Loblaw Q2 Sales Up 4 Pct., Earnings Drop

TORONTO -- In the face of supply chain challenges posed by an ambitious revamping plan, Loblaw Cos. Ltd. here -- operator of the Provigo and Loblaws supermarket chains -- reported an 8.1 percent drop in second quarter profits of C$194 million vs. C$211 million the year earlier.

On the brighter side, Loblaw's sales gained 4.6 percent, as Canada's leading grocer implemented aggressive price cuts to drive business. The second quarter 4.6 percent -- or C$294 million -- sales increase was good for C$6.7 billion vs. C$6.4 billion recorded during the same period in 2005. The inclusion of Easter sales in the most recent quarter added about one percent to Loblaw's sales.

The company said continued investments in lower food prices to drive sales growth had a short-term negative impact on net earnings, and that the challenges associated with its supply chain restructuring have been more complex and are costing more than anticipated.

Loblaw's also pointed to higher labor, store and distribution center costs that were incurred in order to stabilize the flow of product to the stores.

Adjusting for one-time items, the company said it earned 70 cents per share in the period, compared to adjusted per share earnings of 82 cents in the same quarter of fiscal 2005.
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