Canadian food distributor Loblaw Companies Ltd. (LBLCF.PK,L.TO) reported Wednesday a profit for the third quarter that increased from last year, reflecting improved operating margin and sales growth amid same-store sales increase of 1.3 percent. Earnings per share came in below analysts' expectations, while quarterly revenues topped their estimates.
The company transitioned to International Financial Reporting Standards or IFRS, effective January 2, 2011, and all comparative figures for 2010 have been restated to conform with IFRS.
"In the third quarter, Loblaw's continued improvement in execution helped to drive the top-line while EBITDA margin and expenses remained on trend," Executive Chairman Galen Weston said in a statement.
The Brampton, Canada-based company reported net earnings of C$236 million or C$0.83 per share for the third quarter, higher than from C$197 million or C$0.70 per share in the prior-year quarter.
On average, six analysts polled by Thomson Reuters expected the company to report earnings of C$0.85 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter grew 2.0 percent to C$9.73 billion from C$9.54 billion in the same quarter last year, drive by improvements in both retail sales and financial services revenue. Three Wall Street analysts had a consensus revenue estimate of C$9.64 billion for the quarter.
Retail segment sales for the quarter increased 2.0 percent to C$9.56 billion from last year, with same-store sales growth of 1.3 percent. Food sales grew moderately, while drugstore sales declined marginally on new generic versions of certain prescription drugs.
Gas bar sales growth was strong as a result of higher retail gas prices, while sales in general merchandise, excluding apparel, declined moderately. Apparel sales increased moderately.
Financial services segment revenues grew 3.8 percent to C$164 million from last year, primarily driven by higher interchange fee income amid increased credit card transaction values.
Total operating margin for the quarter expanded 20 basis points to 4.3 percent as a 40 basis point increase in retail operating margin was partially offset by decline in operating margin at financial services segment.
Meanwhile, the average national food price inflation was 4.9 percent in the third quarter, as measured by "The Consumer Price Index for Food Purchased from Stores" or CPI, compared to 1.3 percent in the year-ago quarter.
Separately, the company announced a quarterly dividend of C$0.21 per common share, payable on December 30 to shareholders of record as of December 15, 2011.
"As our infrastructure program progresses, going forward we expect the related investments to negatively impact operating income. With our initiatives tracking to plan, we look forward to the ongoing leadership of our new President, Vicente Trius, who is now firmly established in his role," Weston added.
In Wednesday's regular trading session, L.TO is currently trading on the Toronto Stock Exchange at C$37.80, down C$0.56 or 1.46% on a volume of 8,061 shares.
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