Loblaw's Preliminary Results for 4Q and Fiscal 2005 Show Negative Impact From Restructuring

BRAMPTON, Ont. -- Citing short-term financial costs related to "one of the largest transformations in the company's history," Loblaw Cos. Ltd. here yesterday reported basic net earnings for the fourth quarter ended Dec. 31, 2005 of $201 million (US $175 million), or 73 cents (US 65 cents) per common share, compared with $337 million (US $294 million), or $1.23 (US $1.07) per common share, last year. On a year-to-date basis, basic net earnings declined to $746 million ($651 million), or $2.72 (US $2.37) per common share, from $968 million (US $845 million), or $3.53 (US $3.08) per common share, in the year-ago period.

As a result of its massive restructuring, which was spurred by Loblaw's desire to streamline operations, increase efficiency, strengthen its competitive position and remain the market leader among Canadian supermarket operators, the company experienced disruptions to its systems, supply chain, and general merchandise areas, leading to additional operating costs. The retailer, however, "is prepared to incur these short-term consequences in order to realize the long- term benefits associated with its strategic transformation."

Loblaw anticipated that the adverse effect of its restructuring program would be absorbed by the end of the second quarter of 2006, including an anticipated decline in adjusted basic net earnings per common share in the first quarter of 2006 vs. the same period last year. The company said that adjusted basic net earnings per common share performance should improve during the second half of 2006. According to the retailer, it "remains confident that its strategic plan is appropriate given the increased competitive landscape."

Loblaw confirmed its previously announced anticipated sales growth for fiscal 2006, excluding variable interest entities, of 3 percent to 6 percent, while it expected growth in adjusted basic net earnings per common share to be from 4 percent to 7 percent.
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