BRAMPTON, ON, Nov. 16,
2022 /CNW/ - Loblaw Companies Limited (TSX: L)
("Loblaw" or the "Company") announced today its unaudited financial
results for the third quarter ended October
8, 2022.(1)
Loblaw delivered positive financial and operating performance as
it continued to execute on retail excellence in its core businesses
while advancing its growth and efficiencies initiatives, and
furthering its Environmental, Social and Governance leadership.
In a continued period of global food inflation, Canadian retail
food inflation remained among the lowest of G7 countries, however
global inflationary forces continued to increase the cost of food
in the quarter. Loblaw's efforts to moderate cost increases and
provide superior value to customers through its PC
OptimumTM Program and promotions resulted in
strong sales and stable gross margins in Food Retail. Sales were
led by strong performance in Discount banners such as No Frills®
and Real Canadian Superstore® , and a continued shift to private
label brands including President's Choice® and no name®. In Drug
Retail, revenues benefited from elevated sales of higher margin
categories like beauty, cough and cold.
"In a difficult economic environment, Loblaw is putting the
strength of its unique assets to work for Canadians, offering
record loyalty rewards, unmatched private-label brands, the best
discount stores, and an inflation-fighting price freeze," said
Galen G. Weston, Chairman and
President, Loblaw Companies Limited. "Customer expectations for
value have never been higher, and we are working hard to meet
them."
2022 THIRD QUARTER HIGHLIGHTS
- Revenue was $17,388 million, an
increase of $1,338 million, or
8.3%.
- Retail segment sales were $17,130
million, an increase of $1,299
million, or 8.2%.
-
- Food Retail (Loblaw) same-stores sales increased by 6.9%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
7.7%.
- E-commerce sales increased by 3%.
- Operating income was $991
million, an increase of $128
million, or 14.8%.
- Adjusted EBITDA(2) was $1,846
million, an increase of $172
million, or 10.3%.
- Retail segment adjusted gross profit percentage(2)
was 30.8%, an increase of 10 basis points.
- Net earnings available to common shareholders of the Company
were $556 million, an increase of
$125 million or 29.0%. Diluted net
earnings per common share were $1.69,
an increase of $0.42, or 33.1%.
- Adjusted net earnings available to common shareholders of the
Company(2) were $663
million, an increase of $123
million, or 22.8%.
- Adjusted diluted net earnings per common share(2)
were $2.01, an increase of
$0.42 or 26.4%.
- Repurchased for cancellation, 3.4 million common shares at a
cost of $403 million and invested
$432 million in capital expenditures.
Retail segment free cash flow(2) was $543 million.
See "News Release
Endnotes" at the end of this News Release.
|
CONSOLIDATED AND SEGMENT RESULTS OF OPERATIONS
The following
tables provide key performance metrics for the Company by segment
and same-store sales.
