BRAMPTON, ON, Feb. 23, 2017 /CNW/ - Loblaw Companies
Limited (TSX: L) ("Loblaw" or the "Company") today announced its unaudited financial results for the fourth quarter ended
December 31, 2016 and the release of its 2016 Annual Report ("Annual Report"), which includes the Company's audited
consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the fiscal year ended
December 31, 2016. The Company's 2016 Annual Report will be available in the Investors section of the Company's website at
loblaw.ca and will be filed with SEDAR and available at sedar.com.
"We continued to lower prices, delivering more value to consumers," said Galen G. Weston,
Chairman and Chief Executive Officer, Loblaw Companies Limited.
"Our focus on our strategic framework and financial plan delivered solid financial performance in the fourth quarter and
demonstrated the strength of our portfolio of businesses amidst a highly competitive food retail environnment, and pressures from
healthcare reform."
2016 FOURTH QUARTER HIGHLIGHTS
The following highlights include the impacts of the consolidation of franchises, as set out in "Other Retail Business
Matter."
- Revenue was $11,130 million, an increase of $265 million, or
2.4%, compared to the fourth quarter of 2015.
- Retail segment sales were $10,845 million, an increase of $239
million, or 2.3%, compared to the fourth quarter of 2015.
- Food retail (Loblaw) same-store sales growth was 1.1%, excluding gas bar.
- Drug retail (Shoppers Drug Mart) same-store sales growth was 3.4%, with same-store pharmacy sales increasing by 2.5%
and same-store front store sales increasing by 4.1%.
- Same-store sales growth included the favourable impact of an extra selling day, due to the timing of New Year's day, of approximately 1.0% on Food retail same-store sales and 0.6% on Drug retail same-store
sales.
- Operating Income was $449 million, an increase of $133 million,
or 42.1%, compared to the fourth quarter of 2015.
- Adjusted EBITDA(2) was $956 million, an increase of $75
million, or 8.5%, compared to the fourth quarter of 2015.
- Net earnings available to common shareholders of the Company were $201 million, an increase
of $73 million, or 57.0%, compared to the fourth quarter of 2015. Diluted net earnings per common
share were $0.50, an increase of $0.19, or 61.3%, compared to the
fourth quarter of 2015.
- Adjusted net earnings available to common shareholders of the Company(2) were $393
million, an increase of $30 million, or 8.3%, compared to the fourth quarter of 2015.
Adjusted diluted net earnings per common share(2) were $0.97, an increase of
$0.10, or 11.5%, compared to the fourth quarter of 2015.
- The Company repurchased 2.8 million shares for cancellation at a cost of $200 million.
- In 2016, the Company invested $1,224 million in capital expenditures and generated
$1,821 million of free cash flow(2).
See "News Release Endnotes" at the end of this News Release.
CONSOLIDATED RESULTS OF OPERATIONS
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For the periods ended December 31,
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2016 and January 2, 2016
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2016
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2015
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2016
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2015(6)
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(millions of Canadian dollars except
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where otherwise indicated)
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(12 weeks)
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(12 weeks)
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$ Change
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% Change
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(52 weeks)
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(52 weeks)
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$ Change
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% Change
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Revenue
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$
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11,130
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$
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10,865
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$
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265
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2.4%
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$
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46,385
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$
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45,394
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$
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991
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2.2%
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Operating Income
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449
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316
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133
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42.1%
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2,092
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1,601
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491
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30.7%
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Adjusted EBITDA(2)
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956
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881
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75
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8.5%
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3,852
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3,549
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303
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8.5%
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Adjusted EBITDA margin(2)
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8.6%
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8.1%
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8.3%
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7.8%
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Net earnings attributable to
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shareholders of the Company
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$
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204
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$
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131
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$
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73
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55.7%
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$
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983
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$
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598
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$
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385
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64.4%
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Net earnings available to common
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shareholders of the Company(i)
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201
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128
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73
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57.0%
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971
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591
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380
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64.3%
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Adjusted net earnings available to
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common shareholders of the
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Company(2)
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393
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363
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30
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8.3%
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1,655
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1,422
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233
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16.4%
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Diluted net earnings per common
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share ($)
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$
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0.50
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$
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0.31
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$
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0.19
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61.3%
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$
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2.37
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$
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1.42
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$
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0.95
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66.9%
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Adjusted diluted net earnings per
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common share(2) ($)
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0.97
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0.87
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0.10
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11.5%
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4.05
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3.42
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0.63
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18.4%
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Diluted weighted average common
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shares outstanding (millions)
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405.6
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415.2
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409.1
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415.2
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(i)
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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.
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Net earnings available to common shareholders of the Company in the fourth quarter of 2016 were $201
million ($0.50 per common share), an increase of $73 million
($0.19 per common share) compared to the fourth quarter of 2015. The increase in net earnings
available to common shareholders of the Company was driven by improvements in underlying operating performance of
$30 million and the net favourable impact of certain adjusting items totaling $43 million as described below:
- improvements in underlying operating performance of $30 million ($0.10 per common share), primarily due to the following:
- the Retail segment, which (excluding the impact of the consolidation of franchises) included achieving higher sales
with stable gross margins and lower selling, general and administrative expenses ("SG&A");
- the Financial Services segment, primarily driven by growth in the credit card portfolio;
- the Choice Properties segment, primarily resulting from expansion of the property portfolio through development of
properties and an increase in base rent from existing properties; and
- the favourable impact of a decrease in depreciation and amortization, primarily due to a change in the estimated useful
life of certain equipment and fixtures in the second quarter of 2016.
- the net favourable year-over-year impact of certain adjusting items totaling $43 million
($0.09 per common share) including:
- the impairment of Drug retail ancillary assets held for sale of $82 million ($0.20 per common share) in the prior year;
- the accelerated finalization of transitioning of certain grocery stores to more cost effective and efficient Labour
Agreements of $40 million ($0.10 per common share) incurred in
the prior year;
- the charge related to inventory measurement associated with the conversion of all of its franchised grocery stores to
the new IT systems of $24 million ($0.06 per common share)
incurred in the prior year; partially offset by
- an unfavourable impact of asset impairments, net of recoveries, of $90 million
($0.21 per common share); and
- an unfavourable impact of pension annuities and buy-outs of $10 million ($0.03 per common share).
Adjusted net earnings available to common shareholders of the Company(2) in the fourth quarter of 2016 were
$393 million ($0.97 per common share), an increase of $30 million ($0.10 per common share) compared to the fourth quarter of 2015,
primarily due to the improvements in underlying operating performance, as described above.
REPORTABLE OPERATING SEGMENTS
The Company has three reportable operating segments with all material operations carried out in Canada:
- The Retail segment consists primarily of corporate and franchise-owned retail food and Associate-owned drug stores, and
includes in-store pharmacies and other health and beauty products, gas bars and apparel and other general merchandise. This
segment is comprised of several operating segments that are aggregated primarily due to similarities in the nature of products
and services offered for sale in the retail operations and the customer base;
- The Financial Services segment provides credit card services, loyalty programs, insurance brokerage services, personal
banking services provided by a major Canadian chartered bank, deposit taking services and telecommunication services; and
- The Choice Properties segment owns, manages and develops retail and commercial properties across Canada. The Choice Properties segment information presented below reflects the accounting policies of
Choice Properties, which may differ from those of the consolidated Company. Differences in policies are eliminated in
Consolidation and Eliminations.
Retail Segment
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For the periods ended December 31,
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2016 and January 2, 2016
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2016
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2015
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2016
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2015
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(millions of Canadian dollars except
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where otherwise indicated)
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(12 weeks)
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(12 weeks)
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$ Change
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% Change
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(52 weeks)
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(52 weeks)
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$ Change
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% Change
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Sales
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$
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10,845
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$
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10,606
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$
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239
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2.3%
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$
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45,384
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$
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44,469
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$
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915
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2.1%
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Operating Income
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392
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265
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127
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47.9%
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1,902
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1,429
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473
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33.1%
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Adjusted gross profit(2)
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2,945
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2,844
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101
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3.6%
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12,262
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11,747
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515
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4.4%
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Adjusted gross profit %(2)
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27.2%
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26.8%
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27.0%
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26.4%
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Adjusted EBITDA(2)
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$
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889
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$
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823
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$
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66
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8.0%
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$
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3,631
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$
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3,352
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$
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279
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8.3%
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Adjusted EBITDA margin(2)
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8.2%
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7.8%
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8.0%
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7.5%
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Depreciation and amortization
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$
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355
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$
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369
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$
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(14)
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(3.8)%
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$
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1,512
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$
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1,567
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$
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(55)
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(3.5)%
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For the periods ended December 31,
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2016 and January 2, 2016
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2016
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2015
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2016
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2015
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(millions of Canadian dollars except
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where otherwise indicated)
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(12 weeks)
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(12 weeks)
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(52 weeks)
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(52 weeks)
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Sales
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Same-store
sales
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Sales
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Same-store
sales
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Sales
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Same-store
sales
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Sales
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Same-store
sales
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Food retail
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$
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7,789
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1.1%
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$
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7,631
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2.4%
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$
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33,175
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1.1%
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$
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32,672
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1.9%
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Drug retail
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3,056
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3.4%
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2,975
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5.0%
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12,209
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4.0%
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11,797
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4.3%
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Pharmacy
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1,361
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2.5%
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1,315
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4.2%
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5,730
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2.9%
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5,545
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3.7%
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Front Store
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1,695
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4.1%
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1,660
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5.7%
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6,479
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5.0%
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6,252
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4.7%
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Sales, operating income, adjusted gross profit(2), adjusted gross profit percentage(2), adjusted
EBITDA(2) and adjusted EBITDA margin(2) in the fourth quarter of 2016 included the impacts of the
consolidation of franchises, as set out in "Other Retail Business Matters".
