BRAMPTON, ON, July 26,
2023 /CNW/ - Loblaw Companies Limited (TSX: L)
("Loblaw" or the "Company") announced today its unaudited financial
results for the second quarter ended June
17, 2023(1).
Loblaw delivered another quarter of strong operational and
financial results as it continued to execute on retail excellence.
The quarter was characterized by increased sales, a focus on value,
and lower gross margins. Net earnings were up 31.3%, unusually
elevated by lapping a prior year charge at President's Choice Bank
("PC Bank"), while adjusted net earnings were up 10.6%. Loblaw's
ability to deliver everyday value and savings to Canadians was
reflected in strong sales growth across its Food and Drug
businesses. Food Retail sales growth was led by a continued
consumer shift to discount stores, as customers continued to find
value in Loblaw's private label brands and personalized PC Optimum™
offers. Drug front-store and pharmacy sales remained strong, led by
continued strength in beauty products. Retail gross margin declined
slightly in both Food and Drug as the Company faced double digit
supplier cost increases that were not fully passed on to consumers,
and higher shrink. Higher sales and cost control initiatives drove
adjusted net earnings growth in the quarter.
"Our businesses remain focused on providing Canadians with the
selection, freshness, care and value they need today," said
Galen G. Weston, Chairman and
President, Loblaw Companies Limited. "We will build on this
strength and continue to take meaningful steps to fight back
against inflation. Our discount offering, best-in-class control
brand products and PC Optimum™ Program are resonating with
customers who are looking for value without sacrificing
quality."
2023 SECOND QUARTER HIGHLIGHTS
- Revenue was $13,738 million, an
increase of $891 million, or
6.9%.
- Retail segment sales were $13,471
million, an increase of $848
million, or 6.7%.
-
- Food Retail (Loblaw) same-stores sales increased by 6.1%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
5.7%, with front store same-store sales growth of 5.0% and pharmacy
same-store sales growth of 6.3%.
- E-commerce sales increased by 13.9%.
- Operating income was $927
million, an increase of $185
million, or 24.9%.
- Adjusted EBITDA(2) was $1,640
million, an increase of $141
million, or 9.4%.
- Retail segment adjusted gross profit percentage(2)
was 31.1%, a decrease of 30 basis points.
- Net earnings available to common shareholders of the Company
were $508 million, an increase of
$121 million or 31.3%. Diluted net
earnings per common share were $1.58,
an increase of $0.42, or 36.2%. The
increase included the lapping of a prior year charge of
$111 million related to a PC Bank
commodity tax matter.
- Adjusted net earnings available to common shareholders of the
Company(2) were $626
million, an increase of $60
million, or 10.6%.
- Adjusted diluted net earnings per common share(2)
were $1.94, an increase of
$0.25 or 14.8%.
