BRAMPTON, ON, July 23, 2020 /CNW/ - Loblaw Companies Limited (TSX: L) ("Loblaw" or the "Company") announced today its unaudited financial results for the second quarter ended June 13, 2020. The Company's 2020 Second Quarter Report to Shareholders will be available in the Investors section of the Company's website at loblaw.ca and will be filed on SEDAR and available at sedar.com(Open in a new tab).

"Loblaw delivered strong operational performance, as both our base business and strategic growth pillars performed well amidst the extraordinary conditions brought on by COVID-19," said Galen G. Weston, Executive Chairman, Loblaw Companies Limited. "Significant investments in the safety and wellbeing of everyone in our stores delivered against customer expectations, despite negatively impacting earnings. At the same time, the Company considerably strengthened its position in e-commerce as online grocery sales surged 280%."

In the final two weeks of the first quarter, the Company experienced unprecedented consumer demand and stockpiling relating to COVID-19. Although this resulted in a sharp increase in revenue and profit, spending to protect our colleagues and customers was only just beginning to ramp up. In the second quarter, the Canadian market entered the next phase of the pandemic. Unprecedented demand for products across multiple categories continued. Food sales growth included changes within the mix and the benefit from strong demand for essential food categories. Overall demand shifted towards conventional formats, with the Market division delivering strong same-store sales growth of 18.8% and the Discount division growing sales by 4.9%. Same store sales in Drug declined by 1.1%. Growth in front store sales from essential categories was more than offset by a decline in pharmacy sales due to COVID-19.

As expected, profit declined year over year in the quarter as the strong growth in sales was insufficient to overcome substantial COVID-19 related costs in the quarter. In total, the Company invested $282 million to protect and benefit colleagues and customers, with approximately $180 million related to temporary pay premium costs which included a one-time bonus for store and distribution centre colleagues of $25 million. As the Company exited the second quarter, it continued to incur COVID-19 related costs to enhance the safety and security of its customers and colleagues, although at a lower rate of investment than in the second quarter, reflecting a greater degree of stability in store and distribution centre operations.

The COVID-19 pandemic has accelerated certain longer-term trends, supporting the Company's strategy and accelerating its strategic growth areas of Everyday Digital, Connected Healthcare, and Payment & Rewards. The Company's investments in its Everyday Digital platforms have allowed it to offer Canadians a choice of shopping in-store, or online with either home delivery or convenient pickup locations. In the quarter, its e-commerce sales accelerated sharply, growing by 280%. Year to date, Canadians have purchased almost $1.2 billion in everyday items across the Company's grocery, pharmacy, and apparel eCommerce platforms. The accelerated growth rate has resulted in increased costs and investments in the quarter. The Company expects continued growth in its e-commerce business and is investing to expand capacity and enhance its same-day service offering while also improving the cost structure of the business over time.

2020 SECOND QUARTER HIGHLIGHTS

Unless otherwise indicated, the following highlights include the impacts of the consolidation of franchises and COVID-19.

• Revenue was $11,957 million. When compared to the second quarter of 2019, this represented an increase of $824 million, or 7.4%.

• Retail segment sales were $11,768 million. When compared to the second quarter of 2019, this represented an increase of $862 million, or 7.9%.

• • Food retail (Loblaw) same-stores sales growth was 10.0%.

  • Drug retail (Shoppers Drug Mart) same-store sales decreased by 1.1%, with a pharmacy same-store sales decline of 6.2% and front store same-store sales growth of 3.3%.

• COVID-19 investments amounted to approximately $282 million of which $180 million related to compensation costs, inclusive of the one-time bonus for store and DC colleagues of $25 million.

• The Company accelerated its e-commerce initiative, growing its Everyday Digital sales by 280% to $1.2 billion on a year-to-date basis.

• Operating income was $404 million. When compared to the second quarter of 2019, this represented a decrease of $184 million, or 31.3%.

• Adjusted EBITDA² was $1,016 million. When compared to the second quarter of 2019, this represented a decrease of $159 million, or 13.5%.

• Net earnings available to common shareholders of the Company were $169 million. When compared to the second quarter of 2019, this represented a decrease of $117 million, or 40.9%. Diluted net earnings per common share were $0.47. When compared to the second quarter of 2019, this represented a decrease of $0.30, or 39.0%.

• Adjusted net earnings available to common shareholders of the Company² were $266 million. When compared to the second quarter of 2019, this represented a decrease of $107 million, or 28.7%.

• Adjusted diluted net earnings per common share² were $0.74. When compared to the second quarter of 2019, this represented a decrease of $0.27, or 26.7%.

• The Company did not repurchase any common shares for cancellation.

• The Company invested $199 million in capital expenditures and generated $334 million of free cash flow².

• The Company recorded approximately $17 million of restructuring and other related charges, primarily related to Process and Efficiency initiatives.

Note: This is an excerpt from the full release. To view the complete document, please download the full Q2 2020 news release(Open in a new tab).

¹ This News Release contains forward-looking information. See "Forward-Looking Statements" section of this News Release and the Company's 2020 Second Quarter Report to Shareholders for a discussion of material factors that could cause actual results to differ materially from the forecasts and projections herein and of the material factors and assumptions that were used when making these statements. This News Release should be read in conjunction with Loblaw Companies Limited's filings with securities regulators made from time to time, all of which can be found at sedar.com(Open in a new tab) and at loblaw.ca.

² See Section 10 "Non-GAAP Financial Measures" of the Company's 2020 Second Quarter Report to Shareholders, which includes the reconciliation of such non-GAAP measures to the most directly comparable GAAP measures.