Sales Retail segment sales in the fourth quarter of 2016 were $10,845 million, an
increase of $239 million compared to the fourth quarter of 2015. Excluding the consolidation of
franchises, Retail segment sales increased by $168 million primarily driven by the following
factors:
- Food retail same-store sales growth was 1.1% (2015 – 3.1%(5)) for the quarter, after excluding gas bar which had
no impact in the fourth quarter of 2016. This same-store sales growth includes the impact of retail promotional investments.
Including gas bar, Food retail same-store sales growth was 2.4% in 2015. Food retail same-store sales included the favourable
impact of an extra selling day in the fourth quarter of 2016, due to the timing of New Year's
Day, of approximately 1.0%.
- The Company's Food retail average quarterly internal food price index declined and was slightly lower than (2015 –
moderately higher than) the average quarterly national food price deflation of 2.3% (2015 – inflation of 4.1%), 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 the Company's stores.
- Drug retail same-store sales growth was 3.4% (2015 – 5.0%) and was comprised of pharmacy same-store sales growth of 2.5%
(2015 - 4.2%) and front store same-store sales growth of 4.1% (2015 – 5.7%). Drug retail same-store sales included the
favourable impact of an extra selling day in the fourth quarter of 2016, due to the timing of New Year's
Day, of approximately 0.6%.
- In the last 12 months, Retail net square footage increased by 0.3 million square feet, or 0.4%, primarily driven by new
store openings partially offset by the Company's store closure plan announced in 2015 and completed in 2016.
Operating Income Operating Income in the fourth quarter of 2016 was $392 million, an
increase of $127 million compared to the fourth quarter of 2015. The increase in operating income
was driven by improvements in underlying operating performance of $80 million and the net
favourable impact of certain adjusting items totaling $47 million as described below:
- the improvements in underlying operating performance of $80 million were driven by higher
sales with stable gross margins, lower SG&A, lower depreciation and amortization and the favourable impact from the
consolidation of franchises; and
- the net favourable year-over-year impact of certain adjusting items totaling $47 million,
including:
- the impairment of Drug retail ancillary assets held for sale of $112 million in the prior
year;
- the accelerated finalization of transitioning of certain grocery stores to more cost effective and efficient Labour
Agreements of $55 million incurred in the prior year;
- the charge related to inventory measurement associated with the conversion of all of its franchised grocery stores to
the new IT systems of $33 million incurred in the prior year; partially offset by
- an unfavourable impact of asset impairments, net of recoveries, of $126 million; and
- an unfavourable impact of pension annuities and buy-outs of $15 million.
Adjusted Gross Profit(2) Adjusted gross profit(2) in the fourth quarter of 2016 was
$2,945 million, an increase of $101 million compared to the fourth
quarter of 2015. Adjusted gross profit percentage(2) of 27.2% increased by 40 basis points compared to the fourth
quarter of 2015. Excluding the consolidation of franchises, the adjusted gross profit percentage(2) was 26.4%, a
decrease of 20 basis points compared to the fourth quarter of 2015. The decrease in adjusted gross profit
percentage(2) was driven by Food retail promotional investments, partially offset by improvements in Drug retail
margins due to strong front store performance, and improvements in shrink driven by improved inventory management.
Adjusted EBITDA(2) Adjusted EBITDA(2) in the fourth quarter of 2016 was $889 million, an increase of $66 million, compared to the fourth quarter of 2015
driven by the increase in adjusted gross profit(2) described above, partially offset by an increase in SG&A of
$35 million. SG&A as a percentage of sales was 19.0%, a decrease of 10 basis points compared to
the fourth quarter of 2015. Excluding the consolidation of franchises, SG&A decreased $9
million and as a percentage of sales was 18.4%, an improvement of 40 basis points compared to the fourth quarter of 2015,
driven by the following factors:
- lower store support costs;
- the positive impact of the Company's store closure plan announced in 2015 and completed in 2016;
- favourable year-over-year foreign exchange impacts; partially offset by
- higher retail store costs as efficiencies achieved in retail stores were more than offset by an increase in financial
support to franchises.
Depreciation and Amortization Depreciation and amortization in the fourth quarter of 2016 was $355 million, a decrease of $14 million compared to the fourth quarter of 2015
primarily attributable to a change in the estimated useful life of certain equipment and fixtures in the second quarter of 2016.
Included in depreciation and amortization in the fourth quarter of 2016 was the impact of the amortization of intangible assets
related to the acquisition of Shoppers Drug Mart Corporation ("Shoppers Drug Mart") of $124 million
(2015 – $124 million).
Other Retail Business Matters
Impairment of Ancillary Healthcare Business In the fourth quarter, a Shoppers Drug Mart ancillary healthcare
business was triggered for impairment testing due to impacts of Ontario healthcare reform
implemented in the long term care industry. The Company recorded a charge of $88 million related to
the impairment of fixed assets of $15 million and a customer relationship intangible asset of
$73 million.
Consolidation of Franchises The Company has more than 500 franchise food retail stores in its network. As of
the end of the fourth quarter of 2016, 200 of these stores were consolidated for accounting purposes under a new, simplified
franchise agreement ("Franchise Agreement") implemented in 2015.
The Company will convert franchises to the Franchise Agreement as existing agreements expire, at the end of which all
franchises will be consolidated. The following table presents the number of franchises consolidated in the fourth quarter of 2016
and year-to-date, and the total impact of the consolidation of franchises included in the consolidated results of the
Company:
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For the periods ended December 31, 2016 and January 2, 2016
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2016
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2015
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2016
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2015
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(millions of Canadian dollars unless where otherwise indicated)
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(12 weeks)
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(12 weeks)
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(52 weeks)
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(52 weeks)
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Number of Consolidated Franchise stores, beginning of period
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165
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43
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85
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—
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Add: Net number of Consolidated Franchise stores in the period
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35
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42
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115
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|
85
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Number of Consolidated Franchise stores, end of period
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200
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85
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200
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85
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Sales
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$
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99
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$
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28
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$
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363
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$
|
56
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Adjusted gross profit(2)
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|
107
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32
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|
361
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|
58
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Adjusted EBITDA(2)
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27
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(4)
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20
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(12)
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Depreciation and amortization
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6
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3
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21
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5
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Operating Income
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21
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(7)
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(1)
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(17)
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Net earnings (loss) attributable to Non-Controlling Interests
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28
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(4)
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7
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(9)
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Operating Income included in the table above does not significantly impact net earnings available to common shareholders of
the Company as this amount is largely attributable to Non-Controlling Interests.
The Company expects that the estimated impact in 2017 of new and current consolidated franchises will be revenue of
approximately $680 million, adjusted EBITDA(2) of approximately $55 million, depreciation and amortization
of approximately $45 million and net earnings attributable to Non-Controlling Interests of approximately $10 million.
