BRAMPTON, ON, Feb. 23, 2012 /CNW/ - Loblaw Companies Limited
("Loblaw" or the "Company") today announced its unaudited financial
results for the fourth quarter of 2011 and the release of its 2011
Annual Report, which includes the Company's audited consolidated
financial statements and Management's Discussion and Analysis for
the fiscal year ended December 31, 2011. The Company's 2011 Annual
Report will be available in the Investor Centre section of the
Company's website at www.loblaw.ca and will be filed with SEDAR and
available at www.sedar.com. Fourth Quarter 2011 Summary((1)) --
Basic net earnings per common share of $0.62, up 5.1% compared to
the fourth quarter of 2010. -- EBITDA margin(2) of 6.6% compared to
6.7% in the fourth quarter of 2010. -- Revenue of $7,373 million,
an increase of 3.6% over the fourth quarter of 2010. -- Retail
sales growth of 3.2% and same-store sales growth of 2.5%,
positively impacted by an extra day of store operations compared to
the fourth quarter of 2010. "We are pleased with our performance in
the fourth quarter and the year. The ongoing strengthening of our
customer proposition delivered improved sales at satisfactory
margins, particularly in the second half of the year," said Galen
G. Weston, Executive Chairman, Loblaw Companies Limited. "Looking
ahead to 2012, we estimate incremental costs related to investments
in information technology and supply chain to be approximately $70
million, and the continuation of investments in our customer
proposition to be approximately $40 million. We do not expect our
operations to cover these incremental costs, and as a result, we
anticipate full-year 2012 net earnings per share to be down
year-over-year, with more pressure in the first half of the year."
Due to the transition to International Financial Reporting
Standards ("IFRS" or "GAAP") effective January 2, 2011, all
comparative figures for 2010 that were previously reported in the
consolidated financial statements prepared in accordance with
Canadian generally accepted accounting principles ("CGAAP") have
been restated to conform with IFRS. Further information on the
transition to IFRS and its impact on the Company's financial
position, financial performance and cash flows is included in note
31 of the Company's 2011 Annual Report - Financial Review. With
this transition, the Company has two reportable operating segments:
-- The Retail segment, which consists primarily of food and also
includes drugstore, gas bars, apparel and other general
merchandise; and -- The Financial Services segment, which includes
credit card services, a retail loyalty program, insurance brokerage
services, personal banking services provided by a major Canadian
chartered bank, deposit taking services and telecommunication
services. (1) This News Release
contains forward-looking information. See Forward-Looking
Statements in this News Release for a discussion of material
factors that could cause actual results to differ materially from
the conclusions, forecasts and projections herein and of the
material factors and assumptions that were used when making these
statements. This News Release should be read in conjunction with
Loblaw Companies Limited's filings with securities regulators made
from time to time, all of which can be found at sedar.com and at
loblaw.ca. (2) See Non-GAAP Financial
Measures in this News Release. Consolidated Quarterly Results of
Operations For the periods ended December 31, 2011 and January 1,
2011 (unaudited) (millions of Canadian dollars except where 2011
otherwise 2011 2010 % (52 2010 $ % indicated) (12 weeks) (12 weeks)
$ Change Change weeks) (52 weeks) Change Change $ $ $ Revenue $
7,373 $ 7,119 $ 254 3.6% 31,250 30,836 414 1.3% Operating income
315 324 (9) (2.8%) 1,384 1,347 37 2.7% Net earnings 174 165 9 5.5%
769 675 94 13.9% Basic net earnings per common share ($) 0.62 0.59
0.03 5.1% 2.73 2.43 0.30 12.3% Operating margin 4.3% 4.6% 4.4% 4.4%
$ $ $ $ $ EBITDA(1) $ 485 476 9 1.9% 2,083 1,975 108 5.5% EBITDA
margin(1) 6.6% 6.7% 6.7% 6.4% -- The $254 million increase in
revenue compared to the fourth quarter of 2010 was driven by
improvements in both Retail sales and Financial Services revenue,
as described below. -- Operating income decreased by $9 million
compared to the fourth quarter of 2010 as a result of a decrease in
Retail operating income of $6 million and a decrease in Financial
Services operating income of $3 million. Operating margin was 4.3%
for the fourth quarter of 2011 compared to 4.6% in the same quarter
in 2010. -- Consolidated operating income included the following
notable items: o A $23 million charge (2010 - nil) related to the
transition of certain Ontario conventional stores to more cost
effective and efficient operating terms of collective agreements
ratified in 2010; o Incremental costs of $22 million related to
investments in information technology ("IT") and supply chain.
