BRAMPTON, ON, July 27,
2022 /CNW/ - Loblaw Companies Limited (TSX: L)
("Loblaw" or the "Company") announced today its unaudited financial
results for the second quarter ended June
18, 2022.(1)
Loblaw delivered strong operational and financial results as it
continued to execute on retail excellence in its core businesses,
while advancing its growth and efficiencies initiatives. Drug
Retail performance continued to drive overall margin expansion, as
sales benefited from growth in higher margin front-store
categories. The positive trend in Food Retail continued with the
Company's conventional stores performing well relative to peers and
sales growth in its discount banners, heightened by the strength of
the No Frills® and Maxi® hard-discount stores and the Company's
value focused control brand no name®.
"Loblaw delivered consistent operating and financial results, as
customers recognized the value, quality and convenience delivered
through our diverse store formats, control brand products, and our
PC Optimum loyalty program," said Galen G.
Weston, Chairman and President, Loblaw Companies Limited.
"In the quarter we also continued to pursue our strategic growth
agenda, with the completion of our acquisition of Lifemark Health
Group, bolstering our healthcare services offering and furthering
our purpose to help Canadians Live Life Well."
2022 SECOND QUARTER HIGHLIGHTS
- Revenue was $12,847 million, an
increase of $356 million, or
2.9%.
- Retail segment sales were $12,623
million, an increase of $341
million, or 2.8%.
-
- Food Retail (Loblaw) same-stores sales increased by 0.9%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
5.6%.
- E-commerce sales decreased by 17.5%, lapping elevated online
sales due to lockdowns last year.
- Operating income was $742
million, a decrease of $10
million, or 1.3%. Operating income was negatively impacted
by $111 million as a result of a
charge related to a President's Choice Bank ("PC Bank") commodity
tax matter.
- Adjusted EBITDA(2) was $1,499
million, an increase of $128
million, or 9.3%.
- Retail segment adjusted gross profit percentage(2)
was 31.4%, an increase of 50 basis points.
- Net earnings available to common shareholders of the Company
were $387 million, an increase of
$12 million or 3.2%. Diluted net
earnings per common share were $1.16,
an increase of $0.07, or 6.4%.
Diluted net earnings per common share was negatively impacted by
$0.25 per common share as a result of
a charge related to a PC Bank commodity tax matter.
- Adjusted net earnings available to common shareholders of the
Company(2) were $566
million, an increase of $102
million, or 22.0%.
- Adjusted diluted net earnings per common share(2)
were $1.69, an increase of
$0.34 or 25.2%.
- Repurchased for cancellation, 5.4 million common shares at a
cost of $607 million and invested
$302 million in capital expenditures.
Retail segment free cash flow(2) was $840 million.
- Acquired Lifemark Health Group ("Lifemark") on May 10, 2022, adding to the Company's growing
role as a healthcare service provider, with a network of health and
wellness solutions, accessible in-person and digitally.
- PC Express™ Rapid Delivery announced, to make grocery and
convenience items available to customers in an expected express
delivery time of 30-minutes-or-less through a collaboration with
DoorDash.
See "News Release Endnotes" at the end of this News
Release.
CONSOLIDATED AND SEGMENT RESULTS OF OPERATIONS
The following tables provide key performance metrics for the
Company by segment and same-store sales.
|
|
2022
|
|
|
2021
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
June 18, 2022
and June 19,
2021
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Consol-
idated
|
|
|
Retail
|
Financial
Services
|
Elimin-
ations
|
Consol-
idated
|
(millions of Canadian
dollars)
|
|
Revenue
|
|
$
12,623
|
$
297
|
$
(73)
|
$
12,847
|
|
|
$ 12,282
|
$
272
|
$
(63)
|
$
12,491
|
Adjusted gross
profit(2)
|
|
$
3,962
|
$
266
|
$ (73)
|
$
4,155
|
|
|
$
3,793
|
$
231
|
$
(63)
|
$
3,961
|
Adjusted gross profit
%(2)
|
|
31.4 %
|
N/A
|
— %
|
32.3 %
|
|
|
30.9 %
|
N/A
|
— %
|
31.7 %
|
Operating income
(loss)
|
|
$
811
|
$
(69)
|
$
—
|
$
742
|
|
|
$
708
|
$ 44
|
$ —
|
$
752
|
Adjusted operating
Income(2)
|
|
938
|
42
|
—
|
980
|
|
|
830
|
44
|
—
|
874
|
Adjusted
EBITDA(2)
|
|
$
1,445
|
$ 54
|
$
—
|
$
1,499
|
|
|
$
1,316
|
$ 55
|
$ —
|
$
1,371
|
Adjusted EBITDA
margin(2)
|
|
11.4 %
|
N/A
|
— %
|
11.7 %
|
|
|
10.7 %
|
N/A
|
— %
|
11.0 %
|
Net interest expense
and
other financing charges
|
|
$
135
|
$ 17
|
$
—
|
$
152
|
|
|
$
145
|
$
16
|
$ —
|
$
161
|
Adjusted net interest
expense
and other
financing charges
|
|
135
|
17
|
—
|
152
|
|
|
145
|
16
|
—
|
161
|
Earnings (losses)
before income taxes
|
|
$
676
|
$
(86)
|
$
—
|
$
590
|
|
|
$
563
|
$ 28
|
$ —
|
$
591
|
Income Taxes
|
|
|
|
|
|
$ 162
|
|
|
|
|
|
|
$
157
|
Adjusted income
taxes(2)
|
|
|
|
|
|
221
|
|
|
|
|
|
|
190
|
Net earnings
attributable to