Financial Services Segment(3)
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|
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For the periods ended December 31,
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|
|
2016 and January 2, 2016
|
2016
|
2015
|
|
|
2016
|
2015
|
|
|
|
(millions of Canadian dollars except
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|
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|
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|
|
where otherwise indicated)
|
(12 weeks)
|
(12 weeks)
|
$ Change
|
% Change
|
(52 weeks)
|
(52 weeks)
|
$ Change
|
% Change
|
|
Revenue
|
$
|
261
|
$
|
240
|
$
|
21
|
8.8%
|
$
|
911
|
$
|
849
|
$
|
62
|
7.3%
|
|
Earnings before income taxes
|
39
|
33
|
6
|
18.2%
|
124
|
106
|
18
|
17.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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As at
|
|
As at
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
December 31, 2016
|
January 2, 2016
|
$ Change
|
% Change
|
|
Average quarterly net credit card receivables
|
$
|
2,769
|
$
|
2,642
|
$
|
127
|
4.8%
|
|
Credit card receivables
|
2,926
|
2,790
|
136
|
4.9%
|
|
Allowance for credit card receivables
|
52
|
54
|
(2)
|
(3.7)%
|
|
Annualized yield on average quarterly gross credit card
receivables
|
13.5%
|
|
13.6%
|
|
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|
|
Annualized credit loss rate on average quarterly gross credit card
receivables
|
4.3%
|
|
4.3%
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Income Taxes Earnings before income taxes in the fourth quarter of 2016 were $39
million, an increase of $6 million compared to the fourth quarter of 2015, primarily driven
by:
- higher net interest and net interchange income attributable to growth in the credit card portfolio;
- higher sales attributable to The Mobile Shop; and
- lower credit card losses; partially offset by
- higher costs associated with the Financial Services' loyalty program; and
- higher operating costs as a result of an increase in the active customer base.
Credit Card Receivables As at December 31, 2016, credit card receivables were $2,926
million, an increase of $136 million compared to January 2, 2016. This increase was
primarily driven by growth in the active customer base as a result of continued investments in customer acquisition, marketing
and product initiatives. As at December 31, 2016, the allowance for credit card receivables was $52
million, a decrease of $2 million compared to January 2, 2016.
Choice Properties Segment(3)
|
|
|
|
|
|
|
|
|
|
For the periods ended December 31,
|
|
|
|
|
|
|
|
|
|
2016 and January 2, 2016
|
2016
|
2015
|
|
|
2016
|
2015
|
|
|
|
(millions of Canadian dollars except
|
|
|
|
|
|
|
|
|
|
where otherwise indicated)
|
(12 weeks)
|
(12 weeks)
|
$ Change
|
% Change
|
(52 weeks)
|
(52 weeks)
|
$ Change
|
% Change
|
|
Revenue
|
$
|
198
|
$
|
191
|
$
|
7
|
3.7%
|
$
|
784
|
$
|
743
|
$
|
41
|
5.5%
|
|
Net interest expense and other
|
|
|
|
|
|
|
|
|
|
financing charges
|
(11)
|
184
|
(195)
|
(106.0)%
|
900
|
756
|
144
|
19.0%
|
|
Net income (loss)(i)
|
256
|
41
|
215
|
524.4%
|
(223)
|
(155)
|
(68)
|
(43.9)%
|
|
Adjusted funds from operations(2)
|
82
|
82
|
—
|
—%
|
330
|
313
|
17
|
5.4%
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Choice Properties qualifies as a "mutual fund trust" under the Income Tax
Act (Canada) and therefore net income (loss) is equal to earnings before income taxes.
|
Net income (loss) Net income in the fourth quarter of 2016 was $256 million, an
increase of $215 million compared to the fourth quarter of 2015. The increase was primarily
driven by:
- the change in fair value adjustment on Class B Limited Partnership units;
- the change in fair value adjustment on investment properties;
- additional net operating income generated from tenant openings in newly developed leasable space; and
- an increase in base rent from existing properties.
Adjusted Funds from Operations(2) Adjusted funds from operations(2) in the fourth quarter of 2016
were $82 million, flat compared to the fourth quarter of 2015.
Other Matters In the fourth quarter of 2016, Choice Properties Real Estate Investment Trust ("Choice Properties")
acquired two investment properties from third-parties for a purchase price of approximately $14
million, excluding acquisition costs, which was fully settled in cash.
Subsequent to the end of 2016, Choice Properties redeemed, at par, the $200 million Series 6
senior unsecured debentures with an original maturity date of April 20, 2017.
DECLARATION OF DIVIDENDS
Subsequent to the end of the fourth quarter of 2016, the Board of Directors declared a quarterly dividend on Common Shares and
Second Preferred Shares, Series B.
|
Common Shares
|
|
$0.26 per common share, payable on April 1, 2017 to shareholders of record
on March 15, 2017
|
|
|
|
|
Second Preferred Shares, Series B
|
|
$0.33 per share, payable on March 31, 2017 to shareholders of record on
March 15, 2017
|
OUTLOOK(4)
Loblaw remains focused on its strategic framework, delivering the best in food, best in health and beauty, operational excellence
and growth. This framework is supported by our financial plan of maintaining a stable trading environment that targets positive
same-store sales and stable gross margin, surfacing efficiencies to deliver operating leverage, and returning capital to
shareholders.
In 2017, on a full year comparative basis, despite the current deflationary environment, the Company expects to:
- deliver positive same-store sales and stable gross margin in its Retail segment in a highly competitive grocery market,
with continued negative pressure from healthcare reform;
- grow adjusted net earnings;
- invest approximately $1.3 billion in capital expenditures, including $1.0 billion in its Retail segment; and
- return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.
NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP financial measures: 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 income tax rate; adjusted net earnings available to
common shareholders; adjusted diluted net earnings per common share; free cash flow; and with respect to Choice Properties:
adjusted funds from operations. 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.
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 excludes additional 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.
For details on the nature of items excluded in the calculation of any of the non-GAAP financial measures detailed below see
the "Non-GAAP Financial Measures" section of the Company's 2016 Annual Report.
Retail Segment Gross Profit, Retail Segment Adjusted Gross Profit and Retail Segment Adjusted Gross Profit Percentage
The following table reconciles revenue and cost of merchandise inventories sold to gross profit by segment and then to adjusted
gross profit by segment. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
2015
|
|
|
|
|
(12 weeks)
|
|
|
|
(12 weeks)
|
|
For the periods ended
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 and
|
|
|
|
Consolidation
|
|
|
|
|
Consolidation
|
|
|
|
January 2, 2016
|
|
Financial
|
Choice
|
and
|
|
|
|
Financial
|
Choice
|
and
|
|
|
|
(millions of Canadian dollars)
|
Retail
|
Services(3)
|
Properties(3)
|
Eliminations
|
Total
|
Retail
|
Services(3)
|
Properties(3)
|
Eliminations
|
|
Total
|
|
Revenue
|
$
|
10,845
|
$
|
261
|
$
|
198
|
$
|
(174)
|
$
|
11,130
|
$
|
10,606
|
$
|
240
|
$
|
191
|
$
|
(172)
|
$
|
10,865
|
|
Cost of Merchandise
|
|
|
|
|
|
|
|
|
|
|
|
Inventories Sold
|
7,896
|
27
|
—
|
—
|
7,923
|
7,812
|
19
|
—
|
—
|
7,831
|
|
Gross Profit
|
$
|
2,949
|
$
|
234
|
$
|
198
|
$
|
(174)
|
$
|
3,207
|
$
|
2,794
|
$
|
221
|
$
|
191
|
$
|
(172)
|
$
|
3,034
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
Charges related to retail
|
|
|
|
|
|
|
|
|
|
|
|
|
locations in Fort McMurray,
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
(4)
|
—
|
—
|
—
|
(4)
|
—
|
—
|
—
|
—
|
—
|
|
Net impairment (impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
reversals) related to Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
retail ancillary assets
|
—
|
—
|
—
|
—
|
—
|
46
|
—
|
—
|
—
|
46
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
—
|
—
|
—
|
—
|
—
|
4
|
—
|
—
|
—
|
4
|
|
Adjusted Gross Profit
|
$
|
2,945
|
$
|
234
|
$
|
198
|
$
|
(174)
|
$
|
3,203
|
$
|
2,844
|
$
|
221
|
$
|
191
|
$
|
(172)
|
$
|
3,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
2015
|
|
|
|
|
(52 weeks)
