BRAMPTON, ON, Feb. 24 /CNW/ - Loblaw Companies Limited (TSX: L) ("Loblaw" or the "Company") today is announcing its unaudited financial results for the fourth quarter of 2010, and the release of its 2010 Annual Report, including the Company's audited consolidated financial statements and Management's Discussion and Analysis for the fiscal year ended January 1, 2011. The Company's 2010 Annual Report will be available in the Investor Zone section of the Company's website at www.loblaw.ca and will be filed with SEDAR and will be available at www.sedar.com.
Fourth Quarter 2010 Summary
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- Basic net earnings per common share of $0.54, which includes various
charges as described below.
- EBITDA margin was 6.2% compared to 5.7% in the fourth quarter of
2009.
- Gross profit of $1.8 billion an increase of 2.7% compared to the
fourth quarter of 2009. Gross profit as a percentage of sales was
24.8% compared to 23.6% in the fourth quarter of 2009.
- Sales and same-store sales declined 2.1% and 1.6%, respectively, from
the fourth quarter of 2009.
For the periods ended
January 1, 2011 and ----------
January 2, 2010 2010 2009
($ millions except where (unaudited) (unaudited)
otherwise indicated) (12 weeks) (12 weeks) Change
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Sales $ 7,161 $ 7,311 (2.1%)
Gross profit 1,774 1,728 2.7%
Operating income 289 277 4.3%
Net earnings 151 165 (8.5%)
Basic net earnings per common share ($) 0.54 0.60 (10.0%)
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Same-store sales decline (%) (1.6%) (7.8%)
Operating margin 4.0% 3.8%
EBITDA(2) $ 442 $ 420 5.2%
EBITDA margin(2) 6.2% 5.7%
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2010 2009
(unaudited) (unaudited)
(52 weeks) (52 weeks) Change
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Sales $ 30,997 $ 30,735 0.9%
Gross profit 7,604 7,196 5.7%
Operating income 1,269 1,205 5.3%
Net earnings 681 656 3.8%
Basic net earnings per common share ($) 2.45 2.39 2.5%
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Same-store sales decline (%) (0.6%) (1.1%)
Operating margin 4.1% 3.9%
EBITDA(2) $ 1,924 $ 1,794 7.2%
EBITDA margin(2) 6.2% 5.8%
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(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 assumptions that were used. This News
Release must 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 www.sedar.com and at www.loblaw.ca.
(2) See Non-GAAP Financial Measures.
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"2010 was another year of real progress towards completing our renewal plan," said Galen G. Weston, Executive Chairman, Loblaw Companies Limited. "In the year ahead, we expect to continue our focus on executing the plan in a market environment that remains unpredictable and competitively intense. In 2011, the Company plans to continue its investment in information technology and supply chain which will negatively impact operating income by approximately $135 million over 2010, and estimates capital expenditures for the year to be roughly $1.0 billion."
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- In the fourth quarter of 2010:
- sales in food declined marginally;
- sales in drugstore declined moderately, impacted by deflation due
to regulatory changes in Ontario and the impact of generic
versions of certain prescription drugs;
- sales growth in apparel was moderate while sales of other general
merchandise declined significantly due to lower discretionary
consumer spending and reductions in assortment and square
footage;
- gas bar sales growth was strong as a result of higher retail gas
prices and moderate volume growth; and
- the Company's average quarterly internal retail food price index
was flat. This compared to average quarterly internal retail food
price deflation in the fourth quarter of 2009.
- Gross profit increased by $46 million, or 2.7%, to $1,774 million
(24.8% of sales) in the fourth quarter of 2010 compared to the fourth
quarter of 2009 (23.6% of sales). This increase was primarily
attributable to improved control label profitability and continued
buying synergies and disciplined vendor management, the shift of
pharmaceutical vendor rebates from selling and administrative
expenses to gross profit, improved shrink and a stronger Canadian
dollar. Increased transportation costs partially offset these
improvements.
- Operating income increased by $12 million, or 4.3%, to $289 million
in the fourth quarter of 2010 compared to the fourth quarter of 2009.
Operating margin was 4.0% for the fourth quarter of 2010 compared to
3.8% in 2009. In addition to the increase in gross profit described
above, the following items influenced the Company's operating income
in the fourth quarter of 2010 compared to 2009:
- a charge related to the effect of stock-based compensation net of
equity forwards of $7 million (2009 - $5 million). The effect on
basic net earnings per common share was a charge of $0.02
(2009 - $0.01);
- incremental costs of $27 million related to its investment in
information technology and supply chain, which negatively
impacted basic net earnings per common share by $0.07; and
- a charge of $28 million (2009 - $27 million) for fixed asset
impairments related to asset carrying values in excess of fair
values for certain stores which negatively impacted basic net
earnings per common share by $0.07 (2009 - $0.07).
