CANADA: Loblaw FY profit slides on charges
- Net profit slides 15.5%
- Operating profit down 14.2%
- Net sales up 1.3%
"2012 was a pivotal year for Loblaw", the company said
Canadian retail giant Loblaw has booked a drop in full-year profit as restructuring charges hit earnings.
In the 12 months ended 29 December, net profit slid 15.5% to C$650m (US$857.8m), the company reported today (21 February). Operating profit was down 14.2% to C$1.2m.
Net sales, however, edged up 1.3% in the period to reach C$31.6m.
"2012 was a pivotal year for Loblaw, improving the customer proposition, driving the infrastructure program, and reducing costs," said executive chairman Galen Weston.
Loblaw Companies Limited Reports 2012 Fourth Quarter and Fiscal Year Ended December 29, 2012 Results(1)
BRAMPTON, ON, Feb. 21, 2013 /CNW/ - Loblaw Companies Limited (TSX: L) ("Loblaw" or the "Company") today announced its unaudited financial results for the fourth quarter of 2012 and the release of its 2012 Annual Report - Financial Review, which includes the Company's audited consolidated financial statements and Management's Discussion and Analysis for the fiscal year ended December 29, 2012. The Company's 2012 Annual Report will be available in the Investor Centre section of the Company's website at loblaw.ca and will be filed with SEDAR and available at sedar.com.
Fourth Quarter 2012 Summary(1)
- Basic net earnings per common share of $0.51, including a $0.16 charge related to restructuring, compared to $0.62 in the fourth quarter of 2011.
- EBITDA margin(2) of 6.0%, or 6.8% excluding the charge for restructuring, compared to 6.6% in the fourth quarter of 2011.
- Revenue of $7,465 million, an increase of 1.2% over the fourth quarter of 2011.
- Retail sales growth of 0.9% and flat same-store sales(3).
"2012 was a pivotal year for Loblaw - improving the customer proposition, driving the infrastructure program, and reducing costs," said Galen G. Weston, Executive Chairman, Loblaw Companies Limited. "Despite challenges during the year, the team delivered on plan. Good performance metrics in the last quarter of 2012 and through the beginning of 2013 indicate that management's strategy is taking hold."
"Looking forward, I am confident that our customer offer is improving steadily, the team is driving efficiencies appropriately, and has a disciplined approach to growth. This combination will further strengthen our business and build long term value for shareholders."
Consolidated Quarterly Results of Operations
|For the periods ended December 29,
2012 and December 31 2011 (unaudited)
|(millions of Canadian dollars except
where otherwise indicated)
|$ Change||% Change|| 2012
|$ Change||% Change|
|Revenue||$ 7,465||$ 7,373||$ 92||1.2%||$ 31,604||$ 31,250||$ 354||1.1%|
|Basic net earnings per common share ($)||0.51||0.62||(0.11)||(17.7%)||2.31||2.73||(0.42)||(15.4%)|
|EBITDA(2)||$ 449||$ 485||(36)||(7.4%)||$ 1,973||$ 2,083||(110)||(5.3%)|
|(1)||This News Release contains forward-looking information. See Forward-Looking Statements in this News Release for a discussion of material factors that could cause actual results to differ materially from the conclusions, forecasts and projections herein and of the material factors and assumptions that were used when making these statements. This News Release should be read in conjunction with Loblaw Companies Limited's filings with securities regulators made from time to time, all of which can be found at sedar.com and at loblaw.ca.|
|(2)||See Non-GAAP Financial Measures in this News Release.|
|(3)||For financial definitions and ratios refer to the Glossary of Terms in the Company's 2012 Annual Report - Financial Review.|
- During the fourth quarter of 2012, the Company announced a plan that reduced the number of head office and administrative positions. Focused primarily on management and office positions, the plan affected approximately 700 jobs. In the fourth quarter of 2012, the Company incurred a$61 million charge associated with this restructuring.
- For 2012, the Company incurred $55 million of incremental investment in its customer proposition that was not covered by operations, comprised of $20 million in price, $15 million in shrink and $20 million in labour. Of this amount, $15 million was incurred in the fourth quarter of 2012, $10 million of which was in shrink and $5 million was in labour.
- The $92 million increase in revenue compared to the fourth quarter of 2011 was driven by increases in both the Company's Retail and Financial Services operating segments, as described below.
- Operating income decreased by $53 million compared to the fourth quarter of 2011 as a result of a decrease in Retail operating income of $69 million, partially offset by an increase in Financial Services operating income of $16 million. Operating income included the following notable items:
- A $61 million charge associated with the reduction in head office and administrative positions;
- Incremental costs of $19 million related to investments in information technology ("IT") and supply chain. These costs included the following charges:
- $79 million (2011 - $67 million) related to IT costs;
- $53 million (2011 - $43 million) related to depreciation and amortization;
- $2 million (2011 - $7 million) related to other supply chain project costs; and
- $2 million (2011 - nil) related to changes in the distribution network.