|
|
|
|
(52 weeks)
|
|
For the periods ended
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 and
|
|
|
|
Consolidation
|
|
|
|
|
Consolidation
|
|
|
January 2, 2016
|
|
Financial
|
Choice
|
and
|
|
|
|
Financial
|
Choice
|
and
|
|
|
|
(millions of Canadian dollars)
|
Retail
|
Services(3)
|
Properties(3)
|
Eliminations
|
Total
|
Retail
|
Services(3)
|
Properties(3)
|
Eliminations
|
Total
|
|
Revenue
|
$
|
45,384
|
$
|
911
|
$
|
784
|
$
|
(694)
|
$
|
46,385
|
$
|
44,469
|
$
|
849
|
$
|
743
|
$
|
(667)
|
$
|
45,394
|
|
Cost of Merchandise
|
|
|
|
|
|
|
|
|
|
|
|
Inventories Sold
|
33,130
|
83
|
—
|
—
|
33,213
|
32,780
|
66
|
—
|
—
|
32,846
|
|
Gross Profit
|
$
|
12,254
|
$
|
828
|
$
|
784
|
$
|
(694)
|
$
|
13,172
|
$
|
11,689
|
$
|
783
|
$
|
743
|
$
|
(667)
|
$
|
12,548
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
Charges related to retail
|
|
|
|
|
|
|
|
|
|
|
|
|
locations in Fort McMurray,
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
1
|
—
|
—
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
|
Restructuring and other
|
|
|
|
|
|
|
|
|
|
|
|
|
related costs
|
3
|
—
|
—
|
—
|
3
|
—
|
—
|
—
|
—
|
—
|
|
Net impairment (impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
reversals) related to Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
retail ancillary assets
|
4
|
—
|
—
|
—
|
4
|
46
|
—
|
—
|
—
|
46
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
—
|
—
|
—
|
—
|
—
|
4
|
—
|
—
|
—
|
4
|
|
Charge related to apparel
|
|
|
|
|
|
|
|
|
|
|
|
|
inventory
|
—
|
—
|
—
|
—
|
—
|
8
|
—
|
—
|
—
|
8
|
|
Adjusted Gross Profit
|
$
|
12,262
|
$
|
828
|
$
|
784
|
$
|
(694)
|
$
|
13,180
|
$
|
11,747
|
$
|
783
|
$
|
743
|
$
|
(667)
|
$
|
12,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 GAAP net earnings measures reported in the consolidated
statements of earnings for the periods ended December 31, 2016 and January 2, 2016. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
(12 weeks)
|
|
|
|
|
|
|
|
(12 weeks)
|
|
(millions of Canadian dollars)
|
Retail
|
Financial Services(3)
|
Choice Properties(3)
|
Consolidation and Eliminations
|
Consolidated
|
Retail
|
Financial Services(3)
|
Choice Properties(3)
|
Consolidation and Eliminations
|
Consolidated
|
|
Net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
$
|
204
|
|
|
|
|
$
|
131
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
28
|
|
|
|
|
(4)
|
|
Net interest expense and
|
|
|
|
|
|
|
|
|
|
|
|
other financing charges
|
|
|
|
|
128
|
|
|
|
|
141
|
|
Income taxes
|
|
|
|
|
89
|
|
|
|
|
48
|
|
Operating income
|
$
|
392
|
$
|
52
|
$
|
245
|
$
|
(240)
|
$
|
449
|
$
|
265
|
$
|
48
|
$
|
224
|
$
|
(221)
|
$
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible
|
|
|
|
|
|
|
|
|
|
|
|
|
assets acquired with
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoppers Drug Mart
|
124
|
—
|
—
|
—
|
124
|
124
|
—
|
—
|
—
|
124
|
|
Restructuring and other
|
|
|
|
|
|
|
|
|
|
|
|
|
related costs
|
2
|
—
|
—
|
—
|
2
|
(7)
|
—
|
—
|
—
|
(7)
|
|
Charges related to retail
|
|
|
|
|
|
|
|
|
|
|
|
|
locations in Fort McMurray,
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
(5)
|
—
|
—
|
—
|
(5)
|
—
|
—
|
—
|
—
|
—
|
|
Fair value adjustment on
|
|
|
|
|
|
|
|
|
|
|
|
|
fuel and foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
currency contracts
|
(6)
|
—
|
—
|
—
|
(6)
|
(6)
|
—
|
—
|
—
|
(6)
|
|
Net impairment (impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
reversals) related to Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
retail ancillary assets
|
—
|
—
|
—
|
—
|
—
|
112
|
—
|
—
|
—
|
112
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
—
|
—
|
—
|
—
|
—
|
33
|
—
|
—
|
—
|
33
|
|
Asset impairments, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
recoveries
|
130
|
—
|
—
|
—
|
130
|
4
|
—
|
—
|
—
|
4
|
|
Labour agreements
|
—
|
—
|
—
|
—
|
—
|
55
|
—
|
—
|
—
|
55
|
|
Pension annuities and
|
|
|
|
|
|
|
|
|
|
|
|
|
buy-outs
|
21
|
—
|
—
|
—
|
21
|
6
|
—
|
—
|
—
|
6
|
|
Modifications to certain
|
|
|
|
|
|
|
|
|
|
|
|
|
franchise fee arrangements
|
—
|
—
|
—
|
—
|
—
|
(8)
|
—
|
—
|
—
|
(8)
|
|
Adjusting Items
|
$
|
266
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
266
|
$
|
313
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
313
|
|
Adjusted operating income
|
$
|
658
|
$
|
52
|
$
|
245
|
$
|
(240)
|
$
|
715
|
$
|
578
|
$
|
48
|
$
|
224
|
$
|
(221)
|
$
|
629
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization
|
355
|
4
|
—
|
6
|
365
|
369
|
3
|
—
|
4
|
376
|
|
Less: Amortization of
|
|
|
|
|
|
|
|
|
|
|
|
intangible assets acquired
|
|
|
|
|
|
|
|
|
|
|
|
with Shoppers Drug Mart
|
(124)
|
—
|
—
|
—
|
(124)
|
(124)
|
—
|
—
|
—
|
(124)
|
|
Adjusted EBITDA
|
$
|
889
|
$
|
56
|
$
|
245
|
$
|
(234)
|
$
|
956
|
$
|
823
|
$
|
51
|
$
|
224
|
$
|
(217)
|
$
|
881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
2015(6)
|
|
|
|
|
|
|
|
|
(52 weeks)
|
|
|
|
|
|
|
|
(52 weeks)
|
|
(millions of Canadian dollars)
|
Retail
|
Financial
Services(3)
|
Choice
Properties(3)
|
Consolidation
and
Eliminations
|
Consolidated
|
Retail
|
Financial
Services(3)
|
Choice
Properties(3)
|
Consolidation
and
Eliminations
|
Consolidated
|
|
Net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
|
|
|
|
$
|
983
|
|
|
|
|
|
|
|
|
$
|
598
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
(9)
|
|
Net interest expense and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other financing charges
|
|
|
|
|
|
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
644
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
368
|
|
Operating income
|
$
|
1,902
|
$
|
175
|
$
|
677
|
$
|
(662)
|
$
|
2,092
|
$
|
1,429
|
$
|
163
|
$
|
601
|
$
|
(592)
|
$
|
1,601
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct) impact of the
|
|
|
|
|
|
|
|
|
|
|
|
following:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible
|
|
|
|
|
|
|
|
|
|
|
|
|
assets acquired with
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoppers Drug Mart
|
535
|
—
|
—
|
—
|
535
|
536
|
—
|
—
|
—
|
536
|
|
Restructuring and other
|
|
|
|
|
|
|
|
|
|
|
|
|
related costs
|
46
|
—
|
—
|
—
|
46
|
154
|
—
|
—
|
—
|
154
|
|
Fair value adjustment on
|
|
|
|
|
|
|
|
|
|
|
|
|
fuel and foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
contracts
|
5
|
—
|
—
|
—
|
5
|
(21)
|
—
|
—
|
—
|
(21)
|
|
Charges related to retail
|
|
|
|
|
|
|
|
|
|
|
|
|
locations in Fort McMurray,
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
2
|
—
|
—
|
—
|
2
|
—
|
—
|
—
|
—
|
—
|
|
Prior year tax assessment
|
10
|
—
|
—
|
—
|
10
|
—
|
—
|
—
|
—
|
—
|
|
Net impairment (impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
reversals) related to Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
retail ancillary assets
|
(4)
|
—
|
—
|
—
|
(4)
|
112
|
—
|
—
|
—
|
112
|
|
Asset impairments, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
recoveries
|
135
|
—
|
—
|
—
|
135
|
13
|
—
|
—
|
—
|
13
|
|
Pension annuities and
|
|
|
|
|
|
|
|
|
|
|
|
|
buy-outs
|
23
|
—
|
—
|
—
|
23
|
8
|
—
|
—
|
—
|
8
|
|
Charge related to apparel
|
|
|
|
|
|
|
|
|
|
|
|
|
inventory
|
—
|
—
|
—
|
—
|
—
|
8
|
—
|
—
|
—
|
8
|
|
Shoppers Drug Mart
|
|
|
|
|
|
|
|
|
|
|
|
|
acquisition-related cost, net
|
|
|
|
|
|
|
|
|
|
|
|
|
of impact from divestitures
|
—
|
—
|
—
|
—
|
—
|
2
|
—
|
—
|
—
|
2
|
|
Labour agreements
|
—
|
—
|
—
|
—
|
—
|
55
|
—
|
—
|
—
|
55
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
—
|
—
|
—
|
—
|
—
|
33
|
—
|
—
|
—
|
33
|
|
Modifications to certain
|
|
|
|
|
|
|
|
|
|
|
|
|
franchise fee arrangements
|
—
|
—
|
—
|
—
|
—
|
(8)
|
—
|
—
|
—
|
(8)
|
|
Adjusting Items
|
$
|
752
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
752
|
$
|
892
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
892
|
|
Adjusted operating income
|
$
|
2,654
|
$
|
175
|
$
|
677
|
$
|
(662)
|
$
|
2,844
|
$
|
2,321
|
$
|
163
|
$
|
601
|
$
|
(592)
|
$
|
2,493
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
amortization
|
1,512
|
13
|
1
|
17
|
1,543
|
1,567
|
10
|
1
|
14
|
1,592
|
|
Less: Amortization of
|
|
|
|
|
|
|
|
|
|
|
|
intangible assets acquired
|
|
|
|
|
|
|
|
|
|
|
|
with Shoppers Drug Mart
|
(535)
|
—
|
—
|
—
|
(535)
|
(536)
|
—
|
—
|
—
|
(536)
|
|
Adjusted EBITDA
|
$
|
3,631
|
$
|
188
|
$
|
678
|
$
|
(645)
|
$
|
3,852
|
$
|
3,352
|
$
|
173
|
$
|
602
|
$
|
(578)
|
$
|
3,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 in the consolidated statements of earnings for
the periods ended December 31, 2016 and January 2, 2016. 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.
