Loblaws 2013 Quarterly Results Financials, comparable retail sales

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2013 Fourth Quarter 12 weeks to December 28 - Loblaw Companies starts receiving revenue from newly created subsidiary Choice Properties which makes its money renting out buildings/land/warehouses:  +$319 million.  same store sales up +0.6% which is higher than Sobeys and Metro Inc.

2013 Fiscal Year 52 weeks - Revenue up 2.4% thanks to new revenue from Choice Properties, increase in sales attributable to mobile business; PC Financial (credit cards).  revenue was up only 1% in 2012.  also up versus 2012: same store sales (1.1% up from -0.2%).  cash equivalents nearly doubled to $2.260 billion.  retail sales $30.96-> $31.60 billion.  adjusted operating income down 2.2% to $1.172b; gross profit up 2% to just under $7 billion.  the company closed 13 stores but opened 26 resulting in a net increase of 13 or +0.4m sq ft.  At over 60th sq ft, corporately run locations (Real Canadian Superstore, Atlantic Superstore) remain twice as large as those franchised (No Frills).    

 

 

 

Shopper Drug Mart results won't be included until next year in 2014.

 

 

2013 Third Quarter (16 weeks to October 5, 2013)

Loblaws released it's third quarter report the same day Metro Inc reported on its fourth quarter and fiscal year.  Checkout out analysis of Metro at Metro Inc 2013 results.

Consolidated:  The company earned $154m (down 29.0%, per share down from 77c to 55c) on revenues of

 

$10.009 billion (+1.9% vs $9.827 billion).  strong sales growth in apparel, gas bar; modest in food (flat internal price inflation); declines in pharmacy and general merchandise.  Dividend remains 24 cents (same as 2q2013) but up vs 3q2012 (21c).  Same store sales growth +0.4% (or +0.1% when gas bars excluded +0.1%).  Adjusted earnings per share fared better at 78c (-3.7%) but still lower than analysts estimate of 81 cents. 

Effective tax rate lower in the quarter (27.2-> 26.6%) but higher in 40-week period (25.8-> 26.6%). tax rate now significantly higher versus Sobeys' 24.6% in quarter ended August 3.  Over last eight quarters overall retail sq footage up 0.9m ft2 to 51.8 million ft2.

retail segment:  sales $9.772 billion (+1.5% vs $9.627b), gross profit steady at $2.104b, operating income down 8.3% to $342 million.  margins all down - gross margin 21.5% down from 22.3% 3q2013.. by comparison gross margin was 22.4% in both the 1q2013 and 2q2013; ebitda margin 6.2% down from 6.5%).

40-week period : capital investment -14.1% -> $561 million, total number of stores 1048 -> 1058, average store size corporate owned 65,300 ft2 (+800 ft2), franchised 29,900 ft2 (+400 ft2)

financial services segment:  revenue +$22m -> $222m (up 11%), operating income +$9m -> $41m (up 28%), ebit +$8m -> $27m (up 42%).

 

Assets and Debt as of November 2013 '000000 $

 

 company  Loblaw Co  Empire Co  Metro Inc   Costco Couche Tard

assets

change

 20,460.0

  +17.9%

   8981.3

  +31.3%

  5061.5

  -1.7%

 30,283.0

  +11.6%

  10,672.2

     +3.1%

long term debt

change

    6871.0

  +22.8%

    870.3

   -4.30%

   650.0

 -33.3%

  4998.0

 +261.9%

    3371.9

    +18.5%

2013 Second Quarter (12 weeks to June 16, 2013)

Consolidated:  The company earned $178m (up 14.1%) or 63c per share (+8c) on revenues of $7.520 billion (up 2.0%).  revenues driven higher by clothing business and gas bars (both strong) with food experiencing modest growth (though price inflation was flat down from modest previous year).  Dividend at 24c up from 22c in 1q2013.

Same-store sales growth +1.1% (+1.0% when gas sales are excluded) which is higher than Sobeys (quarter ended May 4 same-store sales +0.6%) and Metro (flat). 

Margins improved for operating income (3.9% -> 4.3%) with gross margin unchanged at 22.3%;  both were helped by the foreign exchange rate, transportation costs, and lower shrink loss (food wasted due to going past best before date). 

By segment:  Retail - revenue up 1.9% to $7372m (from $7236m), gross profit +2.0% $1611-> $1643m, oper income +6.9% to $294m. oper. margin 3.8% -> 4.0%.  Financial Services - includes credit card, mobile phone businesses.  revenue $148 million (up 6.5%), operating income $15m -> $28m with earnings before income tax at $18 million. 