non-controlling interests
|
|
|
|
|
|
$
38
|
|
|
|
|
|
|
$
56
|
Prescribed dividends
on
preferred shares in
share capital
|
|
|
|
|
|
3
|
|
|
|
|
|
|
3
|
Net earnings
available to
common shareholders of
the Company
|
|
|
|
|
|
$
387
|
|
|
|
|
|
|
$
375
|
Adjusted net earnings
available
to common shareholders of
the Company(2)
|
|
|
|
|
|
566
|
|
|
|
|
|
|
464
|
Diluted net earnings
per
common share ($)
|
|
|
|
|
|
$
1.16
|
|
|
|
|
|
|
$
1.09
|
Adjusted diluted net
earnings
per common share(2) ($)
|
|
|
|
|
|
$ 1.69
|
|
|
|
|
|
|
$
1.35
|
Diluted weighted
average
common shares
outstanding (in millions)
|
|
|
|
|
|
334.4
|
|
|
|
|
|
|
342.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended
June 18, 2022 and June 19, 2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
|
Sales
|
Same-
store sales
|
|
|
Sales
|
Same-store
sales
|
Food retail
|
|
|
$
8,981
|
0.9 %
|
|
|
$
8,878
|
(0.1) %
|
Drug retail
|
|
|
3,642
|
5.6 %
|
|
|
3,404
|
9.6 %
|
Pharmacy and
healthcare services
|
|
|
1,813
|
6.1 %
|
|
|
1,656
|
17.2 %
|
Front store
|
|
|
1,829
|
5.2 %
|
|
|
1,748
|
3.6 %
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $12,623
million, an increase of $341
million, or 2.8%.
-
- Food Retail (Loblaw) sales were $8,981
million and Food Retail same-store sales grew by 0.9% (2021
– declined by 0.1%).
-
- The Consumer Price Index as measured by The Consumer Price
Index for Food Purchased From Stores was 9.6% (2021 – 0.5%) which
was generally in line with the Company's internal food
inflation.
- Food Retail basket size decreased and traffic
increased.
- Drug Retail (Shoppers Drug Mart) sales were $3,642 million, and Drug Retail same-store sales
grew by 5.6% (2021 – 9.6%), with pharmacy and healthcare services
same-store sales growth of 6.1% (2021 – 17.2%) and front store
same-store sales growth of 5.2% (2021 – 3.6%). Pharmacy and
healthcare services sales includes Lifemark revenues from the date
of acquisition of $49 million.
Lifemark revenues are excluded from same-store sales.
-
- On a same-store basis, the number of prescriptions dispensed
increased by 2.3% (2021 – 0.3%) and the average prescription value
increased by 3.6% (2021 – 15.9%).
- Operating income was $811
million, an increase of $103
million, or 14.5%.
- Adjusted gross profit(2) was $3,962 million, an increase of $169 million, or 4.5%. The adjusted gross profit
percentage(2) of 31.4% increased by 50 basis points,
primarily driven from favourable changes in Drug Retail sales mix.
Food Retail margins were stable.
- Adjusted EBITDA(2) was $1,445
million, an increase of $129
million, or 9.8%. The increase was driven by an increase in
adjusted gross profit(2), partially offset by an
increase in SG&A. SG&A as a percentage of sales was 19.9%,
a decrease of 30 basis points. The favourable decrease of 30 basis
points was primarily due to lower COVID-19 related expenses,
partially offset by higher costs from the normalization of
post-lockdown expenses.
- Depreciation and amortization was $621
million, an increase of $18
million or 3.0%, primarily driven by an increase in IT
assets and leased assets. Included in depreciation and amortization
was the amortization of intangibles assets related to the
acquisitions of Shoppers Drug Mart Corporation ("Shoppers Drug
Mart") and Lifemark of $114 million
(2021 – $117 million).
- On May 10, 2022, the Company
acquired Lifemark for $832 million.
Lifemark is the leading provider of outpatient physiotherapy,
massage therapy, occupational therapy, chiropractic, mental health,
and other ancillary rehabilitation services through its more than
300 clinics across Canada. Revenue
of $49 million and nominal net
earnings were contributed by Lifemark from the date of acquisition.
Net earnings includes amortization related to the acquired
intangible assets of $3 million.
- 1 food and drug store was opened, and 1 food and drug store was
closed, resulting in a net increase in Retail square footage of 0.1
million square feet, or 0.1%.
FINANCIAL SERVICES SEGMENT
- Revenue was $297 million, an
increase of $25 million or 9.2%. The
increase was primarily driven by higher interest income and other
credit card related fees from normalizing credit card receivable
balances and higher interchange income from an increase in consumer
spending, partially offset by lower sales attributable to The
Mobile Shop™.
- Losses before income taxes were $86
million, a decrease in earnings of $114 million. The Financial Services business
continues to benefit from the economic re-opening but earnings have
decreased primarily due to a charge of $111
million related to a commodity tax matter.
- On July 19, 2022, the Tax Court
of Canada ("Tax Court") released
its decision relating to PC Bank, a subsidiary of the Company. The
Tax Court ruled that PC Bank is not entitled to claim notional
input tax credits for certain payments it made to Loblaws Inc. in
respect of redemptions of loyalty points. PC Bank is planning to
appeal the decision.