|
|
|
|
|
|
|
|
2016
|
2015
|
2016
|
2015
|
|
(millions of Canadian dollars)
|
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Net interest expense and other financing charges
|
|
$
|
128
|
$
|
141
|
$
|
653
|
$
|
644
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
Fair value adjustment to the Trust Unit Liability
|
|
2
|
(7)
|
(118)
|
(81)
|
|
Accelerated amortization of deferred financing costs
|
|
—
|
—
|
—
|
(15)
|
|
Adjusted net interest expense and other financing charges
|
|
$
|
130
|
$
|
134
|
$
|
535
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
Adjusted Income Taxes and Adjusted Income Tax Rate The Company believes adjusted income taxes is useful in assessing
the Company's underlying operating performance and in making decisions regarding the ongoing operations of its
business.
|
|
|
|
|
|
|
For the periods ended December 31, 2016 and January 2, 2016
|
|
2016
|
2015
|
2016
|
2015(6)
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Adjusted operating income(i)
|
|
$
|
715
|
$
|
629
|
$
|
2,844
|
$
|
2,493
|
|
Adjusted net interest expense and other financing
charges(i)
|
|
130
|
134
|
535
|
548
|
|
Adjusted earnings before taxes
|
|
$
|
585
|
$
|
495
|
$
|
2,309
|
$
|
1,945
|
|
Income taxes
|
|
$
|
89
|
$
|
48
|
$
|
449
|
$
|
368
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
Tax impact of items included in adjusted earnings before
taxes(ii)
|
|
72
|
85
|
189
|
229
|
|
Statutory corporate income tax rate change
|
|
—
|
—
|
(3)
|
(72)
|
|
Adjusted income taxes
|
|
$
|
161
|
$
|
133
|
$
|
635
|
$
|
525
|
|
Effective tax rate
|
|
27.7%
|
27.4%
|
31.2%
|
38.5%
|
|
Adjusted income tax rate
|
|
27.5%
|
26.9%
|
27.5%
|
27.0%
|
|
|
|
|
|
|
|
(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 income 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.
Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net Earnings Per Common Share The Company
believes 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.
The following table reconciles net earnings attributable to shareholders of the Company to net earnings available to common
shareholders of the Company and then to adjusted net earnings available to common shareholders of the Company for the periods
ended December 31, 2016 and January 2, 2016:
|
|
|
|
|
|
|
|
2016
|
2015
|
2016
|
2015(6)
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Net earnings attributable to shareholders of the Company
|
|
$
|
204
|
$
|
131
|
$
|
983
|
$
|
598
|
|
Less: Prescribed dividends on preferred shares in share capital
|
|
(3)
|
(3)
|
(12)
|
(7)
|
|
Net earnings available to common shareholders of the Company
|
|
$
|
201
|
$
|
128
|
$
|
971
|
$
|
591
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to shareholders of the Company
|
|
$
|
204
|
$
|
131
|
$
|
983
|
$
|
598
|
|
Adjusting items (refer to the following table)
|
|
192
|
235
|
684
|
831
|
|
Adjusted net earnings attributable to shareholders of the
Company
|
|
$
|
396
|
$
|
366
|
$
|
1,667
|
$
|
1,429
|
|
Less: Prescribed dividends on preferred shares in share capital
|
|
(3)
|
(3)
|
(12)
|
(7)
|
|
Adjusted net earnings available to common shareholders of the
Company
|
|
$
|
393
|
$
|
363
|
$
|
1,655
|
$
|
1,422
|
|
Diluted weighted average common shares outstanding (millions)
|
|
405.6
|
415.2
|
409.1
|
415.2
|
|
|
|
|
|
|
The following table reconciles adjusted net earnings available to common shareholders of the Company and adjusted diluted net
earnings per common share to GAAP net earnings available to common shareholders of the Company and diluted net earnings per
common share as reported for the periods ended December 31, 2016 and January 2, 2016:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015(6)
|
|
|
(12 weeks)
|
|
(12 weeks)
|
|
(52 weeks)
|
|
(52 weeks)
|
|
(millions of Canadian dollars/
Canadian dollars)
|
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
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
$
|
201
|
$
|
0.50
|
$
|
128
|
$
|
0.31
|
$
|
971
|
$
|
2.37
|
$
|
591
|
$
|
1.42
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment to the
|
|
|
|
|
|
|
|
|
|
|
Trust Unit Liability(i)
|
(2)
|
—
|
7
|
0.01
|
118
|
0.29
|
81
|
0.20
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug Mart
|
90
|
0.22
|
92
|
0.21
|
395
|
0.97
|
394
|
0.95
|
|
Restructuring and other
|
|
|
|
|
|
|
|
|
|
|
related costs
|
3
|
0.01
|
(5)
|
(0.01)
|
44
|
0.11
|
127
|
0.31
|
|
Fair value adjustment on fuel
|
|
|
|
|
|
|
|
|
|
|
and foreign currency contracts
|
(4)
|
(0.01)
|
(5)
|
(0.01)
|
4
|
0.01
|
(16)
|
(0.04)
|
|
Charges related to retail locations
|
|
|
|
|
|
|
|
|
|
|
in Fort McMurray, net of recoveries
|
(3)
|
(0.01)
|
—
|
—
|
2
|
—
|
—
|
—
|
|
Net impairment (impairment
|
|
|
|
|
|
|
|
|
|
|
reversals) related to Drug retail
|
|
|
|
|
|
|
|
|
|
|
ancillary assets
|
—
|
—
|
82
|
0.20
|
(3)
|
(0.01)
|
82
|
0.20
|
|
Statutory corporate income tax
|
|
|
|
|
|
|
|
|
|
|
rate change
|
—
|
—
|
—
|
—
|
3
|
0.01
|
72
|
0.17
|
|
Asset impairments, net of
|
|
|
|
|
|
|
|
|
|
|
recoveries
|
93
|
0.22
|
3
|
0.01
|
97
|
0.24
|
10
|
0.02
|
|
Charge related to apparel inventory
|
—
|
—
|
—
|
—
|
—
|
—
|
6
|
0.01
|
|
Accelerated amortization of
|
|
|
|
|
|
|
|
|
|
|
deferred financing costs
|
—
|
—
|
—
|
—
|
—
|
—
|
11
|
0.03
|
|
Prior year tax assessment
|
—
|
—
|
—
|
—
|
7
|
0.02
|
—
|
—
|
|
Pension annuities and buy-outs
|
15
|
0.04
|
5
|
0.01
|
17
|
0.04
|
6
|
0.01
|
|
Labour agreements
|
—
|
—
|
40
|
0.10
|
—
|
—
|
40
|
0.10
|
|
Modifications to certain
|
|
|
|
|
|
|
|
|
|
|
franchise fee arrangements
|
—
|
—
|
(8)
|
(0.02)
|
—
|
—
|
(8)
|
(0.02)
|
|
Shoppers Drug Mart acquisition-
|
|
|
|
|
|
|
|
|
|
|
related cost, net of impact from
|
|
|
|
|
|
|
|
|
|
|
divestitures
|
—
|
—
|
—
|
—
|
—
|
—
|
2
|
—
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
—
|
—
|
24
|
0.06
|
—
|
—
|
24
|
0.06
|
|
Adjusting items
|
$
|
192
|
$
|
0.47
|
$
|
235
|
$
|
0.56
|
$
|
684
|
$
|
1.68
|
$
|
831
|
$
|
2.00
|
|
Adjusted
|
$
|
393
|
$
|
0.97
|
$
|
363
|
$
|
0.87
|
$
|
1,655
|
$
|
4.05
|
$
|
1,422
|
$
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Gains or losses related to the fair value adjustment to the Trust Unit
Liability are not subject to tax.
