GWL's 2021 First Quarter Report has been filed on SEDAR and is available at sedar.com and in the Investor Centre section of the Company's website at weston.ca.
"We are pleased with the strength and performance of our businesses in the quarter, as we lapped the onset of the pandemic a year ago and lockdowns continued." said
"Both
Loblaw Companies Limited ("Loblaw") generated strong financial results in the first quarter of 2021. Revenue increased despite Loblaw's retail sales lapping the significant increase in demand for essential items in the final two weeks of the first quarter of 2020. Loblaw's results reflect continued momentum and positive consumer response to the value and services it provides and its expanding online solutions. The COVID-19 pandemic has accelerated certain longer-term trends, enabling Loblaw to advance its strategic growth areas of Everyday Digital Retail,
Choice Properties Real Estate Investment Trust ("
2021 FIRST QUARTER HIGHLIGHTS
Adjusted net earnings available to common shareholders of the Company(1) in the first quarter of 2021 were
CONSOLIDATED RESULTS OF OPERATIONS
The Company's results reflect the impact of COVID-19 and the year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the significant changes in
(unaudited) | |||||||||||
($ millions except where otherwise indicated) | 12 Weeks Ended | ||||||||||
For the periods ended as indicated | $ Change | % Change | |||||||||
Revenue | $ | 12,352 | $ | 12,333 | $ | 19 | 0.2% | ||||
Operating income | $ | 830 | $ | 598 | $ | 232 | 38.8% | ||||
Adjusted EBITDA(1) | $ | 1,335 | $ | 1,300 | $ | 35 | 2.7% | ||||
Adjusted EBITDA margin(1) | 10.8% | 10.5% | |||||||||
Net (loss) earnings attributable to shareholders | |||||||||||
of the Company | $ | (52) | $ | 592 | $ | (644) | (108.8)% | ||||
Net (loss) earnings available to common shareholders | |||||||||||
of the Company | $ | (62) | $ | 582 | $ | (644) | (110.7)% | ||||
Adjusted net earnings available to common | |||||||||||
shareholders of the Company(1) | $ | 243 | $ | 239 | $ | 4 | 1.7% | ||||
Diluted net (loss) earnings per common share ($) | $ | (0.41) | $ | 3.78 | $ | (4.19) | (110.8)% | ||||
Adjusted diluted net earnings per common share(1) ($) | $ | 1.59 | $ | 1.55 | $ | 0.04 | 2.6% | ||||
In the first quarter of 2021, the Company recorded net loss available to common shareholders of the Company of $62 million (
- The unfavourable year-over-year net impact of adjusting items totaling
$648 million ($4.23 per common share) was due to: - the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability of
$743 million ($4.85 per common share) as a result of the increase inChoice Properties' unit price in the first quarter of 2021; and - the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares of
$55 million ($0.36 per common share);
partially offset by,
- the favourable year-over-year impact of the fair value adjustment on investment properties of
$123 million ($0.81 per common share); - the favourable year-over-year impact of restructuring and other related costs of
$14 million ($0.09 per common share); and - the favourable year-over-year impact of the fair value adjustments on derivatives of
$12 million ($0.08 per common share). - The improvement in the Company's consolidated underlying operating performance of
$4 million ($0.04 per common share) was due to: - the favourable underlying operating performance of Loblaw including the impact of COVID-19 and related costs;
partially offset by,
- the unfavourable underlying operating performance of
Weston Foods driven by the impact of COVID-19 and related costs; and - an increase in the adjusted effective tax rate(1) primarily attributable to the impact of certain other non-deductible items.
- Diluted net earnings per common share also included the favourable impact of shares purchased for cancellation in the fourth quarter of 2020 and the first quarter of 2021.
Adjusted net earnings available to common shareholders of the Company(1) were
CONSOLIDATED OTHER BUSINESS MATTERS
COVID-19 RELATED COSTS The Company incurred COVID-19 related costs of approximately $54 million in the first quarter of 2021 (2020 -
(unaudited) | 12 Weeks Ended | |||||
($ millions) | ||||||
Loblaw | $ | 48 | $ | 32 | ||
2 | — | |||||
4 | — | |||||
Consolidated | $ | 54 | $ | 32 | ||
(i) |
Refer to "COVID-19 Update" of this News Release for more information.
REPORTABLE OPERATING SEGMENTS
The Company operates through its three reportable operating segments: Loblaw,
Loblaw has two reportable operating segments, retail and financial services. Loblaw's retail segment consists primarily of food retail and drug retail. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise and financial services.