- Repurchased for cancellation 4.2 million common shares at a
cost of $511 million and invested
$410 million in capital expenditures,
net of proceeds from property disposals. Free cash
flow(2) used in the Retail segment was $600 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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
June 17, 2023 and
June 18, 2022
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
|
Total
|
(millions of Canadian
dollars except where
otherwise indicated)
|
|
|
Revenue
|
|
|
$
13,471
|
$
348
|
$
(81)
|
|
$
13,738
|
|
|
$ 12,623
|
$
297
|
$ (73)
|
|
$ 12,847
|
Adjusted gross
profit(2)
|
|
|
$
4,192
|
$
315
|
$ (81)
|
|
$
4,426
|
|
|
$
3,962
|
$
266
|
$ (73)
|
|
$
4,155
|
Adjusted gross profit
%(2)
|
|
|
31.1 %
|
N/A
|
— %
|
|
32.2 %
|
|
|
31.4 %
|
N/A
|
— %
|
|
32.3 %
|
Operating income
(loss)
|
|
|
$
925
|
$
2
|
$
—
|
|
$
927
|
|
|
$
811
|
$
(69)
|
$
—
|
|
$
742
|
Adjusted operating
income(2)
|
|
|
1,046
|
39
|
—
|
|
1,085
|
|
|
938
|
42
|
—
|
|
980
|
Adjusted
EBITDA(2)
|
|
|
$
1,587
|
$
53
|
$
—
|
|
$
1,640
|
|
|
$
1,445
|
$ 54
|
$
—
|
|
$
1,499
|
Adjusted EBITDA
margin(2)
|
|
|
11.8 %
|
N/A
|
— %
|
|
11.9 %
|
|
|
11.4 %
|
N/A
|
— %
|
|
11.7 %
|
Net interest expense
and other
financing charges
|
|
|
$
157
|
$ 36
|
$
—
|
|
$
193
|
|
|
$
135
|
$ 17
|
$
—
|
|
$
152
|
Adjusted net interest
expense
and other financing charges(2)
|
|
|
157
|
36
|
—
|
|
193
|
|
|
135
|
17
|
—
|
|
152
|
Earnings (Losses)
before income
taxes
|
|
|
$
768
|
$
(34)
|
$
—
|
|
$
734
|
|
|
$
676
|
$
(86)
|
$
—
|
|
$
590
|
Income taxes
|
|
|
|
|
|
|
$
193
|
|
|
|
|
|
|
$
162
|
Adjusted income
taxes(2)
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
221
|
Net earnings
attributable to non-
controlling interests
|
|
|
|
|
|
|
$
30
|
|
|
|
|
|
|
$
38
|
Prescribed dividends on
preferred
shares in share capital
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
3
|
Net earnings
available to
common shareholders of the
Company
|
|
|
|
|
|
|
$
508
|
|
|
|
|
|
|
$
387
|
Adjusted net earnings
available to
common shareholders of the
Company(2)
|
|
|
|
|
|
|
626
|
|
|
|
|
|
|
566
|
Diluted net earnings
per
common share ($)
|
|
|
|
|
|
|
$
1.58
|
|
|
|
|
|
|
$
1.16
|
Adjusted diluted net
earnings per
common share(2) ($)
|
|
|
|
|
|
|
$
1.94
|
|
|
|
|
|
|
$
1.69
|
Diluted weighted
average
common shares outstanding
(in millions)
|
|
|
|
|
|
|
322.5
|
|
|
|
|
|
|
334.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a breakdown of the Company's total
and same-store sales for the Retail segment.
For the periods ended
June 17, 2023 and June 18, 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
|
|
|
$ 9,560
|
6.1 %
|
|
|
$
8,981
|
0.9 %
|
Drug retail
|
|
|
3,911
|
5.7 %
|
|
|
3,642
|
5.6 %
|
Pharmacy and
healthcare services
|
|
|
1,984
|
6.3 %
|
|
|
1,813
|
6.1 %
|
Front store
|
|
|
1,927
|
5.0 %
|
|
|
1,829
|
5.2 %
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $13,471
million, an increase of $848
million, or 6.7%.
-
- Food Retail (Loblaw) sales were $9,560
million and Food Retail same-store sales grew by 6.1% (2022
– 0.9%).
-
- The Consumer Price Index ("CPI") as measured by The Consumer
Price Index for Food Purchased From Stores was 9.1% (2022 – 9.6%)
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 $3,911 million, and Drug Retail same-store sales
grew by 5.7% (2022 – 5.6%), with pharmacy and healthcare services
same-store sales growth of 6.3% (2022 – 6.1%) and front store
same-store sales growth of 5.0% (2022 – 5.2%). Pharmacy and
healthcare services sales include Lifemark Health Group
("Lifemark") revenues of $112 million
(2022 – $49 million). Lifemark was
acquired on May 10, 2022.
-
- On a same-store basis, the number of prescriptions dispensed
increased by 0.9% (2022 – 2.3%) and the average prescription value
increased by 4.7% (2022 – 3.6%).