|
|
2022
|
|
|
2021
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Consol-
idated
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Consol-
idated
|
(millions of Canadian
dollars)
|
|
Revenue
|
|
$
17,130
|
$
350
|
$
(92)
|
$
17,388
|
|
|
$ 15,831
|
$
297
|
$
(78)
|
$ 16,050
|
Adjusted gross
profit(2)
|
|
$
5,272
|
$
294
|
$ (92)
|
$
5,474
|
|
|
$
4,856
|
$
245
|
$
(78)
|
$
5,023
|
Adjusted gross profit
%(2)
|
|
30.8 %
|
N/A
|
— %
|
31.5 %
|
|
|
30.7 %
|
N/A
|
— %
|
31.3 %
|
Operating income
(loss)
|
|
$
949
|
$ 42
|
$
—
|
$
991
|
|
|
$
816
|
$ 47
|
$ —
|
$
863
|
Adjusted operating
Income(2)
|
|
1,091
|
42
|
—
|
1,133
|
|
|
965
|
47
|
—
|
1,012
|
Adjusted
EBITDA(2)
|
|
$
1,791
|
$
55
|
$
—
|
$
1,846
|
|
|
$
1,617
|
$ 57
|
$ —
|
$
1,674
|
Adjusted EBITDA
margin(2)
|
|
10.5 %
|
N/A
|
— %
|
10.6 %
|
|
|
10.2 %
|
N/A
|
— %
|
10.4 %
|
Net interest expense
and
other financing charges
|
|
$
194
|
$ 23
|
$
—
|
$
217
|
|
|
$
187
|
$ 16
|
$ —
|
$
203
|
Adjusted net interest
expense
and other financing charges
|
|
194
|
23
|
—
|
217
|
|
|
187
|
16
|
—
|
203
|
Earnings before
income taxes
|
|
$
755
|
$
19
|
$
—
|
$
774
|
|
|
$
629
|
$ 31
|
$ —
|
$
660
|
Income Taxes
|
|
|
|
|
$ 199
|
|
|
|
|
|
$
172
|
Adjusted income
taxes(2)
|
|
|
|
|
234
|
|
|
|
|
|
212
|
Net earnings
attributable to
non-controlling interests
|
|
|
|
|
$
16
|
|
|
|
|
|
$
54
|
Prescribed dividends
on
preferred shares in
share capital
|
|
|
|
|
3
|
|
|
|
|
|
3
|
Net earnings
available to
common shareholders of
the Company
|
|
|
|
|
$
556
|
|
|
|
|
|
$
431
|
Adjusted net earnings
available
to common shareholders of
the Company(2)
|
|
|
|
|
663
|
|
|
|
|
|
540
|
Diluted net earnings
per
common share ($)
|
|
|
|
|
$
1.69
|
|
|
|
|
|
$
1.27
|
Adjusted diluted net
earnings
per common share(2) ($)
|
|
|
|
|
$ 2.01
|
|
|
|
|
|
$
1.59
|
Diluted weighted
average
common shares
outstanding (in millions)
|
|
|
|
|
329.6
|
|
|
|
|
|
340.1
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended
October 8, 2022 and October 9, 2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
|
Sales
|
Same-store
sales
|
|
|
Sales
|
Same-store
sales
|
Food retail
|
|
|
$
12,221
|
6.9 %
|
|
|
$
11,382
|
0.2 %
|
Drug retail
|
|
|
4,909
|
7.7 %
|
|
|
4,449
|
4.4 %
|
Pharmacy and
healthcare services
|
|
|
2,466
|
4.7 %
|
|
|
2,226
|
4.8 %
|
Front store
|
|
|
2,443
|
10.7 %
|
|
|
2,223
|
4.1 %
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $17,130
million, an increase of $1,299
million, or 8.2%.
-
- Food Retail (Loblaw) sales were $12,221
million and Food Retail same-store sales grew by 6.9% (2021
– grew by 0.2%).
-
- The Consumer Price Index as measured by The Consumer Price
Index for Food Purchased From Stores was 10.7% (2021 – 2.6%) which
was generally in line with the Company's internal food
inflation.
- Food Retail basket size decreased and traffic increased.
- Drug Retail (Shoppers Drug Mart) sales were $4,909 million, and Drug Retail same-store sales
grew by 7.7% (2021 – 4.4%), with pharmacy and healthcare services
same-store sales growth of 4.7% (2021 – 4.8%) and front store
same-store sales growth of 10.7% (2021 – 4.1%). Pharmacy and
healthcare services sales include Lifemark Health Group
("Lifemark") revenues of $120
million. Lifemark revenues are excluded from same-store
sales.
-
- On a same-store basis, the number of prescriptions dispensed
increased by 0.9% (2021 – 2.4%) and the average prescription value
increased by 3.3% (2021 – 1.2%).
- Operating income was $949
million, an increase of $133
million, or 16.3%.