Although the Company believes in the merits of its position, it
recorded a charge during the second quarter of $111 million, inclusive of interest. The Company
believes that this provision is sufficient to cover its liability
from the initial reassessment period in 2009 through to the end of
the second quarter of 2022, if the appeal is ultimately
unsuccessful.
OUTLOOK(3)
Loblaw will continue to execute on retail excellence in its core
grocery and pharmacy businesses while advancing its growth
initiatives in 2022. In the third year of the pandemic, the
Company's businesses remain well placed to service the everyday
needs of Canadians. However, the Company cannot predict the precise
impacts of COVID-19, the related industry volatility and
inflationary environment on its 2022 financial results.
On a full year basis, the Company continues to expect:
- its Retail business to grow earnings faster than sales;
- to invest approximately $1.4
billion in capital expenditures, net of proceeds from
property disposals, reflecting incremental store and distribution
network investments; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
Based on its year to date operating and financial performance
and momentum exiting the second quarter, the Company expects full
year adjusted net earnings per common share(2) growth in
the mid-to-high teens.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
In the second quarter, the Company progressed its ESG
pillars:
- Fighting Climate Change: Loblaw has announced a phase
out of front-end plastic bags nationwide by early 2023 and
initiated pilot reusable container programs in select locations.
The Company continues to drive industry and supplier adoption of
Golden Design Rules for using better and less plastic packaging,
working with the Canadian Plastics Pact; and
- Advancing Social Equity: As part of annual community
investment efforts generating nearly $100
million, the Company raised and donated $2 million for the Ukrainian humanitarian
response here and abroad, and $2.6
million to women's mental health, including through the
annual LOVE YOU by Shoppers Drug Mart™ Run for Women.
NORMAL COURSE ISSUER BID PROGRAM
On a year-to-date basis, the Company repurchased 6.7 million
common shares for cancellation at a cost of $755 million.
The Company participates in an automatic share purchase plan
("ASPP") with a broker in order to facilitate the repurchase of the
Company's common shares under its Normal Course Issuer Bid. During
the effective period of the ASPP, the Company's broker may purchase
common shares at times when the Company would not be active in the
market.
FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the
Company's objectives, plans, goals, aspirations, strategies,
financial condition, results of operations, cash flows,
performance, prospects, opportunities and legal and regulatory
matters. Specific forward-looking statements in this News Release
include, but are not limited to, statements with respect to the
Company's anticipated future results, events and plans, strategic
initiatives and restructuring, regulatory changes, and economic
conditions. These specific forward-looking statements are contained
throughout this News Release including, without limitation, in the
"Consolidated Results of Operations" and "Outlook" section of this
News Release. Forward-looking statements are typically identified
by words such as "expect", "anticipate", "believe", "foresee",
"could", "estimate", "goal", "intend", "plan", "seek", "strive",
"will", "may", "should" and similar expressions, as they relate to
the Company and its management.
Forward-looking statements reflect the Company's estimates,
beliefs and assumptions, which are based on management's perception
of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate
in the circumstances. The Company's estimates, beliefs and
assumptions are inherently subject to significant business,
economic, competitive and other uncertainties and contingencies
regarding future events and as such, are subject to change. The
Company can give no assurance that such estimates, beliefs and
assumptions will prove to be correct.
Numerous risks and uncertainties could cause the Company's
actual results to differ materially from those expressed, implied
or projected in the forward-looking statements, including those
described in the Company's MD&A in the Company's 2021 Annual
Report - Financial Review and Section 4 "Risks" of the Company's
2021 Annual Information Form for the year ended January 1, 2022.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect the Company's
expectations only as of the date of this News Release. Except as
required by law, the Company does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
DECLARATION OF DIVIDENDS
Subsequent to the end of the second quarter of 2022, the Board
of Directors declared a quarterly dividend on Common Shares
and Second Preferred Shares, Series B.
Common
Shares
|
$0.405
per common share, payable on
October 1, 2022 to shareholders of record on
September 15, 2022.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125
per share, payable on September 30,
2022 to shareholders of record on September 15,
2022.
|
|
|
EXCERPT OF NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures, as reconciled and
fully described in Appendix 1 "Non-GAAP Financial Measures" of this
News Release.
These measures do not have a standardized meaning prescribed by
GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies and should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
The following table provides a summary of the differences
between the Company's consolidated GAAP and Non-GAAP financial
measures, which are reconciled and fully described in Appendix
1.
For the periods ended
June 18, 2022 and June 19, 2021
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
|
|
GAAP
|
Adjusting
Items
|
Non-
GAAP(2)
|
EBITDA
|
|
$
1,375
|
$
124
|
$ 1,499
|
|
|
$ 1,366
|
$
5
|
$ 1,371
|
Operating
Income
|
|
$
742
|
$
238
|
$
980
|
|
|
$
752
|
$ 122
|
$
874
|
Net interest expense
and other financing
charges
|
|
152
|
—
|
152
|
|
|
161
|
—
|
161
|
Earnings before
income taxes
|
|
$
590
|
$
238
|
$
828
|
|
|
$
591
|
$ 122
|
$
713
|
Deduct the
following:
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
162
|
59
|
221
|
|
|
157
|
33
|
190
|
Non-controlling
Interests
|
|
38
|
—
|
38
|
|
|
56
|
—
|
56
|
Prescribed dividends
on preferred shares
|
|
3
|
—
|
3
|
|
|
3
|
—
|
3
|
Net earnings
available to common
shareholders of the Company(i)
|
|
$
387
|
$
179
|
$
566
|
|
|
$
375
|
$
89
|
$ 464
|
Diluted net earnings
per common share ($)
|
|
$
1.16
|
$
0.53
|
$
1.69
|
|
|
$ 1.09
|
$ 0.26
|
$
1.35
|
Diluted weighted
average common shares
(millions)
|
|
334.4
|
—
|
334.4
|
|
|
342.9
|
—
|
342.9
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Net earnings available
to common shareholders of the Company are net earnings attributable
to shareholders of the Company net of dividends declared on the
Company's Second Preferred Shares, Series B.