These costs included the following charges: # $43 million (2010 -
$34 million) related to depreciation and amortization; # $74
million (2010 - $60 million) related to other supply chain and IT
costs; and # A nil charge (2010 - $1 million) related to changes in
the distribution network. o $16 million (2010 - nil) of start-up
costs associated with the launch of the Company's Joe Fresh brand
in the United States; o A $5 million charge (2010 - $7 million
recovery) for fixed asset impairments net of recoveries, related to
asset carrying values in excess of recoverable amounts for specific
retail locations; and o A charge of $4 million (2010 - $7 million)
related to the effect of share-based compensation net of equity
forwards. -- The increase in net earnings of $9 million, or 5.5%,
compared to the fourth quarter of 2010 was primarily due to a
decrease in net interest expense and other financing charges and a
decline in the effective income tax rate, partially offset by the
decrease in operating income. In the fourth quarter of 2010, the
Company recognized a tax expense of $14 million related 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. -- Basic net earnings per common share were impacted
by the following o A $0.06 charge (2010 - nil) related to the
transition of certain Ontario conventional stores to the operating
terms under collective agreements ratified in 2010; o A $0.06
charge related to incremental investments in IT and supply chain; o
A $0.04 charge (2010 - nil) related to the start-up costs
associated with the launch of the Company's Joe Freshbrand in the
United States; o A $0.01 charge (2010 - $0.02 recovery) for fixed
asset impairments net of recoveries; o A $0.01 charge (2010 -
$0.02) related to the effect of share-based compensation net of
equity forwards; and o A nil charge (2010 - $0.05) related to the
tax expense recognized due to changes in federal tax legislation
related to share-based compensation. -- In 2011, the Company
invested $1.0 billion in capital expenditures with approximately
50% invested in its IT and supply chain infrastructure and the
remaining 50% invested in its retail operations.
(1) See Non-GAAP Financial Measures in
this News Release. The consolidated quarterly results by reportable
operating segments were as follows: Retail Results of Operations
For the periods ended December 31, 2011 and January 1, 2011
(unaudited) (millions of Canadian dollars except where 2010
otherwise 2011 2010 $ % 2011 (52 $ % indicated) (12weeks) (12
weeks) Change Change (52weeks) weeks) Change Change $ $ $ $ Sales $
7,226 $ 7,001 225 3.2% 30,703 30,315 388 1.3% Gross profit 1,569
1,583 (14) (0.9%) 6,820 6,787 33 0.5% Operating income 297 303 (6)
(2.0%) 1,312 1,239 73 5.9% Same-store sales growth (decline) 2.5%
(1.6%) 0.9% (0.6%) Gross profit percentage 21.7% 22.6% 22.2% 22.4%
Operating margin 4.1% 4.3% 4.3% 4.1% -- In the fourth quarter of
2011, the increase of $225 million, or 3.2%, in Retail sales over
the same period in the prior year was impacted by the following
factors: o Same-store sales growth was 2.5% (2010 - 1.6% decline),
with an extra day of store operations having a positive impact
estimated to be between 0.8% and 1.0%; o Sales growth in food was
strong, partially driven by the extra day of store operations; o
Sales growth in drugstore was flat; o Gas bar sales growth was
strong as a result of higher retail gas prices and moderate volume
growth; o Sales in general merchandise, excluding apparel, declined
marginally due to continued reductions in square footage and
optimization of range and assortment of products; o Sales growth in
apparel was strong, partially driven by increased apparel square
footage, including five new Joe Fresh free standing stores; and o
The Company experienced moderate average quarterly internal food
price inflation during the fourth quarter of 2011, which was lower
than the average quarterly national food price inflation of 5.2%