- Adjusted gross profit(2) was $5,272 million, an increase of $416 million, or 8.6%. The adjusted gross profit
percentage(2) of 30.8% increased by 10 basis points,
primarily driven from growth in higher margin Drug Retail front
store categories. Compared to the third quarter of 2021, when
inflation started to accelerate, Food Retail gross margins were
flat.
- Adjusted EBITDA(2) was $1,791
million, an increase of $174
million, or 10.8%. 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 favorable decrease of 20 basis points. The favourable decrease of
20 basis points was primarily due to operating leverage from higher
sales and lower COVID-19 related expenses.
- Depreciation and amortization was $851
million, an increase of $44
million or 5.5%, primarily driven by an increase in IT
assets and leased assets. Included in depreciation and amortization
was the accelerated depreciation of $14
million due to the reassessment of the estimated useful life
of certain IT assets, and the amortization of intangibles assets
related to the acquisitions of Shoppers Drug Mart Corporation
("Shoppers Drug Mart") and Lifemark of $151
million (2021 – $155
million).
- Revenue of $120 million and
nominal net earnings were contributed by Lifemark in the quarter.
Net earnings includes amortization related to the acquired
intangible assets of $3 million.
- Two food and drug stores were opened, and three stores were
closed, resulting in a net decrease in Retail square footage of 0.3
million square feet, or 0.4%.
FINANCIAL SERVICES SEGMENT
- Revenue was $350 million, an
increase of $53 million or 17.8%. The
increase was primarily driven by higher interest income from growth
in credit card receivable balances and higher interchange income
and other credit card related fees from an increase in consumer
spending.
- Earnings before income taxes were $19
million, a decrease in earnings of $12 million. The Financial Services business
continued to benefit from the economic re-opening in the quarter.
The decrease in earnings was mainly driven by higher contractual
charge-off and an increase in the expected credit loss provision
attributable to the increase in unemployment rate forecasts.
OUTLOOK(3)
Loblaw will continue to execute on retail excellence in its core
grocery and pharmacy businesses while advancing its growth
initiatives in 2022. In the third year of the pandemic, the
Company's businesses remain well placed to service the everyday
needs of Canadians. However, the Company cannot predict the precise
impacts of COVID-19, the related industry volatility and
inflationary environment on its 2022 financial results.
On a full year basis, the Company continues to expect:
- its Retail business to grow earnings faster than sales;
- to invest approximately $1.4
billion in capital expenditures, net of proceeds from
property disposals, reflecting incremental store and distribution
network investments; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
Based on its year to date operating and financial performance
and momentum exiting the third quarter, the Company expects full
year adjusted net earnings per common share(2) growth in
the high teens.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
In the third quarter, the Company progressed its ESG
pillars:
- Fighting Climate Change: Loblaw has disclosed, for the
first time, comprehensive details regarding its approach to
reducing carbon, climate risk mitigation and risks in line with the
Task Force on Climate Related Financial Disclosures ("TCFD"). To
see those disclosures please visit
loblaw.ca/en/responsibility.
- Advancing Social Equity: Loblaw has released additional
disclosures on its ongoing work to ensure that the Company and its
partners are upholding the highest human rights standards. To see
added details on that work please visit
loblaw.ca/en/responsibility. This past quarter, in recognition of
the heightened costs and community demand facing food security
charities, Loblaw partnered with Food Banks Canada and Second
Harvest to provide new capacity grants and to expand fundraising
support. Last year, Loblaw provided more than $40 million to support food security programs
nationwide.
NORMAL COURSE ISSUER BID PROGRAM
On a year-to-date basis, the Company repurchased 10.1 million
common shares for cancellation at a cost of $1,158 million.
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, and economic
conditions. 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 Management Discussion and Analysis
("MD&A") in the Company's 2021 Annual Report - Financial Review
and Section 4 "Risks" of the Company's 2021 Annual Information Form
for the year ended January 1,
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 third quarter of 2022, the Board of
Directors declared a quarterly dividend on Common Shares and
Second Preferred Shares, Series B.