Weston Foods is a North American bakery making bread, rolls, cupcakes, donuts, cookies, cakes, pies, cones and wafers, artisan baked goods and more.
Loblaw Operating Results
(unaudited) | ||||||||||||
($ millions except where otherwise indicated) | 12 Weeks Ended | |||||||||||
For the periods ended as indicated | $ Change | % Change | ||||||||||
Revenue | $ | 11,872 | $ | 11,800 | $ | 72 | 0.6% | |||||
Operating income | $ | 615 | $ | 539 | $ | 76 | 14.1% | |||||
Adjusted EBITDA(1) | $ | 1,216 | $ | 1,163 | $ | 53 | 4.6% | |||||
Adjusted EBITDA margin(1) | 10.2% | 9.9% | ||||||||||
Depreciation and amortization(i) | $ | 610 | $ | 594 | $ | 16 | 2.7% | |||||
(i) | Depreciation and amortization in the first quarter of 2021 includes $117 million (2020 – $119 million) of amortization of intangible assets acquired with |
Revenue Loblaw revenue in the first quarter of 2021 was
Retail sales in the first quarter of 2021 increased by $86 million, or 0.7%, compared to the same period in 2020 and included food retail sales of
- food retail same-store sales growth was 0.1% for the quarter. During the first quarter of 2021, retail experienced continued strong same-store sales growth before the lapping of the late first quarter of 2020 stock-up from the initial onset of the COVID-19 pandemic. Food retail basket size increased and traffic decreased in the quarter, as compared to the first quarter of 2020;
- Loblaw's food retail average article price was higher by 3.9% (2020 – 1.5%), which reflects the year-over-year growth in food retail revenue over the average number of articles sold in Loblaw's stores in the quarter. The increase in average article price was due to sales mix; and
- drug retail same-store sales decreased by 1.7% for the quarter. The drug retail same-store sales decline reflects the initial demand for grocery and pharmacy products late in the first quarter of 2020 following the onset of the COVID-19 pandemic in
Canada . Pharmacy same-store sales growth was 3.5% and front store same-store sales declined by 6.4%.
In the last 12 months, 20 food and drug stores were opened and nine food and drug stores were closed, resulting in a net increase in retail square footage of 0.4 million square feet, or 0.6%.
Financial services revenue in the first quarter of 2021 decreased by
Operating income Loblaw operating income in the first quarter of 2021 was $615 million, an increase of $76 million, or 14.1%, compared to the same period in 2020. The increase included an improvement in underlying operating performance of $35 million and the favourable year-over-year net impact of adjusting items totaling $41 million, as described below:
- the improvement in underlying operating performance of
$35 million was primarily due to the improvement in the underlying operating performance of financial services, partially offset by a decline in the underlying operating performance of retail driven by the lapping of the late first quarter of 2020 stock-up from the initial onset of the COVID-19 pandemic; - the favourable year-over-year net impact of adjusting items totaling
$41 million was primarily due to the following: - the favourable year-over-year impact of the fair value adjustments on derivatives of
$23 million ; - the favourable year-over-year impact of restructuring and other related costs of
$11 million ; and - the favourable impact of the gain on sale of non-operating properties of
$5 million .
Adjusted EBITDA(1) Loblaw adjusted EBITDA(1) in the first quarter of 2021 was
Retail adjusted EBITDA(1) in the first quarter of 2021 decreased by $12 million driven by the lapping of the late first quarter of 2020 stock-up from the initial onset of the COVID-19 pandemic and the unfavourable increase in SG&A, partially offset by an increase in retail gross profit.
- Retail gross profit percentage of 30.3% increased by 50 basis points compared to the same period in 2020 from underlying improvements in business initiatives.
- Retail SG&A as a percentage of sales was 20.5%, an increase of 70 basis points compared to the same period of 2020. The unfavourable increase of 70 basis points was primarily due to COVID-19 related costs and incremental e-commerce labour costs as a result of increased online sales.