|
|
|
The following table provides a summary of the Company's
adjusting items which are reconciled and fully described in
Appendix 1.
As at or for the
periods ended June 18, 2022 and June 19, 2021
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(12
weeks)
|
|
|
(12 weeks)
|
Operating
Income
|
|
$
742
|
|
|
$
752
|
Add (Deduct) impact of
the following:
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$
111
|
|
|
$
117
|
Amortization of
intangible assets acquired with Lifemark
|
|
3
|
|
|
—
|
Charge related to PC
Bank commodity tax matter
|
|
111
|
|
|
—
|
Lifemark transaction
costs
|
|
13
|
|
|
—
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
4
|
|
|
(3)
|
Restructuring and other
related costs
|
|
—
|
|
|
8
|
Gain on sale of
non-operating properties
|
|
(4)
|
|
|
—
|
Adjusting
Items
|
|
$
238
|
|
|
$
122
|
Adjusted Operating
Income(2)
|
|
$
980
|
|
|
$
874
|
Net interest expense
and other financing charges
|
|
$
152
|
|
|
$
161
|
Adjusted Net
interest expense and other financing
charges(2)
|
|
$
152
|
|
|
$
161
|
Income
Taxes
|
|
$
162
|
|
|
$
157
|
Add the impact of the
following:
|
|
|
|
|
|
Tax impact of items
included in adjusted earnings before taxes
|
|
$
59
|
|
|
$
33
|
Adjusting
Items
|
|
$
59
|
|
|
$
33
|
Adjusted Income
Taxes(2)
|
|
$
221
|
|
|
$
190
|
|
|
|
|
|
|
CORPORATE PROFILE
2021 Annual Report and 2022 Second Quarter Report to
Shareholders
The Company's 2021 Annual Report and 2022 Second Quarter Report
to Shareholders are available in the "Investors" section of the
Company's website at loblaw.ca and on sedar.com.
Additional financial information has been filed electronically
with various securities regulators in Canada through the System for Electronic
Document Analysis and Retrieval (SEDAR) and with the Office of the
Superintendent of Financial Institutions (OSFI) as the primary
regulator for the Company's subsidiary, President's Choice Bank.
The Company holds an analyst call shortly following the release of
its quarterly results. These calls are archived in the "Investors"
section of the Company's website at loblaw.ca.
Conference Call and Webcast
Loblaw Companies Limited will host a conference call as well as
an audio webcast on July 27, 2022 at
10:00 a.m. (ET).
To access via tele-conference, please dial (416) 764-8688 or
(888) 390-0546. The playback will be made available approximately
two hours after the event at (416) 764-8677 or (888) 390-0541,
access code: 854261#. To access via audio webcast, please go
to the "Investor" section of loblaw.ca. Pre-registration will be
available.
Full details about the conference call and webcast are available
on the Loblaw Companies Limited website at loblaw.ca.
|
News
Release Endnotes
|
(1)
|
This News Release
contains forward-looking information. See "Forward-Looking
Statements" section of this News Release and the Company's 2021
Annual Report for a discussion of material factors that could cause
actual results to differ materially from the forecasts and
projections herein and of the material factors and assumptions that
were used when making these statements. This News Release should be
read in conjunction with Loblaw Companies Limited's filings with
securities regulators made from time to time, all of which can be
found at sedar.com and at loblaw.ca.
|
(2)
|
See "Non-GAAP Financial
Measures" section in Appendix 1 of this News Release, which
includes the reconciliation of such non-GAAP measures to the most
directly comparable GAAP measures.
|
(3)
|
To be read in
conjunction with the "Forward-Looking Statements" section of this
News Release and the Company's 2021 Second Quarter Report to
Shareholders.
|
|
|
APPENDIX 1: NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP financial measures and
ratios: Retail segment gross profit; Retail segment adjusted gross
profit; Retail segment adjusted gross profit percentage; adjusted
earnings before income taxes, net interest expense and other
financing charges and depreciation and amortization ("adjusted
EBITDA"); adjusted EBITDA margin; adjusted operating income;
adjusted net interest expense and other financing charges; adjusted
income taxes; adjusted effective tax rate; adjusted net earnings
available to common shareholders; adjusted diluted net earnings per
common share, and free cash flow. The Company believes these
non-GAAP financial measures and ratios provide useful information
to both management and investors in measuring the financial
performance and financial condition of the Company for the reasons
outlined below.
