Shoppers Drug Mart boosts Loblaw's Q3

BRAMPTON, Ontario — Canada’s Loblaw posted double-digit revenue gains during the third quarter fueled by the solid performance of Shoppers Drug Mart, which was acquired in the second quarter.



"In the third quarter, we continued to advance our strategic initiatives and improve our market position," said Galen Weston, president and executive chairman, Loblaw. "We delivered solid performance across our portfolio of businesses, recognized efficiencies, realized significant synergies and remained on track with our deleveraging targets.



"Although the industry and regulatory backdrop continues to be challenging, our momentum is encouraging," continued Weston. "As we look forward, we believe our performance will continue to improve, supported by stable business performance, further efficiencies and planned synergies."



Revenue during the quarter ended Oct. 4 increased 35.9% to C$13.6 billion. Excluding the impact of Shoppers Drug Mart, revenue increased 2%.



Retail sales grew 36.9% compared with the prior year. Excluding Shoppers Drug Mart, retail sales grew by 2.2% and same-store sales growth was 2.6%.



Sales at Shoppers Drug Mart were C$3.4 billion during the quarter. On a same-store basis, Shoppers Drug Mart sales increased by 2.5%, with same-store pharmacy sales up 3.5% and same-store front-end sales up 1.6%.



Net earnings decreased by C$8 million to C$142 million, primarily driven by the decrease in operating income, largely offset by the decrease in net interest expense and other financing charges and by a decrease in income taxes due to certain non-deductible items.



Loblaw also reported that, during the quarter, it realized roughly C$44 million of net synergies associated with the acquisition of Shoppers Drug Mart. However, it also recorded $46 million in restructuring and reorganization costs primarily associated with the reduction of corporate and store-support positions, the departure of certain executives and the realignment of certain central office functions.



Going forward, Loblaw expects industry and business trends to continue for the balance of the year. As a result, for 2014 the company expects its business divisions to achieve financial and operational performance, on an adjusted basis and excluding net synergies, in line with 2013 performance trends. The company also remains on track to achieve $100 million in net synergies in the first 12 months following the acquisition of Shoppers Drug Mart.