(2010 - 1.5%) as measured by "The Consumer Price Index for Food
Purchased from Stores" ("CPI"). CPI does not necessarily reflect
the effect of inflation on the specific mix of goods sold in Loblaw
stores. -- In the fourth quarter of 2011 the gross profit
percentage was 21.7%, consistent with the third quarter of 2011,
but a decline from 22.6% in the fourth quarter of 2010. The decline
was primarily driven by a higher level of promotional activity and
higher input costs outpacing internal food price inflation, a
higher proportion of lower margin gas bar sales and increased
transportation costs, partially offset by improved shrink. The $14
million decrease in gross profit was mainly due to increases in
promotional pricing programs and transportation costs, partially
offset by improved control brand profitability, improved shrink and
the growth and performance of the Company's franchise business. --
Operating income decreased by $6 million compared to the fourth
quarter of 2010 and operating margin was 4.1% for the fourth
quarter of 2011 compared to 4.3% in the same period in 2010. In
addition to the notable items described in the "Consolidated
Quarterly Results of Operations" above, these decreases were also
driven by the decline in gross profit, partially offset by
improvements in the growth and performance of the Company's
franchisees and continued labour, supply chain and other operating
cost efficiencies. Financial Services Results of Operations For the
periods ended December 31, 2011 and January 1, 2011 (unaudited)
(millions of Canadian dollars except where 2011 otherwise 2011 2010
$ % (52 2010 $ % indicated) (12 weeks) (12 weeks) Change Change
weeks) (52 weeks) Change Change Revenue $ $ $ 147 $ 118 29 24.6% $
547 $ 521 26 5.0% Operating income 18 21 (3) (14.3%) 72 108 (36)
(33.3%) Earnings before income taxes 7 11 (4) (36.4%) 24 66 (42)
(63.6%) Unaudited (millions As at As at $ Change % Change of
Canadian dollars December 31, 2011 January 1, 2011 except where
otherwise indicated) Average quarterly $ 1,974 $ 1,941 $ 33 1.7%
net credit card receivables Credit card 2,101 1,997 104 5.2%
receivables Credit card 37 34 3 8.8% receivables provision
Annualized yield on 12.5% 13.2% average quarterly gross credit card
receivables Annualized credit 4.2% 5.6% loss rate on average
quarterly gross credit card receivables -- The 24.6% increase in
revenue over the fourth quarter of 2010 was driven by increased
credit card transaction values resulting in higher interchange fee
income and higher PC Telecom revenues as a result of the launch of
the new Mobile Shop kiosks in the fourth quarter. -- The decreases
of $3 million in operating income and $4 million in earnings before
income taxes compared to the fourth quarter of 2010 were
attributable to investments in the launch of PC Telecom's Mobile
Shop kiosks and an increased credit card loss provision as a result
of quarterly growth in the receivables program, partially offset by
the increase in interchange fee income. Outlook((1)) -- For fiscal
2012, the Company expects: o Capital expenditures to be
approximately $1.1 billion, with approximately 40% to be dedicated
to investing in the IT infrastructure and supply chain projects and
the remaining 60% to be spent on retail operations; o Costs
associated with the transition of certain Ontario conventional
stores under collective agreements ratified in 2010 to range from
$30 million to $40 million; o Incremental costs related to
investments in IT and supply chain to be approximately $70 million;
o Incremental investments in its customer proposition to be
approximately $40 million; and o Full-year 2012 net earnings per
share to be down year-over-year, with more pressure in the first
half of the year, as a result of the Company's expectation that
operations will not cover the incremental costs related to the
investments in IT and supply chain and its customer proposition.
