Loblaw Q1 2023 Financials: Revenue Jumps, Profits Decline, $383 Million In Buybacks

Loblaw Companies (TSX: L) reported 6% growth in first-quarter revenues, boosted by robust demand for necessities such as food and medications.

The topline figure ended at $13.0 billion, jumping from Q1 2022’s $12.26 billion but falling shy of the analysts’ estimates of $13.17 billion. This is however, a drop from Q4 2022’s $14.0 billion.

“In the face of ongoing inflation, we are working hard to deliver the value and choice Canadians are looking for,” said President Galen Weston. “I’m pleased that customers are responding positively to the breadth of our offerings including our diverse store formats, market leading prices, private label brands, and loyalty offers.”

Weston will be stepping down from his position as the president at the end of the year, but will still remain as chair of the board and will continue to run Loblaw’s parent company, George Weston Limited (TSX: WN).

Retailers throughout the industry have recently relied on sales of vital goods such as groceries, frozen protein, and pharmaceuticals as inflation-stricken consumers focus spending on necessities.

According to the corporation, higher-margin cosmetics and cough and cold goods drove drug retail sales. Food retail sales increased by 3.1% on a same-store basis in the quarter, while drug retail sales increased by 7.4%.

The Canadian retailer reported reduced net income of $418 million, or $1.29 per share, compared to $437 million, or C$1.30 per share, a year before, when earnings were bolstered by a favorable court verdict.

Earnings per share increased to $1.55 from $1.36 on an adjusted basis, meeting analysts’ projections for the period.

The company generated $915 million in operating cash flow for the three-month period, higher than its year-ago counterpart of $863 million. Despite this, the firm yielded a smaller free cash flow of $147 million during the quarter, compared to last year’s $313 million, mainly attributable to a jump in capital investments in the first quarter.

The retail firm situated in Brampton, Ontario, maintained its yearly profit prediction of low double-digit growth.

Separately, the firm this morning also indicated that it will be conducting further share buybacks. The TSX has approved the company to repurchase up to 16.1 million common shares, which represents 5% of its outstanding shares. The program is set to run through to May 4, 2024.

Under the current program, which expires tomorrow, Loblaws repurchased 14.3 million shares at an average cost of $116.57 per share. The figure implies that Loblaws spent approximately $1.67 billion on share buybacks over the last year, of which $383 million was spent during the first quarter.

Loblaw also indicated it will be increasing its dividend for the twelfth year in a row, with the dividend rising from $0.405 per share to $0.446 per share, which represents a 10% increase.

Loblaw last traded at $128.66 on the TSX.

Information for this briefing was found via Sedar, Reuters, MarketWatch, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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