George Weston Q3 2024 Earnings Collapse 97% As Choice Properties’ Valuation Wipes Out Gains
George Weston Limited (TSX: WN) reported its third-quarter results for 2024, with revenue reaching $18.69 billion, a 1.5% increase from $18.41 billion in the same period last year. This growth was primarily driven by Loblaw’s retail and pharmacy businesses and steady performance in Choice Properties’ real estate portfolio.
However, this revenue increase only slightly outpaced inflationary pressures and lagged behind broader economic expectations for growth in the retail and real estate sectors.
Loblaw, the company’s flagship subsidiary, delivered revenue of $18.54 billion in the quarter, up 1.5% year-over-year and slightly higher than the $18.38 billion reported in the previous quarter. The retail segment, which includes grocery and drugstore operations, showed strength in its hard-discount banners, particularly No Frills and Maxi, alongside its multicultural-focused T&T Supermarket chain.
Choice Properties reported revenue of $340 million, a 4.6% increase from $325 million last year, driven by rental rate increases in its retail and industrial portfolios, as well as higher recoveries.
Operating income for the quarter was $1.62 billion, a 31.4% increase from $1.23 billion in the same period last year. The performance was supported by Loblaw’s recovery of $155 million related to a commodity tax matter, which significantly bolstered its results. Without this one-time recovery, the operating income growth would have been less pronounced.
Despite solid operational performance, net earnings available to common shareholders fell sharply to $15 million, down 97.5% from $610 million in the third quarter of 2023. This staggering decline was primarily attributed to an unfavorable year-over-year impact from the fair value adjustment of Choice Properties’ Trust Unit liability, driven by increases in its unit price. The reliance on fair value adjustments to explain such earnings volatility exposes George Weston to significant market-driven risks, particularly in its real estate segment.
The consolidated adjusted diluted net earnings per share came in at $3.57, up 6.3% from $3.36 in Q3 2023, due to adjusted operational improvements and reduced share count from buybacks. However, on a GAAP basis, diluted net earnings per share fell to $0.08, a stark decline from $4.41 in the previous year.
Adjusted EBITDA improved by 6.9% year-over-year to $2.16 billion, compared to $2.02 billion in the same quarter of 2023. Loblaw contributed $2.07 billion of this total, reflecting a 7.4% increase from last year, driven by stronger retail margins, higher pharmacy revenues, and improved shrink management. However, Choice Properties’ EBITDA grew by only 1.3% year-over-year to $237 million, indicating tepid performance relative to Loblaw and underscoring the challenges in sustaining growth in its real estate portfolio. Quarter-over-quarter, consolidated adjusted EBITDA rose by 4.5%, a modest gain that suggests operational efficiency improvements but limited organic growth.
From a shareholder return perspective, the company repurchased 1.3 million shares for $284 million during the quarter under its normal course issuer bid, down from 2.4 million shares repurchased for $364 million in the same period last year.
The company’s outlook remains cautiously optimistic, with plans for Loblaw to grow its retail business earnings faster than sales and continue expanding its store footprint. Choice Properties aims to stabilize occupancy rates and maintain low leverage, but its performance will remain heavily tied to market sentiment, posing ongoing risks.
George Weston last traded at $217.76 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