- Due to changes in the federal tax legislation that resulted in the
elimination of the Company's ability to deduct costs associated with
cash-settled stock options the Company has recognized a tax expense
of $12 million in the fourth quarter of 2010. The effect on basic
net earnings per common share was a charge of $0.04.
- The Company invested $1.3 billion in capital in 2010 and estimates
capital expenditures to be approximately $1.0 billion for 2011.
- Subsequent to year-end, the Board of Directors approved discontinuing
the Company's dividend reinvestment plan after the dividend payment
on April 1, 2011 when approximately $300 million in common share
equity will be raised through the program as planned.
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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. 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, are intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect the Company's current expectations concerning future results and events.
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:
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- the possibility that the Company's plans and objectives will not be
achieved;
- changes in economic conditions including the rate of inflation or
deflation and changes in interest and currency exchange rates;
- changes in consumer spending and preferences;
- heightened competition, whether from new competitors or current
competitors;
- changes in the Company's or its competitors' pricing strategies;
- failure of the Company's franchised stores to perform as expected;
- failure to realize sales growth, anticipated cost savings or
operating efficiencies from the Company's major initiatives,
including investments in the Company's information technology
systems, supply chain investments and other cost reduction
initiatives, or unanticipated results from these initiatives;
- increased costs relating to utilities, including electricity and
fuel;
- the inability of the Company to successfully implement its
infrastructure and information technology components of its plan;
- the inability of the Company's information technology infrastructure
to support the requirements of the Company's business;
- the inability of the Company to manage inventory to minimize the
impact of obsolete or excess inventory and to control shrink;
- failure to execute successfully and in a timely manner the Company's
introduction of innovative and reformulated products or new and
renovated stores;
- the inability of the Company's supply chain to service the needs of
the Company's stores;
- failure to achieve desired results in labour negotiations, including
the terms of future collective bargaining agreements, which could
lead to work stoppages;
- changes to and failure to comply with the legislative/regulatory
environment in which the Company operates, including failure to
comply with environmental laws and regulations;
- the adoption of new accounting standards and changes in the Company's
use of accounting estimates;
- fluctuations in the Company's earnings due to changes in the value of
stock based compensation and equity forward contracts relating to its
Common Shares;
- changes in the Company's income, commodity and other tax liabilities
including changes in tax laws or future assessments;
- reliance on the performance and retention of third-party service
providers including those associated with the Company's supply chain
and apparel business;
- public health events including those related to food safety;
- the inability of the Company to collect on its credit card
receivables;
- any requirement of the Company to make contributions to its
registered funded defined benefit pension plans in excess of those
currently contemplated;
- the inability of the Company to attract and retain key executives;
- supply and quality control issues with vendors; and
- failure by the Company to maintain appropriate documentation to
support its compliance with accounting, tax or legal rules,
regulations and policies.
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These and other 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") included in the Company's 2010 Annual Report - Financial Review. These forward looking statements reflect management's current assumptions regarding these risks and uncertainties and their respective impact on the Company.
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. 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.
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Consolidated Statements of Earnings
For the periods ended
January 1, 2011 and ---------- ----------
January 2, 2010 2010 2009 2010 2009
($ millions except where (unaudited) (unaudited) (unaudited) (unaudited)
otherwise indicated) (12 weeks) (12 weeks) (52 weeks) (52 weeks)
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Sales $ 7,161 $ 7,311 $ 30,997 $ 30,735
Cost of Merchandise
Inventories Sold 5,387 5,583 23,393 23,539
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Gross Profit 1,774 1,728 7,604 7,196
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Operating Expenses
Selling and administrative
expenses 1,332 1,308 5,680 5,402
Depreciation and
amortization 153 143 655 589
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1,485 1,451 6,335 5,991
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Operating Income 289 277 1,269 1,205
Interest expense and other
financing charges 63 64 273 269
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Earnings before Income Taxes
and Minority Interest 226 213 996 936
Income Taxes 71 39 297 269
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Net Earnings before Minority
Interest 155 174 699 667
Minority Interest 4 9 18 11
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Net Earnings $ 151 $ 165 $ 681 $ 656
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Net Earnings Per Common
Share ($)
Basic $ 0.54 $ 0.60 $ 2.45 $ 2.39
Diluted $ 0.54 $ 0.59 $ 2.44 $ 2.38
