Loblaw sees profit grow in Q3 as costs controlled, supply chain improved

By The Canadian Press

BRAMPTON, Ont. - Loblaw Companies Ltd (TSX: L.TO) saw its third-quarter profits jump by 20 per cent as the grocery chain benefited from cost containment and improved supply chain efficiencies.

Canada's largest food distributor reported Tuesday net income of $189 million or 69 cents per share for the quarter ended October 10. That was up from year-ago profit of $157 million or 57 cents per share.

The company warned, however, that it expects to see its sales and margins face continuing challenges from decreasing inflation, competition and ongoing renovation and infrastructure programs in the future.

Revenues totalled $9.47 billion for the quarter, compared to $9.49 billion last year.

Analysts were expecting on average earnings of 62 cents per share before items and revenue of $9.62 billion, according to estimates compiled by Thomson Reuters.

Loblaw, whose banner includes No Frills, Zehrs, Fortinos and Real Canadian Superstores, said it incurred a one-time charge of $25 million related to an investment in information technology and supply chain which negatively impacted its net earnings.

The company added that its sales were negatively impacted by the sale of its food service business in the fourth quarter of 2008.

"As we progressed through the third quarter, our sales were increasingly impacted by the significant decline in inflation and the ramp-up of our pricing investments," said Galen Weston, Loblaw's executive chairman.

The company said same-store sales fell 0.6 per cent in the quarter, adding that the Thanksgiving holiday sales had helped boost figures.

Loblaw noted that its recent acquisition of T&T Supermarket Inc. just before the quarter's end had not significantly impacted earnings, but was expected to boost figures in the future.

Loblaw shares closed at $30.40 Monday on the Toronto Stock Exchange.