Financial services adjusted EBITDA(1) increased by $65 million compared to the same period in 2020, primarily driven by a
Depreciation and Amortization Loblaw's depreciation and amortization in the first quarter of 2021 was $610 million, an increase of $16 million compared to the same period in 2020, primarily driven by an increase in information technology ("IT") assets, an increase in depreciation of leased assets and an increase in depreciation and amortization in financial services due to the launch of PC Money Account. Included in depreciation and amortization is the amortization of intangible assets acquired with
Consolidation of Franchises Loblaw has more than 500 franchise food retail stores in its network. Non-controlling interests at Loblaw represent the franchise's earnings in food. Loblaw's net earnings attributable to non-controlling interests was
Choice Properties Operating Results
(unaudited) | ||||||||||||
($ millions except where otherwise indicated) | 12 Weeks Ended | |||||||||||
For the periods ended as indicated | $ Change | % Change | ||||||||||
Revenue | $ | 327 | $ | 325 | $ | 2 | 0.6% | |||||
Net interest expense (income) and other financing | ||||||||||||
charges(i) | $ | 347 | $ | (256) | $ | 603 | (235.5)% | |||||
Net (loss) income | $ | (62) | $ | 333 | $ | (395) | 118.6% | |||||
Funds from Operations(1)(ii) | $ | 171 | $ | 171 | $ | — | —% | |||||
(i) | Net interest expense (income) and other financing charges includes a fair value adjustment on Exchangeable Units. |
(ii) | Funds from operations is calculated in accordance with the |
Revenue Revenue in the first quarter of 2021 was
The increase in revenue was primarily driven by:
- the net contribution from acquisitions and development transfers completed in 2020; and
- an increase in lease surrender revenue;
partially offset by,
- foregone revenue from dispositions in 2020;
- vacancies in select retail and office assets; and
- a reduction in transient parking revenue in the office portfolio due to the impact of the pandemic on city centres.
Net Interest Expense (Income) and Other Financing Charges Net interest expense and other financing charges in the first quarter of 2021 were
Net (Loss) Income Net loss in the first quarter of 2021 was
- the unfavourable impact of higher net interest expense and other financing charges described above;
partially offset by,
- a favourable change in the adjustment to fair value of investment properties, including those held within equity accounted joint ventures.
Funds from Operations(1) Funds from Operations(1) in the first quarter of 2021 was $171 million, which was flat compared to the same period in 2020, as an increase in non-recurring lease surrender revenue and savings from lower borrowing costs was offset by higher bad debt expense and a decline in interest income due to fewer mortgages receivable outstanding as compared to prior year.
Choice Properties Other Business Matters
Investment Property Transactions Subsequent to the quarter end,
Weston Foods Operating Results
(unaudited) | |||||||||||
($ millions except where otherwise indicated) | 12 Weeks Ended | ||||||||||
For the periods ended as indicated | $ Change | % Change | |||||||||
Sales | $ | 472 | $ | 535 | $ | (63) | (11.8)% | ||||
Operating income | $ | — | $ | 1 | $ | (1) | (100.0)% | ||||
Adjusted EBITDA(1) | $ | 34 | $ | 52 | $ | (18) | (34.6)% | ||||
Adjusted EBITDA margin(1) | 7.2% | 9.7% | |||||||||
Depreciation and amortization(i) | $ | 36 | $ | 43 | $ | (7) | (16.3)% | ||||
(i) | Depreciation and amortization in the first quarter of 2020 included $9 million of accelerated depreciation related to restructuring and other related costs. |
Sales Weston Foods sales in the first quarter of 2021 were $472 million, a decrease of $63 million, or 11.8%, compared to the same period in 2020. Sales included the unfavourable impact of foreign currency translation of approximately 2.6%. Excluding the unfavourable impact of foreign currency translation, sales decreased by 9.2%. Sales were impacted by a decrease in volumes mainly due to the impact of the COVID-19 pandemic. Volumes declined in retail celebratory categories and certain foodservice channels, and reflect the impact of lapping strong performance and stockpiling in the last two weeks of the first quarter of 2020 at the onset of the pandemic. In addition, Girl Scout cookie sales in
Operating Income Weston Foods operating income in the first quarter of 2021 was a nominal loss compared to
- the favourable year-over-year impact of restructuring and other related costs of
$16 million ; and - the favourable year-over-year impact of the fair value adjustment of derivatives of
$3 million .
Adjusted EBITDA(1) Weston Foods adjusted EBITDA(1) in the first quarter of 2021 was $34 million compared to $52 million in the same period in 2020, a decrease of $18 million, or 34.6%. The decrease was driven by the decline in sales as described above, higher input costs and an increase in COVID-19 related expenses, partially offset by lower distribution costs and other cost savings initiatives.