Common
Shares
|
$0.405
per common share, payable on
December 30, 2022 to shareholders of record on
December 15, 2022.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125
per share, payable on December 31,
2022 to shareholders of record on December 15,
2022.
|
|
|
EXCERPT OF NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures, as reconciled and
fully described in Appendix 1 "Non-GAAP Financial Measures" of this
News Release.
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.
The following table provides a summary of the differences
between the Company's consolidated GAAP and Non-GAAP financial
measures, which are reconciled and fully described in Appendix
1.
For the periods ended
October 8, 2022 and October 9, 2021
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
EBITDA
|
|
$
1,855
|
$
(9)
|
$
1,846
|
|
|
$ 1,680
|
$
(6)
|
$
1,674
|
Operating
Income
|
|
$
991
|
$
142
|
$
1,133
|
|
|
$
863
|
$ 149
|
$ 1,012
|
Net interest expense
and other financing
charges
|
|
217
|
—
|
217
|
|
|
203
|
—
|
203
|
Earnings before
income taxes
|
|
$
774
|
$ 142
|
$
916
|
|
|
$
660
|
$ 149
|
$
809
|
Deduct the
following:
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
199
|
35
|
234
|
|
|
172
|
40
|
212
|
Non-controlling
Interests
|
|
16
|
—
|
16
|
|
|
54
|
—
|
54
|
Prescribed dividends
on preferred shares
|
|
3
|
—
|
3
|
|
|
3
|
—
|
3
|
Net earnings
available to common
shareholders of the
Company(i)
|
|
$
556
|
$ 107
|
$
663
|
|
|
$
431
|
$ 109
|
$
540
|
Diluted net earnings
per common share ($)
|
|
$
1.69
|
$
0.32
|
$
2.01
|
|
|
$ 1.27
|
$ 0.32
|
$ 1.59
|
Diluted weighted
average common shares
(millions)
|
|
329.6
|
—
|
329.6
|
|
|
340.1
|
—
|
340.1
|
|
|
|
|
|
|
|
|
|
|
(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.
As at or for the
periods ended October 8, 2022 and October 9, 2021
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(16
weeks)
|
|
|
(16 weeks)
|
Operating
Income
|
|
$
991
|
|
|
$
863
|
Add (Deduct) impact of
the following:
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$
147
|
|
|
$
155
|
Amortization of
intangible assets acquired with Lifemark
|
|
4
|
|
|
—
|
Gain on sale of
non-operating properties
|
|
(3)
|
|
|
(7)
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
(6)
|
|
|
(8)
|
Restructuring and other
related costs
|
|
—
|
|
|
9
|
Adjusting
Items
|
|
$
142
|
|
|
$
149
|
Adjusted Operating
Income(2)
|
|
$
1,133
|
|
|
$
1,012
|
Net interest expense
and other financing charges
|
|
$
217
|
|
|
$
203
|
Adjusted Net
interest expense and other financing
charges(2)
|
|
$
217
|
|
|
$
203
|
Income
Taxes
|
|
$
199
|
|
|
$
172
|
Add the impact of the
following:
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before taxes
|
|
$
35
|
|
|
$
40
|
Adjusting
Items
|
|
$
35
|
|
|
$
40
|
Adjusted Income
Taxes(2)
|
|
$
234
|
|
|
$
212
|
|
|
|
|
|
|
CORPORATE PROFILE
2021 Annual Report and 2022 Third Quarter Report to
Shareholders
The Company's 2021 Annual Report and 2022 Third 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 November 16, 2022
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: 576182#. 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 2021
Annual Report 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 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 2022 Third Quarter Report to
Shareholders.
|
|
|
APPENDIX 1: NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP 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 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 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 merchandise inventories sold 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.