- Operating income was $925
million, an increase of $114
million, or 14.1%.
- Adjusted gross profit(2) was $4,192 million, an increase of $230 million, or 5.8%. The adjusted gross profit
percentage(2) of 31.1% decreased by 30 basis points
(2022 – increased by 50 basis points). Retail margins declined
slightly, primarily driven by higher shrink and higher supplier
costs that were not passed on to consumers.
- Adjusted EBITDA(2) was $1,587
million, an increase of $142
million, or 9.8%. 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 19.3%, a
favourable decrease of 60 basis points. The favourable decrease of
60 basis points was primarily due to operating leverage from higher
sales.
- Depreciation and amortization was $657
million, an increase of $36
million or 5.8%, primarily driven by an increase in
depreciation of information technology ("IT") assets and leased
assets, and accelerated depreciation of $8
million (2022 – nil) as a result of network optimization.
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 of $116 million (2022 – $114
million).
- The Company recorded charges of $17
million associated with network optimization, which include
accelerated depreciation of $8
million as described above, and other charges.
FINANCIAL SERVICES SEGMENT
- Revenue was $348 million, an
increase of $51 million or 17.2%. The
increase was primarily driven by higher interest income from growth
in credit card receivables, and higher interchange income and other
credit card related revenue from an increase in customer
spending.
- Losses before income taxes were $34
million in the second quarter of 2023, as compared to losses
of $86 million in the prior period.
The improvement was mainly driven by the year-over-year impact from
the prior period charge of $111
million versus the current period charge of $37 million related to commodity tax matters, and
higher revenue as described above. This was partially offset by the
year-over-year impact of the expected credit loss provision from
the prior period release of $3
million versus the current period increase of $8 million, higher contractual charge-off costs,
and higher funding costs from an increase in interest rates and
growth in the credit card portfolio.
- In the second quarter of 2023, the Federal government enacted
certain commodity tax legislation that may apply to PC Bank on a
retroactive basis. A charge of $37
million, inclusive of interest, has been recorded for this
matter.
- In July 2022, the Tax Court
released a decision relating to PC Bank. Although the Company
believes in the merits of its position, the Company recorded a
charge of $111 million, inclusive of
interest, in the second quarter of 2022. In September 2022, PC Bank filed a Notice of Appeal
with the Federal Court of Appeal. The Company believes that this
provision is sufficient to cover its liability, if the appeal is
ultimately unsuccessful.
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 second quarter, the Company progressed its ESG
pillars:
- Fighting Climate Change: Loblaw unveiled an
unprecedented carbon-free energy deal, that will see the
electricity it purchases for its supermarkets, drug stores, offices
and distribution centres in Alberta generated entirely by wind, sun and
water. The arrangement is the first of its kind in Canada and will allow the Company to eliminate
the carbon emissions associated with electricity purchases in
Alberta. This will lead to a 17%
reduction in nationwide enterprise operating emissions and saving
an estimated 180,000 metric tons of carbon emissions. The Company
also announced plans to purchase five hydrogen fuel cell electric
vehicles (FCEVs), expanding its zero-emissions fleet and enabling
short-haul zero-emission deliveries;
- Advancing Social Equity: As part of annual community
investment efforts generating nearly $110
million, the Company raised over $12
million to support President's Choice Children's Charity's
mission to feed one million children every year by 2025 and raised
more than $2.8 million for local
women's mental health programs through the annual Shoppers Drug
Mart Run for Women. As part of the Feed More Families™ commitment,
the Company provided more than 18 million pounds of food to food
charities in the first half of 2023. The Company also extended its
support to those affected by wildfires across Canada through funds raised and donated to the
Canadian Red Cross; and
- Ensuring Reliability of Our ESG Disclosures: Loblaw has
built a robust control environment to test and validate the
accuracy of ESG information which supports its commitment to
transparency and accountability. Loblaw continues to evolve and
strengthen the control environment as necessary to ensure that the
integrity and reliability of ESG disclosures meet the expectations
of stakeholders in an evolving landscape. For the first time, the
Company obtained limited assurance over its Scope 1 and 2
Greenhouse gas emissions for 2022 and its baseline year, 2020.
