Loblaw Companies, Canada’s largest food distributor, saw its share prices fall by CDN$2.62 (4.6%) after it issued an update on its operating and financial performance yesterday (19 January).

The company announced that net income would be lower than previous estimates and lower than 2004 earnings. It said that fourth quarter earnings per common share are expected to be in the range of CDN$0.71 to CDN$0.76 after the deduction of certain charges associated with restructuring costs, disruptions of the supply chain, stock based compensation and equity forwards. Annual earnings after deductions are expected to range from $2.70 to $2.75 per share.

The company stated that, although its restructuring programme was costly in the short-term, it is necessary to fortify the company’s long-term competitive position. Loblaw has emphasised that it is willing to incur short-term fluctuations in its performance in order to complete the planned organisational transformation.

Earnings losses occurred despite a net sales increase of 4% for the fourth quarter, with sales totalling CDN$6.6bn, and a net sales increase of 6% for the 2005 fiscal, bringing the total up to CND$27.8bn.

The company is predicting 2006 net sales to grow between 3% and 6% and earnings per common share to increase between 4% and 7%. However, it is predicting earnings per common share to drop in the first quarter of 2006, the results of which, Loblaw says, will likely still be felt in the second quarter 2006.