|
|
2022
|
|
|
2021
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
(millions of Canadian
dollars)
|
|
|
Revenue
|
|
$
17,130
|
$
350
|
|
$
(92)
|
|
$
17,388
|
|
|
$ 15,831
|
$
297
|
|
$ (78)
|
|
$ 16,050
|
Cost of merchandise
inventories sold
|
|
11,858
|
56
|
|
—
|
|
11,914
|
|
|
10,975
|
52
|
|
—
|
|
11,027
|
Gross profit
|
|
$
5,272
|
$
294
|
|
$
(92)
|
|
$
5,474
|
|
|
$
4,856
|
$
245
|
|
$ (78)
|
|
$
5,023
|
Adjusted gross
profit
|
|
$
5,272
|
$
294
|
|
$
(92)
|
|
$
5,474
|
|
|
$
4,856
|
$
245
|
|
$ (78)
|
|
$
5,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
(millions of Canadian
dollars)
|
|
Revenue
|
|
$
41,798
|
$ 921
|
|
$ (222)
|
|
$
42,497
|
|
|
$ 39,783
|
$
822
|
|
$ (192)
|
|
$ 40,413
|
Cost of merchandise
inventories sold
|
|
28,821
|
120
|
|
—
|
|
28,941
|
|
|
27,601
|
130
|
|
—
|
|
27,731
|
Gross profit
|
|
$
12,977
|
$ 801
|
|
$ (222)
|
|
$
13,556
|
|
|
$ 12,182
|
$
692
|
|
$ (192)
|
|
$ 12,682
|
Adjusted gross
profit
|
|
$
12,977
|
$ 801
|
|
$
(222)
|
|
$
13,556
|
|
|
$ 12,182
|
$
692
|
|
$
(192)
|
|
$ 12,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
2022
|
|
|
|
2021
|
|
|
|
|
(16
weeks)
|
|
|
|
|
(16 weeks)
|
For the periods ended
October 8, 2022 and October 9, 2021
|
Retail
|
Financial
Services
|
Consolidated
|
|
Retail
|
Financial
Services
|
Consolidated
|
(millions of Canadian
dollars)
|
|
Net earnings
attributable to shareholders of the
Company
|
|
|
|
$
559
|
|
|
|
|
$
434
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
16
|
|
|
|
|
54
|
Net interest expense
and other financing charges
|
|
|
|
217
|
|
|
|
|
203
|
Income
taxes
|
|
|
|
199
|
|
|
|
|
172
|
Operating
income
|
|
$
949
|
$
42
|
$
991
|
|
|
$
816
|
$ 47
|
$
863
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$
147
|
$
—
|
$
147
|
|
|
$
155
|
$ —
|
$
155
|
Amortization of
intangible assets acquired with
Lifemark
|
|
4
|
—
|
4
|
|
|
—
|
—
|
—
|
Restructuring and
other related costs
|
|
—
|
—
|
—
|
|
|
9
|
—
|
9
|
Gain on sale of
non-operating properties
|
|
(3)
|
—
|
(3)
|
|
|
(7)
|
—
|
(7)
|
Fair value adjustment
on fuel and foreign currency
contracts
|
|
(6)
|
—
|
(6)
|
|
|
(8)
|
—
|
(8)
|
Adjusting
items
|
|
$
142
|
$
—
|
$
142
|
|
|
$
149
|
$ —
|
$
149
|
Adjusted operating
income
|
|
$
1,091
|
$
42
|
$
1,133
|
|
|
$
965
|
$
47
|
$
1,012
|
Depreciation and
amortization
|
|
851
|
13
|
864
|
|
|
807
|
10
|
817
|
Less: Amortization of
intangible assets acquired with
Shoppers Drug Mart and Lifemark
|
|
(151)
|
—
|
(151)
|
|
|
(155)
|
—
|
(155)
|
Adjusted
EBITDA
|
|
$
1,791
|
$
55
|
$
1,846
|
|
|
$
1,617
|
$ 57
|
$
1,674
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
2021
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
For the periods ended
October 8, 2022 and October 9, 2021
|
Retail
|
Financial
Services
|
Consolidated
|
|
Retail
|
Financial
Services
|
Consolidated
|
(millions of Canadian
dollars)
|
|
Net earnings
attributable to shareholders of the
Company
|
|
|
|
$ 1,389
|
|
|
|
|
$
1,128
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
87
|
|
|
|
|
129
|
Net interest expense
and other
financing charges
|
|
|
|
511
|
|
|
|
|
524
|
Income
taxes
|
|
|
|
484
|
|
|
|
|
451
|
Operating
income
|
|
$
2,450
|
$
21
|
$ 2,471
|
|
|
$ 2,077
|
$
155
|
$
2,232