The Company's efforts in the second quarter demonstrate its
commitment to fighting climate change and advancing social equity,
with a focus on reducing carbon emissions, addressing food
insecurity and supporting communities in need while continuing to
place importance on governance over ESG disclosures.
NORMAL COURSE ISSUER BID PROGRAM ("NCIB")
On a year-to-date basis, the Company repurchased
7.5 million common shares for cancellation at a cost of
$894 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 second 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 October 1, 2023 to shareholders of record on
September 15, 2023.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125 per share,
payable on September 30, 2023 to shareholders of record on
September 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
June 17, 2023 and June 18, 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
|
|
|
$
1,598
|
$
42
|
$
1,640
|
|
|
$
1,375
|
$ 124
|
$
1,499
|
Operating
income
|
|
|
$
927
|
$ 158
|
$
1,085
|
|
|
$
742
|
$
238
|
$
980
|
Net interest expense
and other financing charges
|
|
|
193
|
—
|
193
|
|
|
152
|
—
|
152
|
Earnings before
income taxes
|
|
|
$ 734
|
$ 158
|
$
892
|
|
|
$
590
|
$
238
|
$
828
|
Deduct the
following:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
193
|
40
|
233
|
|
|
162
|
59
|
221
|
Non-controlling
interests
|
|
|
30
|
—
|
30
|
|
|
38
|
—
|
38
|
Prescribed dividends
on preferred shares
|
|
|
3
|
—
|
3
|
|
|
3
|
—
|
3
|
Net earnings
available to common shareholders of the
Company(i)
|
|
|
$
508
|
$ 118
|
$
626
|
|
|
$
387
|
$ 179
|
$
566
|
Diluted net earnings
per common share ($)
|
|
|
$ 1.58
|
$
0.36
|
$ 1.94
|
|
|
$ 1.16
|
$ 0.53
|
$ 1.69
|
Diluted weighted
average common shares (millions)
|
|
|
322.5
|
—
|
322.5
|
|
|
334.4
|
—
|
334.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
June 17, 2023 and June 18, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Operating
income
|
|
|
$
927
|
|
|
$
742
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
116
|
|
|
$
114
|
Charges related to PC
Bank commodity tax matters
|
|
|
37
|
|
|
111
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
5
|
|
|
4
|
Gain on sale of
non-operating properties
|
|
|
—
|
|
|
(4)
|
Lifemark transaction
costs
|
|
|
—
|
|
|
13
|
Adjusting
items
|
|
|
$
158
|
|
|
$
238
|
Adjusted operating
income(2)
|
|
|
$
1,085
|
|
|
$
980
|
Net interest expense
and other financing charges
|
|
|
$
193
|
|
|
$
152
|
Adjusted net
interest expense and other financing
charge(2)
|
|
|
$
193
|
|
|
$
152
|
Income
taxes
|
|
|
$
193
|
|
|
$
162
|
Add the impact of the
following:
|
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before taxes
|
|
|
$
40
|
|
|
$
59
|
Adjusting
items
|
|
|
$
40
|
|
|
$
59
|
Adjusted income
taxes(2)
|
|
|
$
233
|
|
|
$
221
|
|
|
|
|
|
|
|
CORPORATE PROFILE
2022 Annual Report and 2023 Second Quarter Report
to Shareholders
The Company's 2022 Annual Report and 2023 Second 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 July 26, 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: 664086#. 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 Second 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 Second
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
