- Loblaw Companies shares (TSX:L) are down despite an 11.7 per cent increase in year-over-year earnings for Q3 2023
- Revenue was C$18.26 billion, up by C$877 million, or 5 per cent
- Same-store sales were up on higher traffic and drug prescription values
- Loblaw Companies is Canada’s largest food retailer, with more than 2,400 stores operating under 22 regional and market segment banners
- Loblaw Companies shares (TSX:L) have added 14 per cent year-over-year and 109 per cent since 2018
Loblaw Companies shares (TSX:L) are down despite an 11.7 per cent increase in year-over-year earnings for Q3 2023.
The quarter was marked by strong operational and financial results that yielded sales growth, increased market share and higher unit sales.
The unaudited financial results are further highlighted by:
- Revenue of C$18.26 billion, up by C$877 million, or 5 per cent
- Operating income of C$1.06 billion, up by C$74 million, or 7.5 per cent
- Adjusted net earnings of C$719 million, up by C$56 million, or 8.4 per cent, because of higher sales and ongoing cost control initiatives
- A 13.6 per cent increase in e-commerce sales
- 2.9 million common shares repurchased for cancellation for C$341 million. On a year-to-date basis, the company repurchased 10.4 million common shares for cancellation at a cost of C$1.235 billion
- C$676 million invested in capital expenditures
Retail segment
Loblaw saw increased traffic at its discount stores, which it continues to invest in, as evidenced by the opening of its 150th Maxi location in the community of Ville-des-Laurentides.
Retail gross margin declined in food and drugs because of targeted promotional investments and increased shrink (such as shoplifting or sales errors).
The company also notes that increased investments to lower food prices made its internal food inflation lower than Canada’s food consumer price index. The achievement follows Loblaw’s collaboration with the Canadian government to lower prices for consumers and increase grocery industry transparency.
The company recorded charges of C$13 million associated with network optimization and process and efficiency initiatives. It expects to record C$60 million-C$70 million in charges related to network optimization during 2023.
Loblaw key metrics
- Retail segment sales were C$17.98 billion, up by C$852 million, or 5 per cent
- Food retail (Loblaws) sales of C$12.84 billion, with same-stores sales increasing by 4.5 per cent marked by higher traffic and a smaller basket size
- Drug retail (Shoppers Drug Mart) sales of C$5.13 billion, with same-store sales increasing by 4.6 per cent, and pharmacy same-store sales growth of 7.4 per cent, reflected ongoing strength in beauty products and increased prescription sales
- Retail segment adjusted gross profit of 30.6 per cent, a decrease of 20 basis points
- Opened seven food and drug stores, while closing one store. resulting in a net increase in retail square footage of 0.3 million square feet, or 0.4 per cent
Financial services segment
- Revenue of C$379 million, up by C$29 million, or 8.3 per cent, driven primarily by higher interest income from growth in credit card receivables, higher interchange income and other credit-card-related revenue
Loblaw outlook for 2023
“Our stores are delivering more value, including deeper discounts on essentials, and customers are responding positively,” Galen G. Weston, chairman of Loblaw Companies, said in a statement. “We remain focused on doing what we can to fight inflation and deliver lower prices for Canadians, while continuing to invest for the future.”
The company expects its full-year 2023 results to reflect:
- Faster growth in earnings compared with sales in its retail business
- Adjusted net earnings per common share growth in the low double digits
- A C$1.6 billion investment in capital expenditures focused on the store network and distribution centres
- A significant portion of free cash flow returned to shareholders through share repurchases
Loblaw past financial performance
Loblaw has been profitable over the past four years, including net income of C$1.08 billion in 2019, C$1.09 billion in 2020, C$1.86 billion in 2021 and C$1.90 billion in 2022.
This trend has continued in 2023 with net income of C$418 million in Q1 and C$508 million in Q2.
Loblaw Companies is Canada’s largest food retailer, with more than 2,400 stores operating under 22 regional and market segment banners.
Loblaw Companies shares (TSX:L) opened with a loss of 0.43 per cent trading at C$122.50 per share. The stock has added approximately 14 per cent year-over-year and 109 per cent since 2018.
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