Loblaw Companies (TSX: L) delivered a sharp fourth-quarter earnings jump, but a large slice of the “beat” tracks to a 13th week and accounting roll-offs rather than a step-change in underlying retail economics.
Retail revenue rose to $16.38 billion from $14.73 billion from a year earlier, a headline 11.3% gain that includes roughly $1.14 billion from the extra week. On a comparable 12-week basis, revenue was up 3.5%.
Same-store results were not blowout. Food retail comps rose 1.5% versus 2.5% a year earlier, while drug retail comps rose 3.9% versus 1.3%. The strongest comp engine stayed pharmacy and healthcare services at +5.6%, but that slowed from +6.3% last year, and front-store comps flipped positive to +2.2% from negative 3.1%, helped by beauty and OTC and a deliberate exit from low-margin electronics.
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Operating income jumped to $1.13 billion from $793.0 million, with the quarter’s cost base benefiting from acquired-intangible amortization collapsing to $10.0 million from $115.0 million as Shoppers Drug Mart intangibles become fully amortized.
Net earnings rose to $656.0 million from $462.0 million. On adjusted basis, net earnings increased to $794.0 million from $669.0 million, translating to diluted EPS of $0.67.
Adjusted EBITDA also increased to $1.78 billion from $1.60 billion, while adjusted EBITDA margin held at 10.8%.
Operating cash flow for the quarter increased to $2.20 billion from $1.59 billion, and retail free cash flow ended at $1.24 billion versus $881.0 million. The cash flow statement ends the period at $1.39 billion of cash and cash equivalents down from last year’s $1.46 billion.
For 2026, excluding the PC Financial closing impact and excluding the prior-year 53rd-week impact, Loblaw expects retail earnings to grow faster than sales, adjusted EPS growth in the high single digits, and gross capex of approximately $2,400.0 million, while allocating a significant portion of free cash flow to buybacks.
Loblaw last traded at $67.52 on the TSX.
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