Management uses these and other non-GAAP financial measures to
exclude the impact of certain expenses and income that must be
recognized under GAAP when analyzing underlying consolidated and
segment operating performance, as the excluded items are not
necessarily reflective of the Company's underlying operating
performance and make comparisons of underlying financial
performance between periods difficult. The Company excludes
additional items if it believes doing so would result in a more
effective analysis of underlying operating performance. The
exclusion of certain items does not imply that they are
non-recurring.
These measures do not have a standardized meaning prescribed by
GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies and should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
Retail Segment Gross Profit, Retail Segment Adjusted Gross
Profit and Retail Segment Adjusted Gross Profit Percentage The
following tables reconcile adjusted gross profit by segment to
gross profit by segment, which is reconciled to revenue and cost of
merchandise inventories sold measures as reported in the
consolidated statements of earnings for the periods ended as
indicated. The Company believes that Retail segment gross profit
and Retail segment adjusted gross profit are useful in assessing
the Retail segment's underlying operating performance and in making
decisions regarding the ongoing operations of the business.
Retail segment adjusted gross profit percentage is calculated as
Retail segment adjusted gross profit divided by Retail segment
revenue.
|
|
2022
|
|
|
2021
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
June 18, 2022
and June 19, 2021
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
(millions of Canadian
dollars)
|
|
|
Revenue
|
|
$
12,623
|
$
297
|
|
$
(73)
|
|
$
12,847
|
|
|
$ 12,282
|
$
272
|
|
$ (63)
|
|
$
12,491
|
Cost of merchandise
inventories sold
|
|
8,661
|
31
|
|
—
|
|
8,692
|
|
|
8,489
|
41
|
|
—
|
|
8,530
|
Gross profit
|
|
$
3,962
|
$
266
|
|
$
(73)
|
|
$
4,155
|
|
|
$
3,793
|
$ 231
|
|
$ (63)
|
|
$
3,961
|
Adjusted gross
profit
|
|
$
3,962
|
$
266
|
|
$
(73)
|
|
$
4,155
|
|
|
$
3,793
|
$ 231
|
|
$ (63)
|
|
$
3,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
For the periods ended
June 18, 2022
and June 19, 2021
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
|
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
(millions of Canadian
dollars)
|
|
Revenue
|
|
$
24,668
|
$ 571
|
|
$
(130)
|
|
$
25,109
|
|
|
$ 23,952
|
$
525
|
|
$
(114)
|
|
$ 24,363
|
Cost of merchandise
inventories sold
|
|
16,963
|
64
|
|
—
|
|
17,027
|
|
|
16,626
|
78
|
|
—
|
|
16,704
|
Gross profit
|
|
$
7,705
|
$
507
|
|
$
(130)
|
|
$
8,082
|
|
|
$
7,326
|
$
447
|
|
$
(114)
|
|
$
7,659
|
Adjusted gross
profit
|
|
$
7,705
|
$
507
|
|
$
(130)
|
|
$
8,082
|
|
|
$
7,326
|
$
447
|
|
$
(114)
|
|
$
7,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income, Adjusted EBITDA and Adjusted
EBITDA Margin The following tables reconcile adjusted operating
income and adjusted EBITDA to operating income, which is reconciled
to net earnings attributable to shareholders of the Company as
reported in the consolidated statements of earnings for the periods
ended as indicated. The Company believes that adjusted EBITDA is
useful in assessing the performance of its ongoing operations and
its ability to generate cash flows to fund its cash requirements,
including the Company's capital investment program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided
by revenue.
|
|
|
2022
|
|
|
|
2021
|
|
|
|
|
(12
weeks)
|
|
|
|
|
(12 weeks)
|
For the periods ended
June 18, 2022 and June 19, 2021
|
Retail
|
Financial
Services
|
Consolidated
|
|
Retail
|
Financial
Services
|
Consolidated
|
(millions of Canadian
dollars)
|
|
Net earnings
attributable to shareholders of the
Company
|
|
|
|
$
390
|
|
|
|
|
$
378
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
38
|
|
|
|
|
56
|
Net interest expense
and other financing charges
|
|
|
|
152
|
|
|
|
|
161
|
Income
taxes
|
|
|
|
162
|
|
|
|
|
157
|
Operating
income
|
|
$ 811
|
$
(69)
|
$
742
|
|
|
$
708
|
$ 44
|
$
752
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$ 111
|
$
—
|
$
111
|
|
|
$ 117
|
$ —
|
$
117
|
Amortization of
intangible assets acquired with
Lifemark
|
|
3
|
—
|
3
|
|
|
—
|
—
|
—
|
Charge related to PC
Bank commodity tax matter
|
|
—
|
111
|
111
|
|
|
—
|
—
|
—
|
Lifemark transaction
costs
|
|
13
|
—
|
13
|
|
|
—
|
—
|
—
|
Fair value adjustment
on fuel and foreign
currency contracts
|
|
4
|
—
|
4
|
|
|
(3)
|
—
|
(3)
|
Restructuring and
other related costs
|
|
—
|
—
|
—
|
|
|
8
|
—
|
8
|
Gain on sale of
non-operating properties
|
|
(4)
|
—
|
(4)
|
|
|
—
|
—
|
—
|
Adjusting
items
|
|
$
127
|
$
111
|
$
238
|
|
|
$
122
|
$ —
|
$
122
|
Adjusted operating
income
|
|
$
938
|
$ 42
|
$
980
|
|
|
$
830
|
$
44
|
$
874
|
Depreciation and
amortization
|
|
621
|
12
|
633
|
|
|
603
|
11
|
614
|