(1) See Forward-Looking Statements in this News Release.
Forward-Looking Statements This News Release for Loblaw Companies
Limited contains forward-looking statements about the Company's
objectives, plans, goals, aspirations, strategies, financial
condition, results of operations, cash flows, performance,
prospects and opportunities. These forward-looking statements are
typically identified by words such as "anticipate", "expect",
"believe", "foresee", "could", "estimate", "goal", "intend",
"plan", "seek", "strive", "will", "may" and "should" and similar
expressions, as they relate to the Company and its management. In
this News Release, forward looking statements include the Company's
expectation that: -- its capital expenditures in 2012 will be
approximately $1.1 billion; -- costs associated with the transition
of certain Ontario conventional stores under collective agreements
ratified in 2010 will range from $30 million to $40 million; --
incremental costs related to investments in IT and supply chain in
2012 will be approximately $70 million; -- incremental costs
associated with strengthening its customer proposition will be
approximately $40 million; and -- full-year 2012 net earnings per
share to be down year-over-year, with more pressure in the first
half of the year, as a result of the Company's expectation that
operations will not cover the incremental costs related to the
investments in IT and supply chain and its customer proposition.
These forward-looking statements are not historical facts but
reflect the Company's current expectations concerning future
results and events. They also reflect management's current
assumptions regarding the risks and uncertainties referred to below
and their respective impact on the Company. In addition, the
Company's expectation with regard to its net earnings in 2012 is
based in part on the assumptions that tax rates will be similar to
those in 2011, the Company achieves its plan to increase net retail
square footage by 1% and there are no unexpected adverse events or
costs related to the Company's investments in IT and supply chain.
These forward-looking statements are subject to a number of risks
and uncertainties that could cause actual results or events to
differ materially from current expectations, including, but not
limited to: -- failure to realize revenue growth, anticipated cost
savings or operating efficiencies from the Company's major
initiatives, including investments in the Company's IT systems,
including the Company's IT systems implementation, or unanticipated
results from these initiatives; -- the inability of the Company's
IT infrastructure to support the requirements of the Company's
business; -- heightened competition, whether from current
competitors or new entrants to the market place; -- changes in
economic conditions including the rate of inflation or deflation,
changes in interest and currency exchange rates and derivative and
commodity prices; -- public health events including those related
to food safety; -- failure to achieve desired results in labour
negotiations, including the terms of future collective bargaining
agreements, which could lead to work stoppages; -- the inability of
the Company to manage inventory to minimize the impact of obsolete
or excess inventory and to control shrink; -- failure by the
Company to maintain appropriate records to support its compliance
with accounting, tax or legal rules, regulations and policies; --
failure of the Company's franchise stores to perform as expected;
-- reliance on the performance and retention of third-party service
providers including those associated with the Company's supply
chain and apparel business; -- supply and quality control issues
with vendors; -- changes to or failure to comply with laws and
regulations affecting the Company and its business, including
changes to the regulation of generic prescription drug prices and
the reduction of reimbursement under public drug benefit plans and
the elimination or reduction of professional allowances paid by
drug manufacturers; -- changes in the Company's income, commodity,
