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Loblaw Cos.' Third-quarter Sales Up 6 Percent

TORONTO - Loblaw Companies Ltd., Canada's largest food distributor, said Friday its sales for the third quarter increased 6 percent to $8.1 billion from $7.7 billion for the same period in 2003. Same-store sales improved 1.5 percent, the company said.

Operating income increased 14.6 percent to $455 million for the third quarter of 2004, compared with $397 million in 2003. The net effect of the stock-based compensation income resulted in reported operating income growth of approximately 1 percent when compared with the same period of 2003. Operating margin for the quarter improved to 5.6 percent from 5.2 percent in the comparable period of 2003, due to improved product mix, buying synergies, and operating efficiencies.

Interest expense in the quarter increased over last year, primarily as a result of higher average borrowing levels, while the effective income tax rate decreased primarily as a result of the Canadian federal statutory income tax rate decline.

At the quarter's end Loblaw initiated certain internal reorganizations involving its merchandising, procurement, and operations groups. The company said it believes these changes will make it a more efficient and effective operation, helping to better serve its customers and fortify its position as a strong, competitive force in Canadian retailing. These changes will be implemented over the next several months.

Loblaw expects continued good sales and net earnings growth for the remaining quarter of 2004, after adjusting for the impact of the 53rd week in 2003, and that this trend will continue throughout 2005. The company plans to add substantial new retail square footage into the marketplace, supporting the good progress that is being made on the rollout of its general merchandise program. Loblaw expects the financial position and cash flow generation to continue at strong levels.
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