|
Free Cash Flow The following table reconciles free cash flow used in assessing the Company's financial condition to
GAAP measures for the periods ended December 31, 2016 and January 2, 2016. The Company believes that free cash flow is
the appropriate measure in assessing the Company's cash available for additional financing and investing activities.
|
|
|
|
|
|
2016
|
2015
|
2016
|
2015
|
|
(millions of Canadian dollars)
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Cash flows from operating activities
|
$
|
861
|
$
|
564
|
$
|
3,519
|
$
|
3,079
|
|
Less:
|
|
|
|
|
|
Capital investments
|
470
|
433
|
1,224
|
1,241
|
|
Interest paid
|
78
|
95
|
474
|
491
|
|
Free cash flow
|
$
|
313
|
$
|
36
|
$
|
1,821
|
$
|
1,347
|
|
|
|
|
|
Choice Properties' Adjusted Funds from Operations The following table reconciles Choice Properties' adjusted funds from
operations to GAAP measures for the periods ended December 31, 2016 and January 2, 2016. The Company believes adjusted
funds from operations is useful in measuring economic performance and is indicative of Choice Properties' ability to pay
distributions.
|
|
|
|
|
|
|
|
2016
|
2015
|
2016
|
2015
|
|
(millions of Canadian dollars)
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Net income (loss)
|
$
|
256
|
$
|
41
|
$
|
(223)
|
$
|
(155)
|
|
Fair value adjustments on Class B Limited Partnership units
|
(107)
|
96
|
530
|
411
|
|
Fair value adjustments on investment properties
|
(102)
|
(88)
|
(109)
|
(72)
|
|
Fair value adjustments on unit-based compensation
|
(1)
|
—
|
4
|
1
|
|
Fair value adjustments of investment property held in equity accounted
joint venture
|
—
|
—
|
(14)
|
—
|
|
Distributions on Class B Limited Partnership units
|
56
|
52
|
219
|
203
|
|
Internal expenses for leasing
|
1
|
—
|
3
|
1
|
|
Funds from Operations
|
$
|
103
|
$
|
101
|
$
|
410
|
$
|
389
|
|
Straight-line rental revenue
|
(9)
|
(10)
|
(36)
|
(37)
|
|
Amortization of finance charges
|
1
|
—
|
1
|
(1)
|
|
Unit-based compensation expense
|
1
|
—
|
3
|
2
|
|
Sustaining property and leasing capital expenditures,
normalized(i)
|
(14)
|
(9)
|
(48)
|
(40)
|
|
Adjusted Funds from Operations
|
$
|
82
|
$
|
82
|
$
|
330
|
$
|
313
|
|
|
|
|
|
|
|
|
|
(i)
|
Seasonality impacts the timing of capital expenditures. The adjusted funds
from operations calculation has been adjusted for this factor to make the quarters more comparable.
|
SELECTED FINANCIAL INFORMATION
The following includes selected quarterly and annual financial information, which is prepared by management in accordance with
International Financial Reporting Standards ("IFRS") and is based on the Company's audited annual consolidated financial
statements for the year ended December 31, 2016. This financial information does not contain all disclosures required by
IFRS, and accordingly, should be read in conjunction with the Company's 2016 Annual Report, which is available in the Investor
Centre section of the Company's website at loblaw.ca and on sedar.com.
Consolidated Statements of Earnings
|
|
|
|
|
|
December 31, 2016
|
January 2, 2016
|
2016
|
2015(6)
|
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
|
(audited)
|
|
Revenue
|
$
|
11,130
|
$
|
10,865
|
$
|
46,385
|
$
|
45,394
|
|
Cost of Merchandise Inventories Sold
|
7,923
|
7,831
|
33,213
|
32,846
|
|
Selling, General and Administrative Expenses
|
2,758
|
2,718
|
11,080
|
10,947
|
|
Operating Income
|
$
|
449
|
$
|
316
|
$
|
2,092
|
$
|
1,601
|
|
Net interest expense and other financing charges
|
128
|
141
|
653
|
644
|
|
Earnings Before Income Taxes
|
$
|
321
|
$
|
175
|
$
|
1,439
|
$
|
957
|
|
Income taxes
|
89
|
48
|
449
|
368
|
|
Net Earnings
|
$
|
232
|
$
|
127
|
$
|
990
|
$
|
589
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Shareholders of the Company
|
$
|
204
|
$
|
131
|
$
|
983
|
$
|
598
|
|
Non-Controlling Interests
|
28
|
(4)
|
7
|
(9)
|
|
Net Earnings
|
$
|
232
|
$
|
127
|
$
|
990
|
$
|
589
|
|
|
|
|
|
|
Net Earnings per Common Share ($)
|
|
|
|
|
|
Basic
|
$
|
0.50
|
$
|
0.31
|
$
|
2.40
|
$
|
1.44
|
|
Diluted
|
$
|
0.50
|
$
|
0.31
|
$
|
2.37
|
$
|
1.42
|
|
Weighted Average Common Shares Outstanding (millions)
|
|
|
|
|
|
Basic
|
401.9
|
410.7
|
405.1
|
411.5
|
|
Diluted
|
405.6
|
415.2
|
409.1
|
415.2
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
As at
|
As at
|
|
(millions of Canadian dollars)
|
December 31, 2016
|
January 2, 2016(6)
|
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash and cash equivalents
|
$
|
1,314
|
$
|
1,018
|
|
Short term investments
|
241
|
64
|
|
Accounts receivable
|
1,122
|
1,325
|
|
Credit card receivables
|
2,926
|
2,790
|
|
Inventories
|
4,371
|
4,322
|
|
Prepaid expenses and other
assets
|
190
|
265
|
|
Assets held for sale
|
40
|
71
|
|
Total Current Assets
|
$
|
10,204
|
$
|
9,855
|
|
Fixed Assets
|
10,559
|
10,480
|
|
Investment Properties
|
218
|
160
|
|
Intangible Assets
|
8,745
|
9,164
|
|
Goodwill
|
3,895
|
3,780
|
|
Deferred Income Tax Assets
|
130
|
132
|
|
Franchise Loans Receivable
|
233
|
329
|
|
Other Assets
|
452
|
457
|
|
Total Assets
|
$
|
34,436
|
$
|
34,357
|
|
Liabilities
|
|
|
|
Current Liabilities
|
|
|
|
Bank indebtedness
|
$
|
115
|
$
|
143
|
|
Trade payables and other liabilities
|
5,091
|
5,106
|
|
Provisions
|
99
|
127
|
|
Income taxes payable
|
329
|
82
|
|
Short term debt
|
665
|
550
|
|
Long term debt due within one year
|
400
|
998
|
|
Associate interest
|
243
|
216
|
|
Total Current Liabilities
|
$
|
6,942
|
$
|
7,222
|
|
Provisions
|
120
|
131
|
|
Long Term Debt
|
10,470
|
10,013
|
|
Trust Unit Liability
|
959
|
821
|
|
Deferred Income Tax Liabilities
|
2,190
|
2,292
|
|
Other Liabilities
|
727
|
754
|
|
Total Liabilities
|
$
|
21,408
|
$
|
21,233
|
|
Equity
|
|
|
|
Share Capital
|
$
|
7,913
|
$
|
8,072
|
|
Retained Earnings
|
4,944
|
4,914
|
|
Contributed Surplus
|
112
|
102
|
|
Accumulated Other Comprehensive Income
|
33
|
23
|
|
Total Equity Attributable to Shareholders of the Company
|
$
|
13,002
|
$
|
13,111
|
|
Non-Controlling Interests