other tax and regulatory liabilities including changes in tax laws,
regulations or future assessments; -- any requirement of the
Company to make contributions to its registered funded defined
benefit pension plans or the multi-employer pension plans in which
it participates in excess of those currently contemplated; -- the
risk that the Company would experience a financial loss if its
counterparties fail to meet their obligations in accordance with
the terms and conditions of their contracts with the Company; and
-- the inability of the Company to collect on its credit card
receivables. This is not an exhaustive list of the factors that may
affect the Company's forward-looking statements. Other risks and
uncertainties not presently known to the Company or that the
Company presently believes are not material could also cause actual
results or events to differ materially from those expressed in its
forward-looking statements. Additional risks and uncertainties are
discussed in the Company's materials filed with the Canadian
securities regulatory authorities from time to time, including the
Enterprise Risks and Risk Management section of the Management's
Discussion and Analysis ("MD&A") and the MD&A included in
the Company's 2011 Annual Report - Financial Review. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect the Company's expectations only as of the
date of this News Release. The Company disclaims any intention or
obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. Consolidated Statements of Earnings 2011
2010 2011 2010 For the periods ended December 31, 2011 and January
1, 2011 (millions of Canadian dollars except where (12 Weeks) (12
Weeks) (52 Weeks) (52 Weeks) otherwise indicated) (unaudited)
(unaudited) (audited) (audited) Revenue $ 7,373 $ 7,119 $ 31,250 $
30,836 Cost of Merchandise 5,664 5,420 23,894 23,534 Inventories
Sold Selling, General and 1,394 1,375 5,972 5,955 Administrative
Expenses Operating Income 315 324 1,384 1,347 Net interest expense
and 81 83 327 353 other financing charges Earnings Before Income
234 241 1,057 994 Taxes Income taxes 60 76 288 319 Net Earnings $
174 $ 165 $ 769 $ 675 Net Earnings per Common Share ($) Basic $
0.62 $ 0.59 $ 2.73 $ 2.43 Diluted $ 0.60 $ 0.58 $ 2.71 $ 2.38
Consolidated Balance Sheets As at As at As at (millions of Canadian
December 31, 2011 January 1, 2011 January 3, 2010 dollars)
(audited) Assets Current Assets Cash and cash $ 966 $ 857 $ 731
equivalents Short term 754 754 663 investments Accounts 467 366 367
receivable Credit card 2,101 1,997 2,095 receivables Inventories
2,025 1,956 1,982 Income taxes - 8 - recoverable Prepaid expenses
117 83 101 and other assets Assets held for 32 71 56 sale Total
Current Assets 6,462 6,092 5,995 Fixed Assets 8,725 8,377 7,815
Investment Properties 82 74 75 Goodwill & Intangible 1,029
1,026 1,023 Assets Deferred Income Taxes 232 227 258 Security
Deposits 266 354 250 Franchise Loans 331 314 344 Receivable Other
Assets 301 377 330 Total Assets $ 17,428 $ 16,841 $ 16,090
Liabilities Current Liabilities Bank $ - $ 10 $ 10 Indebtedness
Trade payables 3,677 3,522 3,372 and other liabilities Provisions
35 62 62 Income taxes 14 - 42 payable Short term debt 905 535 1,225
Long term debt 87 902 312 due within one year Total Current 4,718
5,031 5,023 Liabilities Provisions 50 43 44 Long Term Debt 5,493
5,198 5,041 Deferred Income Taxes 21 35 27 Capital Securities 222
221 220 Other Liabilities 917 710 655 Total Liabilities 11,421
11,238 11,010 Shareholders' Equity Common Share Capital 1,540 1,475
1,308 Retained Earnings 4,414 4,122 3,771 Contributed Surplus 48 1
- Accumulated Other 5 5 1 Comprehensive Income Total Shareholders'
6,007 5,603 5,080 Equity Total Liabilities and $ 17,428 $ 16,841 $
16,090 Shareholders' Equity Consolidated Statements of Cash Flow
2011 2010 2011 2010 For the years ended December 31, 2011 and (12
weeks) (12 weeks) (52 weeks) (52 weeks) January 1, 2011 (unaudited)
(unaudited) (audited) (audited) (millions of Canadian dollars)
Operating Activities Net earnings $ 174 $ 165 $ 769 $ 675 Income
taxes 60 76 288 319 Net interest 81 83 327 353 expense and other