Less: Amortization of
intangible assets acquired
with Shoppers Drug Mart and Lifemark
|
|
(114)
|
—
|
(114)
|
|
|
(117)
|
—
|
(117)
|
Adjusted
EBITDA
|
|
$
1,445
|
$ 54
|
$
1,499
|
|
|
$
1,316
|
$ 55
|
$
1,371
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
2021
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
For the periods ended
June 18, 2022 and June 19, 2021
|
Retail
|
Financial
Services
|
Consolidated
|
|
Retail
|
Financial
Services
|
Consolidated
|
(millions of Canadian
dollars)
|
|
Net earnings
attributable to shareholders of the
Company
|
|
|
|
$
830
|
|
|
|
|
$
694
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
71
|
|
|
|
|
75
|
Net interest expense
and other
financing charges
|
|
|
|
294
|
|
|
|
|
321
|
Income
taxes
|
|
|
|
285
|
|
|
|
|
279
|
Operating
income
|
|
$
1,501
|
$
(21)
|
$
1,480
|
|
|
$
1,261
|
$ 108
|
$ 1,369
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
|
$
228
|
$
—
|
$
228
|
|
|
$
234
|
$
—
|
$
234
|
Amortization of
intangible assets acquired with
Lifemark
|
|
3
|
—
|
3
|
|
|
—
|
—
|
—
|
Charge related to PC
Bank commodity tax matter
|
|
—
|
111
|
111
|
|
|
—
|
—
|
—
|
Lifemark transaction
costs
|
|
16
|
—
|
16
|
|
|
—
|
—
|
—
|
Gain on sale of
non-operating properties
|
|
(4)
|
—
|
(4)
|
|
|
(5)
|
—
|
(5)
|
Fair value adjustment
on fuel and foreign
currency contracts
|
|
(10)
|
—
|
(10)
|
|
|
(11)
|
—
|
(11)
|
Restructuring and
other related costs
|
|
(15)
|
—
|
(15)
|
|
|
12
|
—
|
12
|
Adjusting
items
|
|
$
218
|
$
111
|
$
329
|
|
|
$
230
|
$
—
|
$
230
|
Adjusted operating
income
|
|
$
1,719
|
$ 90
|
$
1,809
|
|
|
$
1,491
|
$
108
|
$ 1,599
|
Depreciation and
amortization
|
|
1,242
|
22
|
1,264
|
|
|
1,204
|
20
|
1,224
|
Less: Amortization of
intangible assets acquired
with Shoppers Drug Mart and Lifemark
|
|
(231)
|
—
|
(231)
|
|
|
(234)
|
—
|
(234)
|
Adjusted
EBITDA
|
|
$
2,730
|
$ 112
|
$
2,842
|
|
|
$
2,461
|
$ 128
|
$ 2,589
|
|
|
|
|
|
|
|
|
|
|
In addition to the items described in the Retail segment
adjusted gross profit section above, when applicable, adjusted
EBITDA was impacted by the following:
Amortization of intangible assets acquired with
Shoppers Drug Mart The acquisition of Shoppers
Drug Mart in 2014 included approximately $6,050 million of definite life intangible
assets, which are being amortized over their estimated useful
lives. Annual amortization associated with the acquired intangibles
will be approximately $500 million until 2024 and will
decrease thereafter.
Amortization of intangible assets acquired with
Lifemark The acquisition of Lifemark in the second quarter
of 2022 included approximately $299
million of definite life intangible assets, which are being
amortized over their estimated useful lives.
Charge related to PC Bank commodity tax matter In
the second quarter of 2022, the Company recorded a charge of
$111 million, inclusive of interest.
On July 19, 2022, the Tax Court
released its decision and ruled that PC Bank is not entitled to
claim notional input tax credits for certain payments it made to
Loblaws Inc. in respect of redemptions of loyalty points. PC Bank
is planning to appeal the decision.
Lifemark transaction costs In connection with
the acquisition of Lifemark, the Company recorded $13 million
of acquisition costs in operating income in the second quarter of
2022 (year-to-date – $16 million).
Gain/loss on sale of non-operating properties In
the second quarter of 2022 and year-to-date, the Company disposed
of non-operating properties to a third party and recorded a gain of
$4 million (2021 – nil and $5
million year-to-date).
Fair value adjustment on fuel and foreign currency
contracts The Company is exposed to commodity price and
U.S. dollar exchange rate fluctuations. In accordance with the
Company's commodity risk management policy, the Company enters into
exchange traded futures contracts and forward contracts to minimize
cost volatility relating to fuel prices and the U.S. dollar
exchange rate. These derivatives are not acquired for trading or
speculative purposes. Pursuant to the Company's derivative
instruments accounting policy, changes in the fair value of these
instruments, which include realized and unrealized gains and
losses, are recorded in operating income. Despite the impact of
accounting for these commodity and foreign currency derivatives on
the Company's reported results, the derivatives have the economic
impact of largely mitigating the associated risks arising from
price and exchange rate fluctuations in the underlying commodities
and U.S. dollar commitments.
Restructuring and other related costs The
Company continuously evaluates strategic and cost reduction
initiatives related to its store infrastructure, distribution
networks and administrative infrastructure with the objective of
ensuring a low cost operating structure. Only restructuring
activities that are publicly announced related to these initiatives
are considered adjusting items.
