Loblaw profit falls as grocery giant hit by flat sales and a slew of charges
TORONTO — Revenue and profit fell at Loblaw Cos Ltd. in the fourth quarter amid stagnant food sales and a whopping $230 million in charges related to its loyalty program and a $25 gift card giveaway to customers.
Net earnings in the period ended Dec. 31 were $19 million, or five cents per share, from $201-million, (50 cents), a year earlier.
Revenue fell 0.9 per cent to $11.03 billion from $11.13 billion in the fourth quarter of 2016 and retail segment sales slid 1.2 per cent to $10.7 billion after the sale of some gas stations. Disposing of the gas bar operations had a negative sales impact of $350 million, Loblaw said.
Food same-store sales, a key measure of industry performance that strips out the effects of square footage changes, were flat, up just 0.5 per cent excluding gas.
Sales at Shoppers Drug Mart were more promising, up 3.9 per cent in the pharmacy and 3.5 per cent in the front of the store.
Adjusted earnings were $1.13 per share, compared with 97 cents a year ago. Operating income sank 69 per cent to $140 million.
The company, which in December admitted that it was the whistleblower as one of the players in a widespread industry scheme to fix bread prices, incurred a slew of charges totalling $230 million, or 61 cents per share.
Changes associated with merging its PC Plus and Shoppers Optimum programs amounted to $154 million and restructuring costs were $123 million. The $25 gift card offered by Loblaw to customers affected by the bread price fixing had an impact of $79 million in the quarter. Those costs were offset by the favourable impact of asset impairments, tax changes and income from the wind-down of PC Financial banking services.
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