Loblaw Companies Limited has reported its financial results for the third quarter of 2018.
Compared with Q3 2017:
- same-store food retail sales increased 0.9 per cent;
- same-store drug retail sales increased 2.5 per cent (pharmacy 0.5 per cent: front store 4.3 per cent);
- net earnings per common share fell $1.96 to $0.28; and
- adjusted earnings per common share rose $0.10 to $1.49.
Despite “the negative impacts of minimum wage increases and incremental healthcare reform,” Loblaw’s retail revenue rose to $14.45 billion, up $261 million or 1.8 per cent compared with the third quarter of 2017.
That rise was driven by an increase in retail segment sales of $235 million or 1.7 per cent compared with the third quarter of 2017.
"We delivered strong financial results in the third quarter and we are pleased with the performance across our retail business," said Loblaw chair and CEO Galen Weston. "Our strategy continues to build momentum as our data-driven insights and process and efficiency initiatives enable us to make additional investments in our future."
Loblaw continues to consolidate the more than 500 franchise food retail stores in its network under a new franchise agreement implemented in 2015.
“The first half of the year was characterized by incremental cost headwinds and a very competitive retail market,” Loblaw stated. “In the second half, the Company is experiencing increased cost pressures, including from the surtax imposed on certain US imports. Management continues to focus on overcoming these headwinds.”
Food prices rose in the quarter, thanks to higher food costs. While the increases were within the lower range of where Loblaw expected them to be, further increases are likely.
“We are seeing cost pressures translate into retail price increases,” Weston told the Toronto Star. “It’s in line with our expectations and what we thought was likely to happen in this quarter and beyond.”
For 2018 Loblaw expects to deliver positive same-store sales and stable gross margin in its retail segment, and plans to invest about $1.3 billion in capital expenditures, $1.0 billion of that in retail.