Loblaw posts big revenue jump after Shoppers Drug Mart acquisition

Loblaw Companies Limited, Canada’s biggest retailer, posted a 35.9% increase in revenue to C$13.599 billion in the third quarter ending October 4th, compared to the same quarter last year.

Shoppers Drug Mart (Drug Mart), which Loblaw acquired in the second quarter, accounted for one quarter of total sales. Excluding Drug Mart’s figures, sales rose by 2% in Q3 2014 versus Q3 2013.

The Brampton-based company says it will continue looking to reduce costs further after cutting 200 jobs in the third quarter.

Retails sales grew by 36.9% in the quarter compared to Q3 2013. Excluding the impact of Drug Mart sales, growth over the same period was 2.2%, while same-store sales growth was 2.6%.

Loblaw’s President and CEO, Galen G. Weston, said regarding the third quarter’s performance:

“In the third quarter we continued to advance our strategic initiatives and improve our market position. 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. As we look forward, we believe our performance will continue to improve, supported by stable business performance, further efficiencies, and planned synergies.”

(Source: Loblaw Companies Limited – Consolidated Quarterly Results of Operations)

A total of $44 million in net synergies related to the acquisition of Drug Mart were realized in the third quarter.

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) came in at $1,001 million in Q3 2014, an increase of 56.9% over the same quarter last year. Excluding Drug Mart’s impact, EBITDA rose by C$8 million.

In the third quarter, adjusted operating income was 74.2% up at $669 million, versus $384 million in Q3 2013. Excluding Drug Mart’s impact the increase was $10 million (2.6%).

The company incurred C$46 million in restructuring and reorganization-related costs.

Expanding personalized promotions

Loblaw says it plans to expand its use of shoppers’ data to offer tailored promotions, after detecting higher sales resulting from personalized offers.

Its PC Plus Loyalty program, which was launched in 2013, is increasing the frequency of Loblaw store visits by customers, Mr. Weston commented. He said the retailer now plans to promote more personalized offers in Drug Mart’s Optimum loyalty program.

Loyalty program members are reconsidering trips they would typically make to other retail outlets and making repeat trips to Loblaw stores, Mr. Weston said in a conference call to discuss the company’s third-quarter performance.

Mr. Weston said:

“The fact that we’re putting these personalized flyers out once a week … it’s driving that incremental trip because customers want to come in and get that added value.”