|
26
|
13
|
|
Total Equity
|
$
|
13,028
|
$
|
13,124
|
|
Total Liabilities and Equity
|
$
|
34,436
|
$
|
34,357
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
December 31, 2016
|
January 2, 2016
|
2016
|
2015(6)
|
|
(millions of Canadian dollars)
|
(12 weeks)
|
(12 weeks)
|
(52 weeks)
|
(52 weeks)
|
|
Operating Activities
|
|
|
|
|
|
Net earnings
|
$
|
232
|
$
|
127
|
$
|
990
|
$
|
589
|
|
Add (Deduct):
|
|
|
|
|
|
|
Income taxes
|
89
|
48
|
449
|
368
|
|
|
Net interest expense and other financing charges
|
128
|
141
|
653
|
644
|
|
|
Depreciation and amortization
|
365
|
376
|
1,543
|
1,592
|
|
|
Asset impairments, net of recoveries
|
130
|
26
|
139
|
73
|
|
|
(Gain) Loss on disposal of assets
|
(2)
|
2
|
—
|
(5)
|
|
|
Charge related to inventory measurement and other conversion
differences
|
—
|
4
|
—
|
4
|
|
$
|
942
|
$
|
724
|
$
|
3,774
|
$
|
3,265
|
|
Change in non-cash working capital
|
95
|
100
|
134
|
235
|
|
Change in credit card receivables
|
(157)
|
(127)
|
(136)
|
(160)
|
|
Income taxes paid
|
(50)
|
(65)
|
(329)
|
(296)
|
|
Interest received
|
2
|
2
|
9
|
7
|
|
Other
|
29
|
(70)
|
67
|
28
|
|
Cash Flows from Operating Activities
|
$
|
861
|
$
|
564
|
$
|
3,519
|
$
|
3,079
|
|
Investing Activities
|
|
|
|
|
Fixed asset purchases
|
$
|
(361)
|
$
|
(329)
|
$
|
(896)
|
$
|
(1,008)
|
|
Intangible asset additions
|
(109)
|
(104)
|
(328)
|
(233)
|
|
Acquisition of QHR, net of cash acquired
|
(153)
|
—
|
(153)
|
—
|
|
Cash assumed on initial consolidation of franchises
|
11
|
31
|
42
|
33
|
|
Change in short term investments
|
(85)
|
(18)
|
(177)
|
(43)
|
|
Proceeds from disposal of assets
|
9
|
2
|
62
|
36
|
|
Change in security deposits
|
(2)
|
209
|
(2)
|
5
|
|
Other
|
14
|
36
|
15
|
(28)
|
|
Cash Flows used in Investing Activities
|
$
|
(676)
|
$
|
(173)
|
$
|
(1,437)
|
$
|
(1,238)
|
|
Financing Activities
|
|
|
|
|
Change in bank indebtedness
|
$
|
(142)
|
$
|
(100)
|
$
|
(28)
|
$
|
(19)
|
|
Change in short term debt
|
190
|
(30)
|
115
|
(55)
|
|
Long Term Debt
|
|
|
|
|
|
|
Issued
|
159
|
338
|
815
|
1,186
|
|
|
Retired
|
(30)
|
(502)
|
(1,049)
|
(1,783)
|
|
Interest paid
|
(78)
|
(95)
|
(474)
|
(491)
|
|
Dividends paid on common and preferred shares
|
(104)
|
(105)
|
(425)
|
(416)
|
|
Common Share Capital
|
|
|
|
|
|
Issued
|
4
|
15
|
42
|
63
|
|
|
Purchased and held in trust
|
—
|
(6)
|
(90)
|
(63)
|
|
|
Purchased and cancelled
|
(200)
|
(186)
|
(708)
|
(280)
|
|
Preferred Share Capital Issued
|
—
|
—
|
—
|
221
|
|
Redemption of Capital Securities
|
—
|
—
|
—
|
(225)
|
|
Other
|
16
|
16
|
20
|
23
|
|
Cash Flows used in Financing Activities
|
$
|
(185)
|
$
|
(655)
|
$
|
(1,782)
|
$
|
(1,839)
|
|
Effect of foreign currency exchange rate changes on cash and cash
equivalents
|
$
|
2
|
$
|
7
|
$
|
(4)
|
$
|
17
|
|
Change in cash and cash equivalents
|
$
|
2
|
$
|
(257)
|
$
|
296
|
$
|
19
|
|
Cash and cash equivalents, beginning of period
|
1,312
|
1,275
|
1,018
|
999
|
|
Cash and Cash Equivalents, End of Period
|
$
|
1,314
|
$
|
1,018
|
$
|
1,314
|
$
|
1,018
|
|
|
|
|
|
|
|
|
|
|
SEGMENT INFORMATION
The Company has three reportable operating segments with all material operations carried out in Canada. The Company's chief operating decision maker evaluates segment performance on the basis of adjusted
EBITDA(2) and adjusted operating income(2), as reported to internal management, on a periodic basis.
Information for each reportable operating segment is included below:
|
|
|
|
December 31, 2016
|
January 2, 2016
|
|
(12 weeks)
|
(12 weeks)
|
|
(millions of Canadian dollars)
|
Retail
|
Financial Services(3)
|
Choice Properties(3)
|
Consolidation and Eliminations(i)
|
Total
|
Retail
|
Financial Services(3)
|
Choice Properties(3)
|
Consolidation and Eliminations(i)
|
Total
|
|
Revenue(ii)
|
$
|
10,845
|
$
|
261
|
$
|
198
|
$
|
(174)
|
$
|
11,130
|
$
|
10,606
|
$
|
240
|
$
|
191
|
$
|
(172)
|
$
|
10,865
|
|
Operating Income
|
$
|
392
|
$
|
52
|
$
|
245
|
$
|
(240)
|
$
|
449
|
$
|
265
|
$
|
48
|
$
|
224
|
$
|
(221)
|
$
|
316
|
|
Net interest expense and other financing charges
|
76
|
13
|
(11)
|
50
|
128
|
82
|
15
|
184
|
(140)
|
141
|
|
Earnings before Income Taxes
|
$
|
316
|
$
|
39
|
$
|
256
|
$
|
(290)
|
$
|
321
|
$
|
183
|
$
|
33
|
$
|
40
|
$
|
(81)
|
$
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
$
|
392
|
$
|
52
|
$
|
245
|
$
|
(240)
|
$
|
449
|
$
|
265
|
$
|
48
|
$
|
224
|
$
|
(221)
|
$
|
316
|
|
Depreciation and Amortization
|
355
|
4
|
—
|
6
|
365
|
369
|
3
|
—
|
4
|
376
|
|
Adjusting items(iii)
|
266
|
—
|
—
|
—
|
266
|
313
|
—
|
—
|
—
|
313
|
|
Less: amortization of intangible assets acquired with Shoppers Drug
Mart
|
(124)
|
—
|
—
|
—
|
(124)
|
(124)
|
—
|
—
|
—
|
(124)
|
|
Adjusted EBITDA(iii)
|
$
|
889
|
$
|
56
|
$
|
245
|
$
|
(234)
|
$
|
956
|
$
|
823
|
$
|
51
|
$
|
224
|
$
|
(217)
|
$
|
881
|
|
Depreciation and Amortization(iv)
|
231
|
4
|
—
|
6
|
241
|
245
|
3
|
—
|
4
|
252
|
|
Adjusted Operating Income
|
$
|
658
|
$
|
52
|
$
|
245
|
$
|
(240)
|
$
|
715
|
$
|
578
|
$
|
48
|
$
|
224
|
$
|
(221)
|
$
|
629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Consolidation and Eliminations includes the following items:
|
|
- Revenue includes the elimination of $133 million (2015 – $128 million) of rental revenue and
$41 million (2015 – $44 million) of cost recovery recognized by Choice Properties, generated from the Retail
segment.
- Adjusted operating income includes the elimination of the $133 million (2015 – $128 million)
impact of rental revenue described above; the elimination of a $102 million gain (2015 – $88 million gain ) recognized
by Choice Properties related to the fair value adjustments on investment properties, which are classified as Fixed
Assets or Investment Properties by the Company and measured at cost; the recognition of $6 million (2015 – $4 million)
of depreciation expense for certain investment properties recorded by Choice Properties; and the elimination of
intercompany recoveries of $1 million (2015 – charges of $1 million).