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
June 17, 2023
and June 18, 2022
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
|
|
Retail
|
Financial
Services
|
Elimi-
nations
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
Revenue
|
|
|
$
13,471
|
$
348
|
|
$
(81)
|
|
$
13,738
|
|
|
$ 12,623
|
$
297
|
|
$ (73)
|
|
$ 12,847
|
Cost of
sales
|
|
|
9,279
|
33
|
|
—
|
|
9,312
|
|
|
8,661
|
31
|
|
—
|
|
8,692
|
Gross profit
|
|
|
$
4,192
|
$ 315
|
|
$
(81)
|
|
$
4,426
|
|
|
$
3,962
|
$
266
|
|
$ (73)
|
|
$
4,155
|
Adjusted gross
profit
|
|
|
$
4,192
|
$ 315
|
|
$
(81)
|
|
$
4,426
|
|
|
$
3,962
|
$
266
|
|
$ (73)
|
|
$
4,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
June 17, 2023 and June 18, 2022
|
|
|
Retail
|
Financial
Services
|
Total
|
|
|
Retail
|
Financial
Services
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
Net earnings
attributable to shareholders of the
Company
|
|
|
|
|
$ 511
|
|
|
|
|
$
390
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
30
|
|
|
|
|
38
|
Net interest expense
and other financing charges
|
|
|
|
|
193
|
|
|
|
|
152
|
Income
taxes
|
|
|
|
|
193
|
|
|
|
|
162
|
Operating income
(loss)
|
|
|
$
925
|
$
2
|
$
927
|
|
|
$ 811
|
$ (69)
|
$
742
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart and Lifemark
|
|
|
$
116
|
$
—
|
$ 116
|
|
|
$ 114
|
$ —
|
$ 114
|
Charges related to PC
Bank commodity tax matters
|
|
|
—
|
37
|
37
|
|
|
—
|
111
|
111
|
Fair value adjustment
on fuel and foreign currency
contracts
|
|
|
5
|
—
|
5
|
|
|
4
|
—
|
4
|
Gain on sale of
non-operating properties
|
|
|
—
|
—
|
—
|
|
|
(4)
|
—
|
(4)
|
Lifemark transaction
costs
|
|
|
—
|
—
|
—
|
|
|
13
|
—
|
13
|
Adjusting
items
|
|
|
$
121
|
$ 37
|
$
158
|
|
|
$
127
|
$ 111
|
$
238
|
Adjusted operating
income
|
|
|
$
1,046
|
$ 39
|
$
1,085
|
|
|
$
938
|
$ 42
|
$
980
|
Depreciation and
amortization
|
|
|
657
|
14
|
671
|
|
|
621
|
12
|
633
|
Less: Amortization of
intangible assets acquired with
Shoppers Drug Mart and Lifemark
|
|
|
(116)
|
—
|
(116)
|
|
|
(114)
|
—
|
(114)
|
Adjusted
EBITDA
|
|
|
$
1,587
|
$ 53
|
$
1,640
|
|
|
$
1,445
|
$ 54
|
$
1,499
|
|
|
|
|
|
|
|
|
|
|
|
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.
Charges related to PC Bank commodity tax
matters In the second quarter of 2023,
the Federal government enacted certain commodity tax
legislation that may apply to PC Bank on a retroactive basis. A
charge of $37 million, inclusive of
interest, has been recorded for this matter.
In the second quarter of 2022, the Company recorded a charge of
$111 million, inclusive of interest.
In July 2022, the Tax Court released
its decision and ruled that PC Bank is not entitled to claim
notional input tax credits for certain payments it made to Loblaws
Inc. in respect of redemptions of loyalty points. In September 2022, PC Bank filed a Notice of Appeal
with the Federal Court of the Appeal.
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
second quarter of 2023, the Company did not record any gain or loss
related to the sale of non-operating properties (2022 – gain of
$4 million).
Lifemark transaction costs In connection with
the acquisition of Lifemark during 2022, the Company recorded
acquisition costs of $13 million in operating income in the
second quarter of 2022.