- A $17 million charge (2011 - $5 million) for fixed asset impairments net of recoveries, related to asset carrying values in excess of recoverable amounts for specific retail locations;
- A $5 million charge (2011 - $23 million) related to the transition of certain Ontario conventional stores to the more cost effective and efficient operating terms of collective agreements ratified in 2010;
- A $2 million charge (2011 - $4 million) related to the effect of share-based compensation net of equity forwards; and
- A nil charge (2011 - $16 million) related to start-up costs associated with the launch of the Company's Joe Fresh brand in the United States.
- Operating margin(1) was 3.5%, or 4.3% excluding the charge for restructuring, for the fourth quarter of 2012 compared to 4.3% in the same quarter in 2011.
- The decrease in net earnings of $31 million compared to the fourth quarter of 2011 was primarily due to the decrease in operating income, partially offset by a decline in the effective income tax rate.
- Basic net earnings per common share were impacted by the following notable items:
- A $0.16 charge related to the reduction in head office and administrative positions;
- A $0.05 charge related to incremental investments in IT and supply chain;
- A $0.05 charge (2011 - $0.01) for fixed asset impairments net of recoveries;
- A $0.01 charge (2011 - $0.06) related to the transition of certain Ontario conventional stores to the operating terms under collective agreements ratified in 2010;
- A nil charge (2011 - $0.01) related to the effect of share-based compensation net of equity forwards; and
- A nil charge (2011 - $0.04) related to the start-up costs associated with the launch of the Company's Joe Fresh brand in the United States.
- In 2012, the Company invested $1.0 billion in capital expenditures with approximately 55% invested in its IT and supply chain infrastructure and the remaining 45% invested in its retail operations.
- In December 2012, the Company announced its intention to create a Real Estate Investment Trust ("REIT"), which will acquire a significant portion of Loblaw's real estate assets and sell units by way of an Initial Public Offering ("IPO"). The IPO of the REIT is expected to be completed by mid-2013, subject to prevailing market conditions and receipt of required regulatory approvals, including approval to list the units on theToronto Stock Exchange.
|(1) For financial definitions and ratios refer to the Glossary of Terms in the Company's 2012 Annual Report - Financial Review.
The consolidated quarterly results by reportable operating segments were as follows:
Retail Results of Operations
|For the periods ended December 29,
2012 and December 31, 2011
|(millions of Canadian dollars except where
|$ Change||% Change|| 2012
|$ Change||% Change|
|Sales||$ 7,289||$ 7,226||$ 63||0.9%||$ 30,960||$ 30,703||$ 257||0.8%|
|Same-store sales(1) (decline) growth||0.0%||2.5%||(0.2%)||0.9%|
|Gross profit percentage||21.6%||21.7%||22.0%||22.2%|
- In the fourth quarter of 2012, the increase of $63 million in Retail sales over the same period in the prior year was impacted by the following factors:
- Same-store sales(1) were flat (2011 - growth of 2.5%), with an extra day of store operations having a positive impact on 2011 same-store sales(1) estimated to be between 0.8% and 1.0%;
- Sales growth in both food and drugstore were modest;
- Sales growth in gas bar was moderate;
- Sales in general merchandise, excluding apparel, declined moderately;
- Sales in apparel were flat;
- The Company's average quarterly internal food price index was flat during the fourth quarter of 2012 (2011 - moderate inflation), which was lower than the average quarterly national food price inflation of 1.5% (2011 - 5.2%) as measured by "The Consumer Price Index for Food Purchased from Stores" ("CPI"). CPI does not necessarily reflect the effect of inflation on the specific mix of goods sold in Loblaw stores; and
- 18 corporate and franchise stores were opened and 11 corporate and franchise stores were closed in the last 12 months, resulting in a net increase of 0.3 million square feet, or 0.6%.
- In the fourth quarter of 2012, gross profit percentage was 21.6%, a decrease from 21.7% in the fourth quarter of 2011. This decline was primarily driven by investments in food margins and increased shrink, partially offset by margin improvements in drugstore and general merchandise and decreased transportation costs. Gross profit increased by $6 million compared to the fourth quarter of 2011, primarily driven by higher sales, partially offset by investments in gross profit percentage. Increased shrink expense included an estimated $10 million of the incremental investment in the Company's customer proposition related to improved assortment in stores that was not covered by operations.
- Operating income decreased by $69 million, including the $61 million charge for restructuring, compared to the fourth quarter of 2011 and operating margin(1) was 3.1%, or 4.0% excluding the restructuring charge, for the fourth quarter of 2012 compared to 4.1% in the same period in 2011. In addition to the notable items described in the Consolidated Results of Operations above, operating income and operating margin(1) were negatively impacted by foreign exchange losses and increased labour costs, partially offset by other operating cost efficiencies and an increase in gross profit. Increased labour costs included an estimated $5 million of the incremental investment in the Company's customer proposition related to improved service in stores that was not covered by operations.
Original source: Loblaw
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