Newspaper article The Canadian Press

Loblaw Lowers Profit Projection, Says Competition Has Hit "Critical Mass"

Newspaper article The Canadian Press

Loblaw Lowers Profit Projection, Says Competition Has Hit "Critical Mass"

Article excerpt

Grocery giant Loblaw sees Q3 profit drop

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TORONTO - The top brass at Loblaw Companies Ltd. (TSX:L) says it remains focused on winning over customers with lower prices and a bigger selection of fresh foods, but admits to disappointment that the grocery giant can no longer expect to grow its profits this year.

"As expected, in the third quarter, the competitive environment intensified significantly," Loblaw executive chairman Galen G. Weston said during a conference call with analysts Wednesday.

"Increases in square footage from incumbents and new entrants reached critical mass. This combined with a shift in consumer expectations put significant pressure on our business," Weston said.

"Balancing sales and margin in such a dynamic market is not easy. Despite this disappointment, as we move into 2014, we remain dedicated to our strategy."

The company, which owns Loblaws, President's Choice and several other grocery brands as well as the Joe Fresh clothing line, announced it has revised its outlook as it reported a 29 per cent drop in net income for the third quarter.

For the three-month period ended Oct. 5, Loblaw had $154 million, or 55 cents per share, of net income, down 28.6 per cent from 77 cents per share a year earlier.

The Brampton, Ont.,-based company said it was introducing three new financial measures beginning with the third-quarter report, that weren't used in previous guidance -- making comparisons with previous estimates more difficult.

Its adjusted earnings, one of the new measures that excludes certain, often one-time items that are part of standard accounting, were $220 million, or 78 cents per share, down 3.7 per cent from 81 cents per share. The earnings came in below what analysts were forecasting, according to Thomson Reuters.

Revenue for the 16-week period was up 1.9 per cent to $10 billion.

Weston, whose family is Loblaw's biggest shareholder, said overall, same-store sales have increased three quarters in a row.

Despite the forecasted flat profit, Loblaw said will continue to invest in margins to lure customers into its stores. Translated, this could mean more competitive prices for shoppers as Loblaw pits itself against other domestic grocery chains, primarily Sobeys and Metro, and U. …

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