- Net interest expense and other financing charges includes the elimination of $68 million (2015
– $63 million) of interest expense included in Choice Properties related to debt owing to the Company and a $107
million fair value gain (2015 – loss of $96 million) recognized by Choice Properties on Class B Limited Partnership
units held by the Company. Net interest and other financing charges also includes Unit distributions to external
unitholders of $13 million (2015 – $12 million), which excludes distributions paid to the Company and a $2 million fair
value gain (2015 – $7 million loss) on the Company's Trust Unit Liability.
|
|
(ii)
|
Included in Financial Services revenue is $97 million (2015 – $94 million)
of interest income.
|
|
(iii)
|
Certain items are excluded from operating income to derive adjusted
EBITDA(2). Adjusted EBITDA(2) is used internally by management when analyzing segment underlying
performance.
|
|
(iv)
|
Depreciation and amortization for the calculation of adjusted
EBITDA(2) excludes $124 million (2015 – $124 million) of amortization of intangible assets acquired with
Shoppers Drug Mart.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
January 2, 2016
|
|
|
(52 weeks)
|
(52 weeks)
|
|
|
Retail
|
Financial
Services(3)
|
Choice
Properties(3)
|
Consolidation
and
Eliminations(i)
|
|
Total
|
Retail
|
Financial
Services(3)
|
Choice
Properties(3)
|
Consolidation
and
Eliminations(i)
|
Total
|
|
(millions of Canadian dollars)
|
|
|
Revenue(ii)
|
|
$
|
45,384
|
$
|
911
|
$
|
784
|
$
|
(694)
|
$
|
46,385
|
$
|
44,469
|
$
|
849
|
$
|
743
|
$
|
(667)
|
$
|
45,394
|
|
Operating Income
|
|
$
|
1,902
|
$
|
175
|
$
|
677
|
$
|
(662)
|
$
|
2,092
|
$
|
1,429
|
$
|
163
|
$
|
601
|
$
|
(592)
|
$
|
1,601
|
|
Net interest expense and other financing charges
|
|
|
332
|
|
51
|
|
900
|
|
(630)
|
|
653
|
|
367
|
|
57
|
|
756
|
|
(536)
|
|
644
|
|
Earnings before Income Taxes
|
|
$
|
1,570
|
$
|
124
|
$
|
(223)
|
$
|
(32)
|
$
|
1,439
|
$
|
1,062
|
$
|
106
|
$
|
(155)
|
$
|
(56)
|
$
|
957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
1,902
|
$
|
175
|
$
|
677
|
$
|
(662)
|
$
|
2,092
|
$
|
1,429
|
$
|
163
|
$
|
601
|
$
|
(592)
|
$
|
1,601
|
|
Depreciation and Amortization
|
|
|
1,512
|
|
13
|
|
1
|
|
17
|
|
1,543
|
|
1,567
|
|
10
|
|
1
|
|
14
|
|
1,592
|
|
Adjusting items(iii)
|
|
|
752
|
|
—
|
|
—
|
|
—
|
|
752
|
|
892
|
|
—
|
|
—
|
|
—
|
|
892
|
|
Less: amortization of intangible assets acquired with Shoppers Drug
Mart
|
|
|
(535)
|
|
—
|
|
—
|
|
—
|
|
(535)
|
|
(536)
|
|
—
|
|
—
|
|
—
|
|
(536)
|
|
Adjusted EBITDA(iii)
|
|
$
|
3,631
|
$
|
188
|
$
|
678
|
$
|
(645)
|
$
|
3,852
|
$
|
3,352
|
$
|
173
|
$
|
602
|
$
|
(578)
|
$
|
3,549
|
|
Depreciation and Amortization(iv)
|
|
|
977
|
|
13
|
|
1
|
|
17
|
|
1,008
|
|
1,031
|
|
10
|
|
1
|
|
14
|
|
1,056
|
|
Adjusted Operating Income
|
|
$
|
2,654
|
$
|
175
|
$
|
677
|
$
|
(662)
|
$
|
2,844
|
$
|
2,321
|
$
|
163
|
$
|
601
|
$
|
(592)
|
$
|
2,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Consolidation and Eliminations includes the following items:
|
|
- Revenue includes the elimination of $520 million (2015 – $502 million) of rental revenue and
$174 million (2015 – $165 million) of cost recovery recognized by Choice Properties, generated from the Retail
segment.
- Adjusted operating income includes the elimination of the $520 million (2015 – $502 million)
impact of rental revenue described above; the elimination of a $109 million gain (2015 – $72 million gain) recognized
by Choice Properties related to the fair value adjustments on investment properties, which are classified as Fixed
Assets or Investment Properties by the Company and measured at cost; the elimination of a $14 million gain (2015 – nil)
recognized by Choice Properties related to the fair value adjustments on investment properties in the joint venture;
the recognition of $17 million (2015 – $14 million) of depreciation expense for certain investment properties recorded
by Choice Properties; and the elimination of intercompany charges of $2 million (2015 – $4 million).
- Net interest expense and other financing charges includes the elimination of $267 million
(2015 – $251 million) of interest expense included in Choice Properties related to debt owing to the Company and a $530
million fair value loss (2015 – loss of $411 million) recognized by Choice Properties on Class B Limited Partnership
units held by the Company. Net interest and other financing charges also includes Unit distributions to external
unitholders of $49 million (2015 – $45 million), which excludes distributions paid to the Company and a $118 million
fair value loss (2015 – loss of $81 million) on the Company's Trust Unit Liability.
|
|
(ii)
|
Included in Financial Services revenue is $383 million (2015 – $368
million) of interest income.
|
|
(iii)
|
Certain items are excluded from operating income to derive adjusted
EBITDA(2). Adjusted EBITDA(2) is used internally by management when analyzing segment underlying
performance.
|
|
(iv)
|
Depreciation and amortization for the calculation of adjusted
EBITDA(2) excludes $535 million (2015 – $536 million) of amortization of intangible assets acquired with
Shoppers Drug Mart.
|
|
|
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, synergies and other benefits associated with the acquisition of Shoppers
Drug Mart, anticipated insurance recoveries, future liquidity, planned capital investments, and the status and impact of
information technology ("IT") systems implementation. These specific forward-looking statements are contained throughout this
News Release including, without limitation, in the "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" and "should" and similar expressions, as they relate to the Company and its
management.
Forward-looking statements reflect the Company's current 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 expectation of operating and financial performance in 2017 is based on certain
assumptions including assumptions about anticipated cost savings, operating efficiencies and continued growth from current
initiatives. 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 Section 12 "Enterprise Risks and Risk Management" of
the Management Discussion and Analysis in the 2016 Annual Report – Financial Review ("2016 Annual Report") and the Company's 2016
Annual Information Form ("AIF") (for the year ended December 31, 2016). Such risks and
uncertainties include:
- changes to the regulation of generic prescription drug prices, the reduction of reimbursements under public drug benefit
plans and the elimination or reduction of professional allowances paid by drug manufacturers;
- failure to effectively manage the Company's loyalty programs;
- the inability of the Company's IT infrastructure to support the requirements of the Company's business, or the occurrence
of any internal or external security breaches, denial of service attacks, viruses, worms and other known or unknown
cybersecurity or data breaches;
- failure to realize benefits from investments in the Company's new IT systems;
- failure to effectively respond to consumer trends or heightened competition, whether from current competitors or new
entrants to the marketplace;
- public health events including those related to food and drug safety;
- changes to any of the laws, rules, regulations or policies applicable to the Company's business;
- failure to merchandise effectively, to execute the Company's e-commerce initiative or to adapt its business model to the
shifts in the retail landscape caused by digital advances;
- failure to realize the anticipated benefits, including revenue growth, anticipated cost savings or operating efficiencies,
associated with the Company's investment in major initiatives that support its strategic priorities;
- changes in economic conditions, including economic recession or changes in the rate of inflation or deflation, employment
rates and household debt, interest rates, currency exchange rates or derivative and commodity prices;
- failure to achieve desired results in labour negotiations, including the terms of future collective bargaining
agreements;
- adverse outcomes of legal and regulatory proceedings and related matters;
- reliance on the performance and retention of third party service providers, including those associated with the Company's
supply chain and apparel business, including issues with vendors in both advanced and developing markets; and
- the inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory and to control
shrink.
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 ("securities regulators")
from time to time, including, without limitation, the section entitled "Risks" in the Company's 2016 AIF (for the year ended
December 31, 2016). 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.
CORPORATE PROFILE
2016 Annual Report
The Company's 2016 Annual Report is 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 February 23,
2017 at 10:00 a.m. (ET).
To access via tele-conference, please dial (416) 642-5209. The playback will be made available approximately two hours after
the event at (647) 436-0148, access code: 9000693. To access via audio webcast, please go to the "Investors" 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 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 of this News Release, which
includes the reconciliation of such non-GAAP measures to the most directly comparable GAAP measures.
|
|
(3)
|
The results for the Financial Services and Choice Properties segments are
for the periods ended December 31, consistent with the segments' fiscal calendars. Adjustments to align Financial
Services' and Choice Properties' results to the Company's fiscal calendar are included in Consolidation and Eliminations.
See the "Non-GAAP Financial Measures" and the "Segment Information" sections of this News Release.
|
|
(4)
|
To be read in conjunction with the "Forward-Looking Statements" section of
this News Release.
|
|
(5)
|
2015 comparative Food retail same-store sales growth also excludes the
negative impact of a change in distribution model by a tobacco supplier, which had no impact in the current
period.
|
|
(6)
|
Certain figures have been restated as a result of the IFRS Interpretations
Committee's agenda decision on IAS 12, "Income Taxes". See Note 2 in the Company's 2016 consolidated financial
statements.
|
SOURCE Loblaw Companies Limited
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