Credit card yields up !  12.7% -> 13.5%.

For the Interim period - same-store sales +1.9% up from -0.3% in 2012.  revenue $14.722m (+3.0%).  operating income up nearly 20% to $653m (from $529m).  Total company profit up 25.5% to $349 million.  The retail business unit accounted for 97.87% of revenue ($14.409b +2.6% / $14.722b) down from 98.13% in 2012.  retail gross profit $3.219b (up 2.5%).  Operating income distribution:  retail $500m +14.6%, financial services $58m +100%.

Last twelve months Loblaw Companies added +10 stores net (open 23 / close 10) = + 400th sq feet of new retail space.  July 5, 2013 - reit ipo launched and named Choice Properties   It handles 415 properties with an asset value of $7 billion.  ipo of $660 million includes $200 million from parent company George Weston Ltd (holds 46% of voting shares).  The purchase of Shoppers Drug Mart lowered George Weston's share of the company from 51% to 46% (about 29% of the entire company is now owned by former shareholders of Shoppers Drug Mart).

 

2013 First Quarter (12 weeks to March 23, 2013)

Loblaw Companies reported generally positive results for the first quarter of the 2013 fiscal year.  Loblaws profited C$171 million +40.2% vs 1q2012, +19.6% vs 4q2012; earnings per share (basic) now stands at 61 cents +41.9% vs 1q2012 (43c), +27.08% vs 4q2012 (48c).  The earnings growth enabled the company to hike its dividend payment for just the second time in the last four quarters (21c -> 22c);  last quarter Sobeys dividend was 24c.  Quarterly revenue increase: $265m of which $36m was from financial services, $229m from the retail segment. Total retail revenue +3.4% to $7.037b (vs $6.808b) with gross profit growth also up over 3% (1529 -> 1576).  operating income grew 24.0% to $279m.   

Total revenue: $7.202b (up from $6.937b 1q2013, down from $7.465b 4q2012).  97.71% of revenue came from the retail segment up from 97.64% q2q (4q2012). ebitda margin: 6.8% (up from 5.9%). net earnings $171m (up from $122m 1q2012 / down from $143m 4q2012).  Financial Services Segment contributed $16m of the $70m growth in operating income.

Same-store sales up 2.8% even when gas sales are excluded, which is great considering gas bar sales were strong this year (last year excl gas sales ss store were down -0.9% vs -0.7%).   The comparable sales increase is quite a feat considering the Canadian national food price inflation index for the quarter was less than half what it was last year at this time (1.4% vs 3.7%). last 12 months the company added eight net additional stores (20 opened/12 closed).  Most recent quarterly same-store sales at main competitors: Sobeys was +1.2%, Metro Inc +1.5%.

Investment perspective:  Loblaws needs to sustain its profit growth so that dividend % can go down to target range.  Dividend now at 22c per share up from 21c.  That's 33% of earnings per share (61c up from 43c). (BASIC).

Loblaw has recently encountered problems relating to its manufacturing operations in Bangladesh.  Joe Fresh Style employees there claimed hourly wages were as low as a couple cents.  Loblaws can't afford to have the Joe Fresh brand image tarnished since it continues to leverage the brand to help with store traffic.  Joe Fresh Style clothing is already being sold at some 700 JC Penny locations (since 2012 when partnership was established).

Generic drug deflation and new competition from Target Canada is among the things Loblaws expects will impact sales growth in 2013.

In the 4Q2012 Loblaws announced plans to create an investment REIT to handle 35 million square feet of real estate assets.  The REIT's IPO will be completed in July 2013.   Real estate assets to be transferred to the REIT will have a market value of over $7 billion.

other notes

  • Retail operations operating income recorded a $51 million gain stemming from amendments made to the company's retirement plan affecting certain employees.  Annual pre tax savings stemming from this change : $14 million.
  • cash and cash equivalents as of March 23, 2013: $689m.  down from $1.079b Dec 29, $657m Mar. 24, 2012.  Net assets however, are higher today than at any other period ($12.499b).
  • Biggest contributors to Total Financial Assets ($3.145b) : Credit card receivables $2.175b, Accounts receivable $519m, Franchise loans $372m.

Financial Services:  revenue $165m (+27.9%), operating income $30m (+114.3%), ebit $19m (+375.0%).  revenue increases in this segment were attributed to higher interest and interchange fee income (more credit card transactions). + higher telecom sales.  renegotiated vendor contracts lowered costs associated with PC Telecom, driving up operating income.  However, loyalty costs for the quarter were higher.

note:  1st, 2nd, 4th quarters are all 12 weeks long.  The 3rd quarters are 16 weeks long.

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