Loblaw earnings drop 19%

Loblaw Cos. Ltd profit fell by almost one fifth last quarter, even as same store sales expanded slightly.

Canada's largest grocery store chain said profit was 57 cents per share, down almost 19 per cent compared with the same period in 2011.

Revenue was $7.37 billion, an increase of 1.3 per cent over the second quarter of 2011. Retail sales and same-stores sales grew 1.1 per cent and 0.2 per cent respectively. Same-store sales are a key metric of retail health, measuring sales at already established stores and stripping out the impact of new store openings.

The company currently operates more than 1,000 grocery stores across the country under numerous banners, including Great Canadian Super Store, Provigo, No Frills and Atlantic Superstore.

The company is battling Wal-Mart's Supercentres in a tight battle to dominate the Canadian grocery industry. Loblaw has cited costs related to upgrading the company's inventory and IT system in order to better compete in almost every quarter since the world's largest retailer started selling groceries in Canada more than five years ago.

As far back as the third quarter of 2007, Loblaw made mention in its quarterly report of "a new multi-year plan to upgrade information technology and supply chain infrastructure designed to substantially improve efficiency" and one that was expected to cost hundreds of millions of dollars.

That plan is still underway, as the grocer cited a $66 million charge related to IT costs in its consolidated operating income on Wednesday.

"In the second quarter we continued to execute our plan," executive chairman Galen Weston said in a release Wednesday.

"We remain confident that our ongoing investments in infrastructure, including the completion of our IT implementation, will enable efficiencies and expense leverage to drive future earnings growth."

Weston added, however, that the "outlook for 2012 is unchanged ? we continue to expect full-year net earnings to be down year-over-year."

For 2012 as a whole, Loblaw says it expects capital expenditures of approximately $1.1 billion, with approximately 40 per cent to be dedicated to investing in IT infrastructure and supply chain projects and the remaining 60 per cent to be spent on retail operations.

Source: http://news.yahoo.com/loblaw-earnings-drop-19-163331851--finance.html

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