Loblaw’s Dropped $1.7 Billion On Buybacks In 2023 While Fighting Against Grocery Code Of Conduct

Loblaw Companies (TSX: L) saw its revenue increase by 3.7% in the fourth quarter of the year to $14.53 billion, beating analyst estimates of $14.52 billion. Adjusted net earnings per share meanwhile climbed by 13.6% for the quarter, hitting $2.00 a share and beating anaylst estimates of $1.90 per share.

The company attributed the beat to an “ongoing focus on retail excellence,” which resulted in traffic growth and market share momentum for the grocery giant.

The retail segment grew by 3.4% to $463 million for the quarter to $14.16 billion, while ecommerce sales grew by 14.6%.

For the fourth quarter, the company reported Adjusted EBITDA of $1.63 billion, an improvement of 9.4%, while net earnings to common shareholders hit $541 million.

For the full year, revenue came in at $59.53 billion, a jump of 5.4%. Adjusted net earnings per common share amounted to $7.75, an increase of 13.6% over the prior year.

The big story for the year however was the firms buyback program, which saw 14.5 million shares repurchased for a figure of $1.73 billion, while retail free cash flow amounted to $1.69 billion. The buybacks come amid a period of high food inflation for Canadians, with the federal government specifically targeting the grocery majors to cut costs under a “grocery code of conduct.”

Despite record profit for Loblaw’s, chairman Galen Weston attempted to pass the blame to grocery suppliers, while also stating that food prices would not go down if Loblaw reduced its profit margins.

“I do understand that Canadians are feeling this pressure. They look at these big numbers and they think to themselves, ‘Gosh, if that company would not make so much profit, our food prices would go down.’ But that’s not the way that it would actually work,” commented Weston in December.

Weston of course expects to grow earnings faster than sales in 2024, while adjusted net earnings are expected to grow in the high single-digits. A “significant portion” of cash flows are also earmarked for share repurchases, however further details on 2024’s buyback program have yet to be released by the company.

Loblaw Companies last traded at $138.11 on the TSX.

Information for this briefing was found via Sedar 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.