In the second quarter of 2022, the Company did not record any
restructuring and other related recoveries or charges (2021 –
charges of $8 million). Year-to-date,
the Company recorded approximately $15
million (2021 – charges of $12 million) of
restructuring and other related recoveries mainly in connection to
the previously announced closure of two distribution centres in
Laval and Ottawa. In the first quarter of 2022, the
Company disposed of one of the distribution centres for proceeds of
$26 million and recognized a gain of
$19 million, which was partially
offset by $4 million of restructuring and other related
charges. The Company invested to build a modern and efficient
expansion to its Cornwall
distribution centre to serve its food and drug retail businesses in
Ontario and Quebec and volumes have been transferred.
Adjusted Net Interest Expense and Other Financing
Charges The following table reconciles adjusted net
interest expense and other financing charges to net interest
expense and other financing charges as reported in the consolidated
statements of earnings for the periods ended as indicated. The
Company believes that adjusted net interest expense and other
financing charges is useful in assessing the Company's underlying
financial performance and in making decisions regarding the
financial operations of the business.
For the periods ended
June 18, 2022 and June 19, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars)
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
Net interest expense
and other financing charges
|
|
$
152
|
|
|
$
161
|
|
|
$
294
|
|
|
$
321
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
Recovery related to
Glenhuron Bank Ltd.
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
Adjusted net interest
expense and other financing
charges
|
|
$
152
|
|
|
$
161
|
|
|
$
305
|
|
|
$
321
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Income Taxes and Adjusted Effective Tax Rate The
following table reconciles adjusted income taxes to income taxes as
reported in the consolidated statements of earnings for the periods
ended as indicated. The Company believes that adjusted income taxes
is useful in assessing the Company's underlying operating
performance and in making decisions regarding the ongoing
operations of its business.
Adjusted effective tax rate is calculated as adjusted income
taxes divided by the sum of adjusted operating income less adjusted
net interest (recovery)/expense and other financing charges.
For the periods ended
June 18, 2022 and June 19, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(12
weeks)
|
|
|
(12
weeks)
|
|
|
(24
weeks)
|
|
|
(24
weeks)
|
Adjusted operating
income(i)
|
|
$
980
|
|
|
$
874
|
|
|
$
1,809
|
|
|
$ 1,599
|
Adjusted net interest
expense and other
financing charges(i)
|
|
152
|
|
|
161
|
|
|
305
|
|
|
321
|
Adjusted earnings
before taxes
|
|
$
828
|
|
|
$
713
|
|
|
$
1,504
|
|
|
$ 1,278
|
Income taxes
|
|
$
162
|
|
|
$
157
|
|
|
$
285
|
|
|
$
279
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
Tax impact of items
included in adjusted
earnings before taxes(ii)
|
|
59
|
|
|
33
|
|
|
84
|
|
|
62
|
Recovery related to
Glenhuron Bank Ltd.
|
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
Adjusted income
taxes
|
|
$
221
|
|
|
$
190
|
|
|
$ 402
|
|
|
$
341
|
Effective tax
rate
|
|
27.4 %
|
|
|
26.6 %
|
|
|
24.0 %
|
|
|
26.6 %
|
Adjusted income tax
rate
|
|
26.7 %
|
|
|
26.6 %
|
|
|
26.7 %
|
|
|
26.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
See reconciliations of
adjusted operating income and adjusted net interest expense and
other financing charges in the tables above.
|
(ii)
|
See the adjusted
operating income, adjusted EBITDA and adjusted EBITDA margin table
and the adjusted net interest expense and other financing charges
table above for a complete list of items included in adjusted
earnings before taxes.
|
Adjusted Net Earnings Available to Common
Shareholders and Adjusted Diluted Net Earnings Per Common
Share The following table reconciles adjusted net earnings
available to common shareholders of the Company and adjusted net
earnings attributable to shareholders of the Company to net
earnings attributable to shareholders of the Company and then to
net earnings available to common shareholders of the Company for
the periods ended as indicated. The Company believes that adjusted
net earnings available to common shareholders and adjusted diluted
net earnings per common share are useful in assessing the Company's
underlying operating performance and in making decisions regarding
the ongoing operations of its business.
