Mark Foote President and Chief Merchandising Officer
and Galen Weston Executive Chairman
2006 was a year of evolution as Loblaw Companies Limited continued to transform into a company that will be truly competitive over the long term.
2006 was a challenging year for Loblaw Companies Limited (“Loblaw” or the “Company”). We faced significant hurdles, took stock of obstacles to profitability and growth, and assessed the considerable strengths that have made us Canada’s pre-eminent food retailer.
We enter 2007 with a new leadership team, a resolve to restore Loblaw to strong profitability and growth, and a game plan for doing it.
Our plan is built on three pillars: “Simplify, Innovate, Grow”. And it has one goal: To Make Loblaw the Best Again.
This Annual Report addresses, in detail, our Company’s performance in 2006. Many of the difficulties we faced were the culmination of two important factors. First, there have been significant changes in how food retailers compete and how consumers shop in Canada.
The second is Loblaw’s own structure, with its history of mergers and acquisitions. The organization is more complex and less responsive than it should have been. These two trends collided in 2006. Loblaw lacked the structural agility and vigour to address its changing environment.
Sales for the year were $28.6 billion compared to $27.6 billion in 2005, which represented a 3.7% improvement over last year. The Company earned $1.3 billion of adjusted operating income(2) in 2006, compared to $1.6 billion in 2005. Including a non-cash goodwill impairment charge and other significant non-routine costs, basic net loss per common share for the year was $0.80 compared to basic net earnings per common share of $2.72 last year. This was the Company’s first annual loss in nineteen years. Adjusted basic net earnings per common share(2) for the year declined to $2.72 in 2006 from $3.35 in the prior year. Excluding the impact of necessary short term costs associated with one of the largest transformations in the Company’s history, Loblaw still earned $1.9 billion in Adjusted
(1) See Forward-Looking Statements.
(2) See Non-GAAP Financial Measures (51 KB PDF) in the Financial Report.