|
336.7
|
|
|
|
|
|
|
|
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
|
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
|
For the periods ended
March 25, 2023 and March 26, 2022
(millions of Canadian dollars/Canadian dollars)
|
|
|
|
|
As
reported
|
|
|
$ 418
|
$
1.29
|
|
|
$ 437
|
$
1.30
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
84
|
$
0.26
|
|
|
$
87
|
$
0.25
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
2
|
—
|
|
|
(11)
|
(0.03)
|
Loss on sale of
non-operating properties
|
|
|
1
|
—
|
|
|
—
|
—
|
Lifemark transaction
costs
|
|
|
—
|
—
|
|
|
2
|
0.01
|
Restructuring and other
related recoveries
|
|
|
—
|
—
|
|
|
(14)
|
(0.04)
|
Recovery related to
Glenhuron
|
|
|
—
|
—
|
|
|
(42)
|
(0.13)
|
Adjusting
items
|
|
|
$
87
|
$
0.26
|
|
|
$
22
|
$
0.06
|
Adjusted
|
|
|
$
505
|
$
1.55
|
|
|
$ 459
|
$
1.36
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
March 25, 2023 and March 26, 2022
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Total
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in) operating activities
|
|
|
$ 652
|
|
$
237
|
|
$
26
|
|
$ 915
|
|
|
$ 748
|
|
$
103
|
|
$
12
|
|
$ 863
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments(ii)
|
|
|
306
|
|
9
|
|
—
|
|
315
|
|
|
182
|
|
4
|
|
—
|
|
186
|
Interest
paid
|
|
|
80
|
|
—
|
|
26
|
|
106
|
|
|
70
|
|
—
|
|
12
|
|
82
|
Lease payments,
net
|
|
|
347
|
|
—
|
|
—
|
|
347
|
|
|
282
|
|
—
|
|
—
|
|
282
|
Free cash
flow(2)
|
|
|
$
(81)
|
|
$
228
|
|
$
—
|
|
$ 147
|
|
|
$ 214
|
|
$
99
|
|
$
—
|
|
$ 313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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