Depreciation and Amortization Weston Foods depreciation and amortization in the first quarter of 2021 was $36 million, a decrease of $7 million compared to the same period in 2020. Depreciation and amortization in the first quarter of 2020 included $9 million of accelerated depreciation related to
Weston Foods Other Business Matters
Restructuring and other related costs
COVID-19 UPDATE(2)
The COVID-19 pandemic continued to impact the Company's operating segments, colleagues, customers, tenants and other stakeholders. The duration and longer-term impact of the COVID-19 pandemic cannot be predicted.
In the second quarter of 2021, Loblaw will lap last year's surge in revenues and its highest periods of COVID-19 related costs. In the four weeks following the end of the first quarter, food same-store sales have declined slightly, while drug same-store sales have trended positively, compared to same-store sales growth of 10.0% in food retail and a decline of 1.1% in drug retail in the second quarter of last year. Loblaw expects to incur COVID-19 related costs in the range of approximately
In the second quarter of 2021,
OUTLOOK(2)
For 2021, the Company expects adjusted net earnings(1) to increase due to the results from its operating segments as described below. Additionally, the Company expects to return capital to shareholders through share repurchases by allocating a portion of the free cash flow received from its operating businesses and proceeds from participating in Loblaw's normal course issuer bid.
Loblaw Loblaw cannot predict the precise impacts of COVID-19 on 2021 financial results. However, Loblaw anticipates that grocery sales will remain elevated due to continued impact of the pandemic, including the impact of lockdown measures in many jurisdictions. As economies reopen, revenue growth will be challenged while lapping elevated 2020 sales. Costs are expected to improve, as Loblaw laps elevated COVID-19 related expenses, and as Process & Efficiencies and Data-Driven Insights programs continue to deliver benefits. Moderate levels of regulatory reform are anticipated.
Loblaw previously announced that, on a full year basis, it expects:
- its core retail business to grow earnings faster than sales;
- growth in financial services profitability;
- EPS growth in the low double digits, excluding the impact of the 53rd week in the fourth quarter of 2020;
- to invest approximately
$1.2 billion in capital expenditures, net of proceeds from property disposals; and - to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.
Loblaw delivered strong financial performance in the first quarter and that momentum has continued into the first four weeks of the second quarter, positioning Loblaw to exceed its full year EPS growth outlook. However, it is still early in the year and given the on-going uncertainty and volatility caused by the COVID-19 pandemic, Loblaw will not update its full year outlook at the current time.
Although there remains uncertainty on the longer-term impact of the COVID-19 pandemic,
In 2021,
- sales to be modestly higher compared to 2020, after excluding the impact of foreign currency translation and the impact of the 53rd week in fiscal 2020;
- adjusted EBITDA(1) to be higher compared to 2020;
- capital expenditures to decrease to approximately
$145 million ; and - depreciation to increase compared to 2020.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the first quarter of 2021, the Company's Board of Directors declared a quarterly dividend on GWL Common Shares, Preferred Shares, Series I, Preferred Shares, Series III, Preferred Shares, Series IV and Preferred Shares, Series V payable as follows:
Common Shares |
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Preferred Shares, Series I |
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Preferred Shares, Series III |
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Preferred Shares, Series IV |
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Preferred Shares, Series V |
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NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures as it believes these measures provide useful information to both management and investors with regard to accurately assessing the Company's financial performance and financial condition.
Management uses these and other non-GAAP financial measures to exclude the impact of certain expenses and income that must be recognized under GAAP when analyzing underlying consolidated and segment operating performance, as the excluded items are not necessarily reflective of the Company's underlying operating performance and make comparisons of underlying financial performance between periods difficult. The Company excludes additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.
These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.
For reconciliation to, and description of the Company's non-GAAP financial measures and financial metrics, see Section 9, "Non-GAAP Financial Measures", of the MD&A in the Company's 2021 First Quarter Report.
Non-GAAP Financial Measures Policy Change Effective First Quarter of 2021 In 2020, management undertook a review of historical adjusting items as part of an effort to reduce the number of items it excludes from its non-GAAP financial measures. Management concluded that, in order to present adjusting items in a manner more consistent with that of its Canadian and
FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this News Release include, but are not limited to, statements with respect to the Company's anticipated future results, events and plans, strategic initiatives and restructuring, regulatory changes including further healthcare reform, future liquidity, planned capital investments, and the status and impact of IT systems implementations. These specific forward-looking statements are contained throughout this News Release including, without limitation, in the "COVID-19 Update" and "Outlook" section of this News Release. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may", "should" and similar expressions, as they relate to the Company and its management.