financing charges Depreciation and 170 152 699 628 amortization
Income taxes (54) (81) (216) (298) paid Interest 18 12 60 52
received Settlement of (7) − (7) − equity forward contracts Net
(increase) decrease in (190) (142) (104) 98 credit card receivables
Change in 348 324 8 151 non-cash working capital Fixed assets and
(4) (10) 5 27 other related impairments (Gain)/loss on (7) (10)
(18) 8 disposal of assets Other 31 14 3 16 Cash Flows from 620 583
1,814 2,029 Operating Activities Investing Activities Fixed asset
(347) (437) (987) (1,190) purchases Change in short 51 50 18 (129)
term investments Proceeds from 6 53 57 90 fixed asset sales Change
in (27) (8) (24) (25) franchise investments and other receivables
Change in (85) (6) 92 (115) security deposits Other (12) 9 (12)
(12) Cash Flows used (414) (339) (856) (1,381) in Investing
Activities Financing Activities Change in bank − 10 (10) −
indebtedness Change in short − (600) 370 (690) term debt Long term
debt Issued 4 609 287 981 Retired (53) (7) (909) (322) Interest
paid (103) (112) (380) (418) Dividends paid (59) (15) (193) (65)
Common shares Issues 2 − 21 − Purchased for (17) − (39) −
cancellation Cash Flows used (226) (115) (853) (514) in Financing
Activities Effect of foreign (1) (4) 4 (8) currency exchange rate
changes on cash and cash equivalents Change in Cash (21) 125 109
126 and Cash Equivalents Cash and Cash 987 732 857 731 Equivalents,
Beginning of Year Cash and Cash $ 966 $ 857 $ 966 $ 857
Equivalents, End of Year 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 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 GAAP. EBITDA and EBITDA Margin The following table reconciles
earnings before income taxes, interest expense and depreciation and
amortization ("EBITDA") to operating income which is reconciled to
GAAP net earnings measures reported in the consolidated statements
of earnings for the years ended December 31, 2011 and January 1,
2011. EBITDA is useful to management in assessing performance of
its ongoing operations and its ability to generate cash flows to
fund its cash requirements, including the Company's capital
investment program. EBITDA margin is calculated as EBITDA divided
by sales. 2011 2010 2011 2010 (millions of (12 weeks) (12 weeks)
(52 weeks) (52 weeks) Canadian dollars) (unaudited) (unaudited)
(unaudited) (unaudited) Net earnings $ 174 $ 165 $ 769 $ 675 Add
impact of the following: Income taxes 60 76 288 319 Net interest 81
83 327 353 expense and other financing charges Operating income 315
324 1,384 1,347 Add impact of the following: Depreciation 170 152
699 628 and amortization EBITDA $ 485 $ 476 $ 2,083 $ 1,975 2011
Annual Consolidated Financial Statements and MD&A The Company's
2011 Annual Report will be available in the Investor Centre section
of the Company's website at www.loblaw.ca or at www.sedar.com.
Investor Relations Shareholders, security analysts and investment
professionals should direct their requests to Kim Lee, Vice
President, Investor Relations at the Company's National Head Office
or by e-mail at investor@loblaw.ca. Additional information has been
filed electronically with various securities regulators in Canada
through the System for Electronic Document Analysis and Retrieval
(SEDAR) and with the Office of the Superintendent of Financial
Institutions (OSFI) as the primary regulator for the Company's
subsidiary, President's Choice Bank. Conference Call and Webcast
Loblaw Companies Limited will host a conference call as well as an
audio webcast on February 23, 2012 at 11:00 a.m. (EST). To access
via tele-conference please dial (647) 427-7450. The playback will
be made available two hours after the event at (416) 849-0833,
access code: 42503608. To access via webcast please visit
www.loblaw.ca, go to Investor Centre and click on webcast.
Pre-registration will be available. Full details are available on
the Loblaw Companies Limited website at www.loblaw.ca.
Loblaw Companies Limited
CONTACT: Kim Lee, Vice President, Investor Relations at the
Company'sNationalHead Office or by e-mail at investor@loblaw.ca
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