Canadian retail giant Loblaw has predicted the recent space expansion seen in the country’s grocery sector will “moderate” in the second half of the year.
Rivals Metro Inc and Sobeys have recently reported lower margins as they moved to invest in price, citing increased comeptition in the country. Loblaw did the same yesterday (20 February) as it posted results for its fourth quarter to 28 December.
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Loblaw said a recent wave of expansion by Canada’s grocers had intensified competition but it indicated that could ease later in the year.
“In the first half of 2014, the environment is expected to remain extremely competitive driven by continued greater than historical square footage expansion, which is expected to moderate in the second half of the year,” it said.
Loblaw said it had been to grow revenue and adjusted operating income in 2013 by “focusing on its customer proposition and generating targeted efficiencies”.
Revenue was up 2.4% at C$32.37bn (US$29.02bn). Adjusted operating income grew 2.6% to C$1.33bn. Reported operating income, which included the impact of items like impairment costs, was up 11% at C$1.33bn.
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By GlobalDataNet earnings dipped 0.6% to C$630m as Loblaw’s income tax bill rose.
Loblaw said its retail sales were up 2.1%, while its same-store sales increased 1.1% year-on-year. Its adjusted operating margin was flat at 4.1%.
The company’s results for the fourth quarter were less strong.
Revenue was up 2.3% at C$7.64bn. Retail sales increased 1.8%. Same-store sales grew 0.6%.
Adjusted operating income fell 0.9% to C$322m. Loblaw’s adjusted operating margin dipped from 4.4% to 4.2%.
Net earnings were down 8.6% at C$127m.
However, shares in Loblaw closed up 4.75% at C$44.29 as the fall in Loblaw’s earnings was not as steep as analysts had expected.