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$
375
|
$
—
|
$
375
|
|
|
$
389
|
$
—
|
$
389
|
Amortization of
intangible assets acquired with
Lifemark
|
|
7
|
—
|
7
|
|
|
—
|
—
|
—
|
Charge related to PC
Bank commodity tax matter
|
|
—
|
111
|
111
|
|
|
—
|
—
|
—
|
Lifemark transaction
costs
|
|
16
|
—
|
16
|
|
|
—
|
—
|
—
|
Gain on sale of
non-operating properties
|
|
(7)
|
—
|
(7)
|
|
|
(12)
|
—
|
(12)
|
Restructuring and
other related costs
|
|
(15)
|
—
|
(15)
|
|
|
21
|
—
|
21
|
Fair value adjustment
on fuel and foreign
currency contracts
|
|
(16)
|
—
|
(16)
|
|
|
(19)
|
—
|
(19)
|
Adjusting
items
|
|
$
360
|
$
111
|
$
471
|
|
|
$
379
|
$
—
|
$
379
|
Adjusted operating
income
|
|
$
2,810
|
$ 132
|
$
2,942
|
|
|
$ 2,456
|
$
155
|
$
2,611
|
Depreciation and
amortization
|
|
2,093
|
35
|
2,128
|
|
|
2,011
|
30
|
2,041
|
Less: Amortization of
intangible assets acquired
with Shoppers Drug Mart and Lifemark
|
|
(382)
|
—
|
(382)
|
|
|
(389)
|
—
|
(389)
|
Adjusted
EBITDA
|
|
$
4,521
|
$ 167
|
$
4,688
|
|
|
$ 4,078
|
$ 185
|
$ 4,263
|
|
|
|
|
|
|
|
|
|
|
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 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.
Amortization of intangible assets acquired with
Lifemark The acquisition of Lifemark in the second
quarter of 2022 included approximately $299
million of definite life intangible assets, which are being
amortized over their estimated useful lives. In the third quarter
of 2022 and year-to-date, net earnings includes amortization
related to the acquired intangible assets of $3 million and $5
million, respectively.
Charge related to President's Choice Bank commodity tax
matter In the second quarter of 2022, the Company
recorded a charge of $111 million,
inclusive of interest. On July 19,
2022, the Tax Court released its decision and ruled that
President's Choice Bank ("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. On September 29, 2022, PC Bank filed a Notice of
Appeal with the Federal Court of the Appeal.
Lifemark transaction costs In connection with
the acquisition of Lifemark, the Company recorded acquisition costs
of $16 million in operating income on a year-to-date
basis.
Gain/loss on sale of non-operating properties In
the third quarter of 2022, the Company recorded a gain related to
the sale of non-operating properties of $3
million (2021 –$7 million). Year-to-date, the Company
disposed of non-operating properties to a third party and recorded
a gain of $7 million (2021 –
$12 million).
Restructuring and other related 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 third quarter of 2022, the Company did not record any
restructuring and other related recoveries or charges (2021 –
charges of $9 million). Year-to-date,
the Company recorded approximately $15
million (2021 – charges of $21 million) of
restructuring and other related recoveries mainly in connection to
the previously announced closure of two distribution centres in
Laval and Ottawa. In the first quarter of 2022, the
Company disposed of one of the distribution centres for proceeds of
$26 million and recognized a gain of
$19 million, which was partially
offset by $4 million of restructuring and other related
charges. 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.
