Stockwatch – Loblaw Reaping Immediate Rewards Of Shoppers Drug Mart Acquisition

Stockwatch – Loblaw Companies Limited (TSE:L, Mkt cap 24.24B, P/E 1 year forward 19.61, Div/yield 0.25/1.67, EPS 0.18, Shares 412.70M) has reported better than expected results for the third quarter, with lower net income offset by higher adjusted earnings.

Stockwatch Galen Weston Loblaw president

Stockwatch – Galen Weston, Loblaw’s president happy with the company’s “solid performance”

It represents the first set of results since completing its acquisition of Shoppers Drug Mart Corp., which saw Canada’s largest grocery company join forces with the country’s largest pharmacy retailer.

Loblaw, majority-owned by George Weston Ltd., bought the pharmacy chain last year in an attempt to better compete with the Canadian businesses of U.S.-based rivals such as Wal-Mart Stores Inc. and Target Corp., which have quickly expanded in the country.

Loblaw had 90 cents per share of adjusted basic net earnings, or $371 million, which marks a 23% increase from a year earlier and three cents better than analyst estimates.

Its revenue, too, showed cause for optimism, increasing 35.9% compared with a year earlier, rising to $13.6 billion. Setting aside income from Shoppers, Loblaw’s revenue was up more than 2% to $10.2 billion, an increase of roughly $203 million.

However, the positive news is tempered by the fact that its net income declined by 5.3% to $142 million, from $150 million in the corresponding three-month period last year. The Brampton-based firm attributed this to a decrease in operating income, which fell to $335 million from $375 million, before adjustments.

Excluding Shoppers Drug Mart, adjusted operating income increased 74.2% to $669 million from $384 million.

Galen G. Weston, Loblaw’s president and executive chairman, appeared content with the company’s “solid performance” and said the firm remained on course to meet its deleveraging targets.

“In the third quarter we continued to advance our strategic initiatives and improve our market position,” he added.

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