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The largest grocer in Canada has seen food prices rise in its last quarter despite rising food prices, and the company predicted that further increases would be likely.
"We are finding that cost pressures are driving up retail prices," said Galen Weston, chief executive officer of Loblaw Companies Ltd., during a conference call with badysts on Wednesday.
The average price of the company's items rose in the third quarter, but price increases were lower than the company's expectations, he said.
"It's consistent with our expectations and what we thought could happen in this quarter and beyond," said Weston.
The company expects its domestic measure of food inflation to rise slightly in the fourth quarter.
Loblaw, Sobeys Inc. and Metro Inc. all reported in a recent phone conversation with badysts that rising food prices were inevitable because of the rates and other cost pressures their businesses faced. .
Higher prices and increased traffic allowed Loblaw to increase its comparable store sales, a key retail trade measure, during its third quarter, which ended on October 6, increased 0.9% for the quarter. and 2.5% in the company's drug retail division, which includes Shopper's Drug Mart.
The company's relatively new PC Optimum Rewards program, which combined two other loyalty programs last February, now has more than 15 million members.
The loyalty program is an increasingly powerful platform, said Weston. Loblaw focuses on offering personalized promotions to members.
While its same-store sales increased, the company's earnings for the third quarter fell from the previous year, following a non-recurring charge related to a tax court decision it plans to make. call.
The retailer earned $ 106 million of common share earnings, or 28 cents per share for the quarter.
The quarter included a charge of $ 367 million related to its former Barbadian banking subsidiary, Glenhuron Bank Ltd., following a decision of the Canada Revenue Tax Court on rebadessments by the Canada Revenue Agency. . Loblaw said it would appeal the decision.
Earnings for the quarter were compared with earnings of $ 883 million, or $ 2.24 a share, a year earlier, when earnings were boosted by a $ 432 million gain on the sale of its post office business petrol.
Revenues totaled $ 14.45 billion, against $ 14.19 billion.
On an adjusted basis, Loblaw reported an adjusted earnings of $ 562 million, or $ 1.49 per share, compared to adjusted earnings of $ 549 million, or $ 1.39 per share a year ago. Analysts on average expected a profit of $ 1.44 per share, according to Thomson Reuters Eikon.
Irene Nattel, RBC Capital Markets, said the slightly better than expected results reflected her extreme focus on operational efficiency and productivity.
She says the company's unchanged outlook for 2018 includes initiatives to offset cost pressures in order to generate a stable net income.
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Companies in this article: (TSX: L)
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