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.
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
October 8, 2022 and October 9, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars)
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
Net interest expense
and other financing charges
|
|
$
217
|
|
|
$
203
|
|
|
$
511
|
|
|
$
524
|
Add: Recovery related
to Glenhuron Bank Ltd.
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
Adjusted net interest
expense and other financing charges
|
|
$
217
|
|
|
$
203
|
|
|
$
522
|
|
|
$
524
|
|
|
|
|
|
|
|
|
|
|
|
|
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
October 8, 2022 and October 9, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
Adjusted operating
income(i)
|
|
$
1,133
|
|
|
$
1,012
|
|
|
$ 2,942
|
|
|
$
2,611
|
Adjusted net interest
expense and other
financing charges(i)
|
|
217
|
|
|
203
|
|
|
522
|
|
|
524
|
Adjusted earnings
before taxes
|
|
$
916
|
|
|
$
809
|
|
|
$ 2,420
|
|
|
$ 2,087
|
Income taxes
|
|
$
199
|
|
|
$
172
|
|
|
$
484
|
|
|
$
451
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
Tax impact of items
included in adjusted
earnings before taxes(ii)
|
|
35
|
|
|
40
|
|
|
119
|
|
|
102
|
Recovery related to
Glenhuron Bank Ltd.
|
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
Adjusted income
taxes
|
|
$
234
|
|
|
$
212
|
|
|
$
636
|
|
|
$
553
|
Effective tax
rate
|
|
25.7 %
|
|
|
26.1 %
|
|
|
24.7 %
|
|
|
26.4 %
|
Adjusted income tax
rate
|
|
25.5 %
|
|
|
26.2 %
|
|
|
26.3 %
|
|
|
26.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
October 8, 2022 and October 9, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
Net earnings
attributable to shareholders
of the Company
|
|
$
559
|
|
|
$
434
|
|
|
$
1,389
|
|
|
$
1,128
|
Prescribed dividends on
preferred shares in
share capital
|
|
(3)
|
|
|
(3)
|
|
|
(9)
|
|
|
(9)
|
Net earnings available
to common shareholders
of the Company
|
|
$
556
|
|
|
$
431
|
|
|
$
1,380
|
|
|
$
1,119
|
Net earnings
attributable to shareholders
of the Company
|
|
$
559
|
|
|
$
434
|
|
|
$
1,389
|
|
|
$
1,128
|
Adjusting items (refer
to the following table)
|
|
107
|
|
|
109
|
|
|
308
|
|
|
277
|
Adjusted net earnings
attributable to shareholders
of the Company
|
|
$
666
|
|
|
$
543
|
|
|
$
1,697
|
|
|
$
1,405
|
Prescribed dividends on
preferred shares in
share capital
|
|
(3)
|
|
|
(3)
|
|
|
(9)
|
|
|
(9)
|
Adjusted net earnings
available to common
shareholders of the Company
|
|
$
663
|
|
|
$
540
|
|
|
$
1,688
|
|
|
$
1,396
|
Diluted weighted
average common shares
outstanding (millions)
|
|
329.6
|
|
|
340.1
|
|
|
331.1
|
|
|
343.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
2022
|
|
|
2021
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
(millions of Canadian
dollars/
Canadian dollars)
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders of the Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earning
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted Net
Earnings
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
|
|
|
|
|
|
|
As
reported
|
|
$ 556
|
$
1.69
|
|
|
$ 431
|
$
1.27
|
|
|
$
1,380
|
$
4.17
|
|
|
$ 1,119
|
$
3.26
|
Add (deduct) impact of
the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible
assets acquired with
Shoppers Drug Mart
|
|
$
109
|
$
0.33
|
|
|
$
113
|
$
0.33
|
|
|
$ 277
|
$
0.84
|
|
|
$
285
|
$
0.83
|
Amortization of
intangible
assets acquired with Lifemark
|
|
3
|
0.01
|
|
|
—
|
—
|
|
|
5
|
0.02
|
|
|
—
|
—
|
Charge related to PC
Bank
commodity tax matter
|
|
—
|
—
|
|
|
—
|
—
|
|
|
86
|
0.25
|
|
|
—
|
—
|
Lifemark transaction
costs
|
|
—
|
—
|
|
|
—
|
—
|
|
|
12
|
0.04
|
|
|
—
|
—
|
Restructuring and
other
related costs
|
|
—
|
—
|
|
|
8
|
0.03
|
|
|
(14)
|
(0.04)
|
|
|
16
|
0.05
|
Recovery related to
Glenhuron
Bank Ltd.