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Consolidated Balance Sheets
As at January 1, 2011 and January 2, 2010 ----------
($ millions) 2010 2009
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Assets
Current Assets
Cash and cash equivalents $ 932 $ 776
Short term investments 735 614
Accounts receivable 724 774
Inventories 2,114 2,112
Future income taxes 39 38
Prepaid expenses and other assets 82 92
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Total Current Assets 4,626 4,406
Fixed Assets 9,123 8,559
Goodwill and Intangible Assets 1,029 1,026
Security Deposits 354 250
Other Assets 787 750
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Total Assets $ 15,919 $ 14,991
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Liabilities
Current Liabilities
Bank indebtedness $ 3 $ 2
Accounts payable and accrued liabilities 3,416 3,279
Income taxes payable - 41
Long term debt due within one year 433 343
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Total Current Liabilities 3,852 3,665
Long Term Debt 4,213 4,162
Other Liabilities 534 497
Future Income Taxes 178 143
Capital Securities 221 220
Minority Interest 41 31
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Total Liabilities 9,039 8,718
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Shareholders' Equity
Common Share Capital 1,475 1,308
Retained Earnings 5,395 4,948
Accumulated Other Comprehensive Income 10 17
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Total Shareholders' Equity 6,880 6,273
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Total Liabilities and Shareholders' Equity $ 15,919 $ 14,991
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Consolidated Cash Flow Statements
For the periods ended ---------- ----------
January 1, 2011 and 2010 2009 2010 2009
January 2, 2010 (unaudited) (unaudited) (unaudited) (unaudited)
($ millions) (12 weeks) (12 weeks) (52 weeks) (52 weeks)
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Operating Activities
Net earnings before
minority interest $ 155 $ 174 $ 699 $ 667
Depreciation and
amortization 153 143 655 589
Future income taxes 34 (33) 42 (29)
Settlement of equity
forward contracts - (17) - (55)
Change in non-cash
working capital 245 298 66 707
Fixed assets and other
related impairments 32 36 72 46
Other (16) 14 60 20
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Cash Flows from Operating
Activities 603 615 1,594 1,945
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Investing Activities
Fixed asset purchases (453) (365) (1,280) (971)
Short term investments 56 (98) (159) (181)
Proceeds from asset sales 53 17 90 27
Credit card receivables,
after securitization (138) (228) 7 8
Business acquisitions -
net of cash acquired - (10) - (204)
Franchise investments
and other receivables 2 10 (11) 6
Security deposits (6) 34 (115) 148
Other 5 (7) 20 (45)
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Cash Flows used in
Investing Activities (481) (647) (1,448) (1,212)
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Financing Activities
Bank indebtedness 2 1 1 (50)
Short term debt - - - (190)
Long term debt
Issued 45 32 450 402
Retired (26) (10) (368) (167)
Common shares retired - (56) - (56)
Dividends (15) (18) (65) (112)
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Cash Flows from (used in)
Financing Activities 6 (51) 18 (173)
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Effect of foreign currency
exchange rate changes on
cash and cash equivalents (4) 5 (8) (27)
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Change in Cash and Cash
Equivalents 124 (78) 156 533
Cash and Cash Equivalents,
Beginning of Period 808 854 776 243
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Cash and Cash Equivalents,
End of Period $ 932 $ 776 $ 932 $ 776
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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 and financial condition of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by Canadian GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with Canadian GAAP.
EBITDA and EBITDA Margin
The following table reconciles earnings before minority interest, income taxes, interest expense and depreciation and amortization ("EBITDA") to operating income which is reconciled to Canadian GAAP net earnings measures reported in the consolidated statements of earnings for the 12 weeks and 52 weeks ended January 1, 2011 and January 2, 2010, respectively. EBITDA is useful to management in assessing the Company's performance of its ongoing operations and its ability to generate cash flows to fund its cash requirements, including the Company's capital investment program.
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2010 2009 2010 2009
(unaudited) (unaudited) (unaudited) (unaudited)
($ millions) (12 weeks) (12 weeks) (52 weeks) (52 weeks)
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Net earnings $ 151 $ 165 $ 681 $ 656
Add impact of the following:
Minority interest 4 9 18 11
Income taxes 71 39 297 269
Interest expense and other
financing charges 63 64 273 269
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Operating income 289 277 1,269 1,205
Add impact of the following:
Depreciation and
amortization 153 143 655 589
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EBITDA $ 442 $ 420 $ 1,924 $ 1,794
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EBITDA margin is calculated as EBITDA divided by sales.
2010 Annual Consolidated Financial Statements and MD&A
The Company's 2010 Annual Report will be available in the Investor Zone 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 February 24, 2011 at 11:00 a.m. (EST).
To access via tele-conference please dial (647) 427-7450. The playback will be made available one hour after the event at (416) 849-0833, passcode: 35155003 followed by the number sign. To access via webcast please visit www.loblaw.ca, go to Investor Zone and click on webcast. Pre-registration will be available.
Full details are available on the Loblaw Companies Limited website at www.loblaw.ca.