For the periods ended
June 18, 2022 and June 19, 2021
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
Net earnings
attributable to shareholders
of the Company
|
|
$
390
|
|
|
$
378
|
|
|
$
830
|
|
|
$
694
|
Prescribed dividends on
preferred shares in
share capital
|
|
(3)
|
|
|
(3)
|
|
|
(6)
|
|
|
(6)
|
Net earnings available
to common shareholders
of the Company
|
|
$
387
|
|
|
$
375
|
|
|
$
824
|
|
|
$
688
|
Net earnings
attributable to shareholders
of the Company
|
|
$
390
|
|
|
$
378
|
|
|
$
830
|
|
|
$
694
|
Adjusting items (refer
to the following table)
|
|
179
|
|
|
89
|
|
|
201
|
|
|
168
|
Adjusted net earnings
attributable to shareholders
of the Company
|
|
$
569
|
|
|
$
467
|
|
|
$
1,031
|
|
|
$
862
|
Prescribed dividends on
preferred shares in
share capital
|
|
(3)
|
|
|
(3)
|
|
|
(6)
|
|
|
(6)
|
Adjusted net earnings
available to common
shareholders of the Company
|
|
$
566
|
|
|
$
464
|
|
|
$
1,025
|
|
|
$
856
|
Diluted weighted
average common shares
outstanding (millions)
|
|
334.4
|
|
|
342.9
|
|
|
335.5
|
|
|
345.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
2022
|
|
|
2021
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
|
|
Net Earnings
(Losses)
Available to
Common
Shareholders
of the
Company
|
Diluted
Net
Earnings
(Losses)
Per
Common
Share
|
For the periods ended
June 18, 2022
and June 19, 2021
(millions of Canadian
dollars/Canadian dollars)
|
|
|
|
|
|
|
|
As
reported
|
|
$ 387
|
$
1.16
|
|
|
$ 375
|
$
1.09
|
|
|
$ 824
|
$
2.46
|
|
|
$ 688
|
$
1.99
|
Add (deduct) impact of
the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible
assets acquired with
Shoppers Drug Mart
|
|
$
81
|
$
0.24
|
|
|
$
86
|
$
0.25
|
|
|
$ 168
|
$
0.50
|
|
|
$ 172
|
$
0.50
|
Amortization of
intangible
assets acquired with Lifemark
|
|
2
|
0.01
|
|
|
—
|
—
|
|
|
2
|
0.01
|
|
|
—
|
—
|
Charge related to PC
Bank
commodity tax matter
|
|
86
|
0.25
|
|
|
—
|
—
|
|
|
86
|
0.25
|
|
|
—
|
—
|
Lifemark transaction
costs
|
|
10
|
0.03
|
|
|
—
|
—
|
|
|
12
|
0.04
|
|
|
—
|
—
|
Fair value adjustment
on fuel
and foreign currency
contracts
|
|
3
|
0.01
|
|
|
(2)
|
—
|
|
|
(8)
|
(0.02)
|
|
|
(8)
|
(0.02)
|
Restructuring and
other
related costs
|
|
—
|
—
|
|
|
5
|
0.01
|
|
|
(14)
|
(0.04)
|
|
|
8
|
0.02
|
Recovery related to
Glenhuron
Bank Ltd.
|
|
—
|
—
|
|
|
—
|
—
|
|
|
(42)
|
(0.13)
|
|
|
—
|
—
|
Gain on sale of
non-operating
properties
|
|
(3)
|
(0.01)
|
|
|
—
|
—
|
|
|
(3)
|
(0.01)
|
|
|
(4)
|
(0.01)
|
Adjusting
items
|
|
$
179
|
$
0.53
|
|
|
$
89
|
$
0.26
|
|
|
$
201
|
$
0.60
|
|
|
$ 168
|
$
0.49
|
Adjusted
|
|
$
566
|
$
1.69
|
|
|
$ 464
|
$
1.35
|
|
|
$
1,025
|
$
3.06
|
|
|
$
856
|
$
2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow The following table reconciles, by
reportable operating segments, free cash flow to cash flows from
operating activities. The Company believes that free cash flow is
the appropriate measure in assessing the Company's cash available
for additional financing and investing activities.
|
|
|
2022
|
|
|
2021
|
|
|
|
(12
weeks)
|
|
|
(12 weeks)
|
For the periods ended
June 18, 2022 and
June 19, 2021
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in)
operating activities
|
|
|
$
1,542
|
|
$
(314)
|
|
$
17
|
|
$ 1,245
|
|
|
$
1,666
|
|
$
(50)
|
|
$
19
|
|
$ 1,635
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments
|
|
|
293
|
|
9
|
|
—
|
|
302
|
|
|
252
|
|
6
|
|
—
|
|
258
|
Interest
paid
|
|
|
66
|
|
—
|
|
17
|
|
83
|
|
|
68
|
|
—
|
|
19
|
|
87
|
Lease payments,
net
|
|
|
343
|
|
—
|
|
—
|
|
343
|
|
|
337
|
|
—
|
|
—
|
|
337
|
Free cash
flow(2)
|
|
|
$
840
|
|
$
(323)
|
|
$
—
|
|
$
517
|
|
|
$
1,009
|
|
$
(56)
|
|
$
—
|
|
$ 953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows from operating activities under the
Financial Services segment.
|
|
|
|
2022
|
|
|
2021
|
|
|
|
(24
weeks)
|
|
|
(24 weeks)
|
For the periods ended
June 18, 2022 and
June 19, 2021
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
|
|
Retail
|
|
Financial
Services
|
|
Eliminations(i)
|
|
Consolidated
|
(millions of Canadian
dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in)
operating activities
|
|
|
$
2,290
|
|
$
(211)
|
|
$
29
|
|
$
2,108
|
|
|
$ 2,247
|
|
$ 207
|
|
$
33
|
|
$
2,487
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments
|
|
|
475
|
|
13
|
|
—
|
|
488
|
|
|
449
|
|
12
|
|
—
|
|
461
|
Interest
paid
|
|
|
136
|
|
—
|
|
29
|
|
165
|
|
|
140
|
|
—
|
|
33
|
|
173
|
Lease payments,
net
|
|
|
625
|
|
—
|
|
—
|
|
625
|
|
|
612
|
|
—
|
|
—
|
|
612
|
Free cash
flow(2)
|
|
|
$
1,054
|
|
$
(224)
|
|
$
—
|
|
$
830
|
|
|
$
1,046
|
|
$
195
|
|
$
—
|
|
$ 1,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows used in operating activities under the
Financial Services segment.
|
SOURCE Loblaw Companies Limited