|
|
—
|
—
|
|
|
—
|
—
|
|
|
(42)
|
(0.13)
|
|
|
—
|
—
|
Gain on sale of
non-operating
properties
|
|
(1)
|
—
|
|
|
(6)
|
(0.02)
|
|
|
(4)
|
(0.01)
|
|
|
(10)
|
(0.03)
|
Fair value adjustment
on fuel
and foreign currency
contracts
|
|
(4)
|
(0.02)
|
|
|
(6)
|
(0.02)
|
|
|
(12)
|
(0.04)
|
|
|
(14)
|
(0.04)
|
Adjusting
items
|
|
$
107
|
$
0.32
|
|
|
$
109
|
$
0.32
|
|
|
$
308
|
$
0.93
|
|
|
$
277
|
$
0.81
|
Adjusted
|
|
$ 663
|
$
2.01
|
|
|
$ 540
|
$
1.59
|
|
|
$
1,688
|
$
5.10
|
|
|
$
1,396
|
$
4.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
2022
|
|
|
2021
|
|
|
|
(16
weeks)
|
|
|
(16 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in)
operating activities
|
|
|
$
1,496
|
|
$
(15)
|
|
$
18
|
|
$ 1,499
|
|
|
$
1,335
|
|
$
(37)
|
|
$
18
|
|
$ 1,316
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments
|
|
|
423
|
|
9
|
|
—
|
|
432
|
|
|
324
|
|
6
|
|
—
|
|
330
|
Interest
paid
|
|
|
76
|
|
—
|
|
18
|
|
94
|
|
|
73
|
|
—
|
|
18
|
|
91
|
Lease payments,
net
|
|
|
454
|
|
—
|
|
—
|
|
454
|
|
|
440
|
|
—
|
|
—
|
|
440
|
Free cash
flow(2)
|
|
|
$
543
|
|
$
(24)
|
|
$
—
|
|
$
519
|
|
|
$
498
|
|
$
(43)
|
|
$
—
|
|
$
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows from operating activities under the
Financial Services segment.
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
(40
weeks)
|
|
|
(40 weeks)
|
For the periods ended
October 8, 2022
and October 9, 2021
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in)
operating activities
|
|
|
$
3,786
|
|
$
(226)
|
|
$
47
|
|
$
3,607
|
|
|
$ 3,582
|
|
$
170
|
|
$
51
|
|
$
3,803
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments
|
|
|
898
|
|
22
|
|
—
|
|
920
|
|
|
773
|
|
18
|
|
—
|
|
791
|
Interest
paid
|
|
|
212
|
|
—
|
|
47
|
|
259
|
|
|
213
|
|
—
|
|
51
|
|
264
|
Lease payments,
net
|
|
|
1,079
|
|
—
|
|
—
|
|
1,079
|
|
|
1,052
|
|
—
|
|
—
|
|
1,052
|
Free cash
flow(2)
|
|
|
$
1,597
|
|
$
(248)
|
|
$
—
|
|
$ 1,349
|
|
|
$
1,544
|
|
$
152
|
|
$
—
|
|
$ 1,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows used in operating activities under the
Financial Services segment.
|
SOURCE Loblaw Companies Limited