Loblaw Quarterly Earnings Dented by Price-Fixing Settlement

By Robb M. Stewart

Loblaw's profit fell by about 10% in the latest quarter, dented by charges tied to an agreed settlement of lawsuits for the big Canadian retailer's role in a decades-old bread price-fixing arrangement.

The operator of one the country's biggest grocery chains on Thursday reported second-quarter earnings of 457 million Canadian dollars (US$331 million), or C$1.48 a share, compared with C$508 million, or C$1.58, a year earlier.

Adjusted earnings -- a metric that strips out certain items to reflect underlying trends -- rose to C$2.15 a share for the 12 weeks to June 15, broadly in line with the C$2.14 mean estimate of analysts polled by FactSet.

Revenue was up 1.5% on last year at C$13.95 billion, below the C$14.17 billion penciled in by analysts.

Sales for Loblaw's core food operation were up 1% to C$9.65 billion, with the pace of comparable same-store growth slowing on a last year to just 0.2%. Its Shoppers Drug Mart arm, saw sales rise 2.4%, while pharmacy and healthcare services sales were up 6.4%.

On Thursday, Loblaw and parent George Weston said they agreed to pay C$500 million for their role in a bread price-fixing arrangement, to settle nationwide class action lawsuits for price fixing between 2001 and 2015. The companies in a statement apologized for their role in the arrangement. Loblaw will pay C$156.5 million on top of credit for money previously paid to customers, and said charges of C$164 million were booked for the quarter for the settlement and related costs.

Canada's dominant grocers have been in the spotlight after a prolonged surge in food-price inflation following the peak of the pandemic, and after years of negotiations have in recent months signed up to an industry self-regulatory code of conduct. Loblaw said its internal food-price inflation during the latest quarter was in line with the 1.7% rise in the consumer price index for food purchased from stores, a sharp cooldown from a year earlier.

For the latest period, Loblaw said its food retail sales reflected increased customer visits in the quarter, but compared with very strong sales growth last year, that was led by its Maxi and NoFrills discount stores. Drug retail continued to outpace food sales, with strength in beauty products and what the company said was a return to more normal levels of pharmacy sales.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

July 25, 2024 07:37 ET (11:37 GMT)

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