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
June 17, 2023 and June 18, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Net interest expense
and other financing charges
|
|
|
$
193
|
|
|
$
152
|
Adjusted net interest
expense and other financing charges
|
|
|
$
193
|
|
|
$
152
|
|
|
|
|
|
|
|
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
June 17, 2023 and June 18, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Adjusted operating
income(i)
|
|
|
$ 1,085
|
|
|
$
980
|
Adjusted net interest
expense and other financing charges(i)
|
|
|
193
|
|
|
152
|
Adjusted earnings
before taxes
|
|
|
$
892
|
|
|
$
828
|
Income taxes
|
|
|
$
193
|
|
|
$
162
|
Add: Tax impact of
items included in adjusted earnings before
taxes(ii)
|
|
|
40
|
|
|
59
|
Adjusted income
taxes
|
|
|
$
233
|
|
|
$
221
|
Effective tax
rate
|
|
|
26.3 %
|
|
|
27.4 %
|
Adjusted effective tax
rate
|
|
|
26.1 %
|
|
|
26.7 %
|
|
|
|
|
|
|
|
|
|
(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
June 17, 2023 and June 18, 2022
|
|
|
2023
|
|
|
2022
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
511
|
|
|
$
390
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Net earnings available
to common shareholders of the Company
|
|
|
$
508
|
|
|
$
387
|
Net earnings
attributable to shareholders of the Company
|
|
|
$
511
|
|
|
$
390
|
Adjusting items (refer
to the following table)
|
|
|
118
|
|
|
179
|
Adjusted net earnings
attributable to shareholders of the Company
|
|
|
$
629
|
|
|
$
569
|
Prescribed dividends on
preferred shares in share capital
|
|
|
(3)
|
|
|
(3)
|
Adjusted net earnings
available to common shareholders of the Company
|
|
|
$
626
|
|
|
$
566
|
Diluted weighted
average common shares outstanding (millions)
|
|
|
322.5
|
|
|
334.4
|
|
|
|
|
|
|
|
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
June 17, 2023 and June 18, 2022
(millions of Canadian dollars/Canadian dollars)
|
|
|
|
|
As
reported
|
|
|
$ 508
|
$
1.58
|
|
|
$ 387
|
$ 1.16
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
|
$
85
|
$
0.26
|
|
|
$
83
|
$
0.25
|
Charges related to PC
Bank commodity tax matters
|
|
|
29
|
0.09
|
|
|
86
|
0.25
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
|
4
|
0.01
|
|
|
3
|
0.01
|
Gain on sale of
non-operating properties
|
|
|
—
|
—
|
|
|
(3)
|
(0.01)
|
Lifemark transaction
costs
|
|
|
—
|
—
|
|
|
10
|
0.03
|
Adjusting
items
|
|
|
$
118
|
$
0.36
|
|
|
$
179
|
$
0.53
|
Adjusted
|
|
|
$
626
|
$
1.94
|
|
|
$ 566
|
$
1.69
|
|
|
|
|
|
|
|
|
|
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
June 17, 2023 and June 18, 2022
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Total
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Total
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in) operating activities
|
|
|
$
1,435
|
|
$
(167)
|
|
$
21
|
|
$
1,289
|
|
|
$
1,542
|
|
$
(314)
|
|
$
17
|
|
$
1,245
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments(ii)
|
|
|
416
|
|
7
|
|
—
|
|
423
|
|
|
293
|
|
9
|
|
—
|
|
302
|
Interest
paid
|
|
|
71
|
|
—
|
|
21
|
|
92
|
|
|
66
|
|
—
|
|
17
|
|
83
|
Lease payments,
net
|
|
|
348
|
|
—
|
|
—
|
|
348
|
|
|
343
|
|
—
|
|
—
|
|
343
|
Free cash
flow(2)
|
|
|
$ 600
|
|
$
(174)
|
|
$
—
|
|
$ 426
|
|
|
$ 840
|
|
$
(323)
|
|
$
—
|
|
$
517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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