Canadian retailer Loblaw has reported a record year in fiscal 2001, realising net earnings per share of C$2.04 (US$1.28), a 19% improvement on 2000.
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Fourth quarter net earnings per share increased 16% to 79 cents while sales were up 7% to C$5.3bn. For the FY, sales were C$21.5bn, 7% ahead of last year. Solid sales growth was experienced across the country with the stores saw continued positive improvements in Quebec.
Same-store sales for the Q4 and FY increased 4%, including the effects of some food price inflation, which eased during the H2 of the year. During the Q4, 18 new corporate and franchised stores were opened, bringing the full year total to 61 new corporate and franchised stores opened.
Operating income for the Q4 increased C$54m, or 16%, to C$397m. Operating margin improved to 7.6% from 7% in 2000, while trading margin (EBITDA, operating income before depreciation, divided by sales) improved to 9% from 8.4% in 2000. For the FY, operating income increased C$160m, 16%, to C$1.14bn with an operating margin of 5.3% as compared with 4.9% in 2000 with a corresponding increase in trading margin. During the year, operating margin improvements were helped by stable or strategically reduced retail pricing offset by better mix management and cost control programs.
Interest expense for the Q4 remained constant at C$34m and increased 10% for the year to date as a result of increased net average borrowing levels partially offset by lower average effective borrowing rates. Interest coverage of 11.7 times for the Q4 improved from 10.1 times for the comparable period in the prior year (7.2 times, up from 6.8 times on a year-to-date basis). The effective income tax rate for the Q4 and on a year-to-date basis decreased as compared with the prior year, in line with statutory income tax rate reductions, to approximately 39.7% year-to-date.
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By GlobalDataThe financial position and cash generating capability of the company remain strong. The 0.76:1 total net debt to equity ratio at the end of the year strengthened from the third quarter as the normal cyclical investment in working capital decreased, consistent with prior years. Operating cash flows improved consistent with EBITDA growth offset somewhat by a strategic investment in non-cash working capital, principally non-food inventory.
Capital investment of C$378m during the Q4 and C$1.1bn for the year was as planned and reflects the company’s continuing commitment to maintain and renew its asset base and invest for growth across all banners and regions of Canada.
During the H1, the company issued a total amount of C$1.04bn of medium-term notes, with interest rates ranging from 6% to 7.1%and maturity dates ranging from 2008 to 2016. Throughout the year, the Series 1991 11.25% Provigo Inc. debentures of C$100m matured, the Series 5 10-per-cent debentures of C$50m were redeemed and C$100m of 7.34% medium-term notes matured.
In last year’s Q1, the company adopted, retroactively without restatement, the new Canadian accounting standards for income taxes and employee future benefits. The combined effect of the initial adoption was a decrease in retained earnings of C$152m in 2000.
During the Q1 of 2001, the company renewed its normal course issuer bid to purchase on the Toronto Stock Exchange or enter into forward contracts for up to 13,812,265 of its common shares, representing approximately 5% of the common shares outstanding. Loblaw, in accordance with the rules and bylaws of the TSE, may purchase its common shares at the then market prices of such shares.
Loblaw expects sales and earnings to continue to grow solidly into 2002 and beyond.