Forward-looking statements reflect the Company's estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The Company's expectation of operating and financial performance in 2021 is based on certain assumptions, including assumptions about the COVID-19 pandemic, healthcare reform impacts, anticipated cost savings and operating efficiencies and anticipated benefits from strategic initiatives. The Company's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events, including the COVID-19 pandemic and as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions will prove to be correct.
Numerous risks and uncertainties could cause the Company's actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including those described in "Enterprise Risks and Risk Management" section, of the MD&A in the Company's 2020 Annual Report and the Company's Annual Information Form for the year ended
Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this News Release. Except as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SEGMENT INFORMATION
The Company has three reportable operating segments: Loblaw,
The accounting policies of the reportable operating segments are the same as those described in the Company's 2020 audited annual consolidated financial statements. The Company measures each reportable operating segment's performance based on adjusted EBITDA(1) and adjusted operating income(1). No reportable operating segment is reliant on any single external customer.
12 Weeks Ended | ||||||||||||||||||||||||||||||
(unaudited) | Loblaw | Choice | Weston | Other and | Total | Loblaw | Choice | Weston | Other and | Total | ||||||||||||||||||||
Revenue | $ | 11,872 | $ | 327 | $ | 472 | $ | (319) | $ | 12,352 | $ | 11,800 | $ | 325 | $ | 535 | $ | (327) | $ | 12,333 | ||||||||||
Operating income (loss) | $ | 615 | $ | 285 | $ | — | $ | (70) | $ | 830 | $ | 539 | $ | 77 | $ | 1 | $ | (19) | $ | 598 | ||||||||||
Net interest expense | ||||||||||||||||||||||||||||||
(income) and other | 160 | 347 | 1 | 38 | 546 | 172 | (256) | (1) | (173) | (258) | ||||||||||||||||||||
Earnings (loss) before | ||||||||||||||||||||||||||||||
income taxes | $ | 455 | $ | (62) | $ | (1) | $ | (108) | $ | 284 | $ | 367 | $ | 333 | $ | 2 | $ | 154 | $ | 856 | ||||||||||
Operating income | $ | 615 | $ | 285 | $ | — | $ | (70) | $ | 830 | $ | 539 | $ | 77 | $ | 1 | $ | (19) | $ | 598 | ||||||||||
Depreciation and | ||||||||||||||||||||||||||||||
amortization | 610 | 1 | 36 | (87) | 560 | 594 | 1 | 43 | (78) | 560 | ||||||||||||||||||||
Adjusting items(i) | (9) | (61) | (2) | 17 | (55) | 30 | 149 | 8 | (45) | 142 | ||||||||||||||||||||
Adjusted EBITDA(i) | $ | 1,216 | $ | 225 | $ | 34 | $ | (140) | $ | 1,335 | $ | 1,163 | $ | 227 | $ | 52 | $ | (142) | $ | 1,300 | ||||||||||
Depreciation and | ||||||||||||||||||||||||||||||
amortization(ii) | 493 | 1 | 36 | (87) | 443 | 475 | 1 | 34 | (78) | 432 | ||||||||||||||||||||
Adjusted operating | ||||||||||||||||||||||||||||||
income(i) | $ | 723 | $ | 224 | $ | (2) | $ | (53) | $ | 892 | $ | 688 | $ | 226 | $ | 18 | $ | (64) | $ | 868 | ||||||||||
(i) | Certain items are excluded from operating income to derive adjusted EBITDA(1). Adjusted EBITDA(1) is used internally by management when analyzing segment underlying operating performance. |
(ii) | Excludes $117 million (2020 – $119 million) of amortization of intangible assets acquired with |
2021 FIRST QUARTER REPORT
The Company's 2020 Annual Report and 2021 First Quarter Report are available in the Investor Centre section of the Company's website at www.weston.ca and have been filed on SEDAR and are available at www.sedar.com.
INVESTOR RELATIONS
Shareholders, security analysts and investment professionals should direct their requests to
Additional financial information has been filed electronically with various securities regulators in
This News Release also includes selected information on
FIRST QUARTER CONFERENCE CALL AND WEBCAST
ANNUAL MEETING
Ce rapport est disponible en français.
Endnotes | |
(1) | See the "Non-GAAP Financial Measures" section of the Company's 2021 First Quarter Results, which includes the reconciliation of such non- |
(2) | This News Release contains forward-looking information. See "Forward-Looking Statements" section of this News Release and the |
(3) | Certain figures have been restated due to the non-GAAP financial measures policy change. See the "Non-GAAP Financial Measures Policy |
SOURCE
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