Newspaper article The Canadian Press

Loblaw Expects Strong Growth despite Heightened Competition from U.S. Rivals

Newspaper article The Canadian Press

Loblaw Expects Strong Growth despite Heightened Competition from U.S. Rivals

Article excerpt

Loblaw profits rise despite more competition

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Loblaw Companies Ltd. says it anticipates strong growth for the rest of the year, even as it braces for increased competition from U.S. discount retailers Walmart and Target.

"We have a lot of competition coming in," chief financial officer Sarah Davis said during a conference call Wednesday.

"You can't underestimate the power of the competition and the number of stores that Target and Walmart will be opening in the remainder of the year."

Target plans to launch approximately 70 new stores in the country before the end of the year, while Walmart expects to have completed 37 new supercentre projects by January 2014.

Both of the U.S. chains sell food products, eating into the market share of grocers like Loblaw, Metro Inc. (TSX:MRU) and Empire Company's (TSX:EMP) Sobeys stores.

But despite the heightened pressure from the American rivals, Loblaw (TSX:L) boosted its outlook on Wednesday.

The supermarket chain said it expects mid-single digit growth in operating income this year compared with earlier expectations for modest, or low-single digit growth.

Managing expenses and improving its product mix helped earnings grow during the second quarter, the company said.

Loblaw earned $178 million or 63 cents per share for the quarter ended June 15, up from $156 million or 55 cents per share in the same period a year ago.

The profit was about five cents per share better than the average analyst estimate compiled by Thomson Reuters.

"We are very, very confident on our strategies, and we are competing in this environment and delivering," said Loblaw president Vicente Trius.

Revenue for the quarter was $7.5 billion, an increase of two per cent over the second quarter of 2012.

Loblaw says same-store sales growth was 1.1 per cent overall and one per cent excluding gas bars. Sales growth in food was modest and drugstore sales were flat, but gas bar and clothing sales were strong. …

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