Loblaw Companies (L) Q3 2024 earnings summary

Executive summary

• Delivered steady operational and financial performance in Q3 2024, with revenue up 1.5% to CAD 18.5 billion and adjusted EBITDA up 7.4%.

• Adjusted diluted EPS grew 10.6% to CAD 2.50; GAAP net earnings rose 25% due to a CAD 125 million tax recovery.

• Food retail saw higher customer traffic and tonnage growth, with discount banners and multicultural stores outperforming conventional stores.

• Drug retail same-store sales grew 2.9%, with pharmacy and healthcare services up 6.3% and strong beauty category sales.

• Online sales achieved highest growth in 2.5 years, up 18.5%.

Financial highlights

• Consolidated revenue: CAD 18.5 billion, up 1.5% year-over-year; Retail segment sales: CAD 18.26 billion.

• Adjusted EBITDA: CAD 2.1 billion, up 7.4% year-over-year.

• Net earnings available to common shareholders: CAD 777 million, up 25.1%; adjusted net earnings: CAD 767 million, up 6.7%.

• Retail free cash flow: CAD 562 million; share repurchases of CAD 523 million in Q3.

• Retail gross margin: 30.9%, up 30 basis points; EBITDA margin: 10.9%-11.2%.

Outlook and guidance

• EPS growth for 2024 expected to be in the low double-digit range, higher than original outlook.

• Q4 off to a good start with improving food same-store sales; front-store and Shoppers expected to face top-line pressure due to electronics exit.

• Gross margin expected to benefit from further shrink improvements.

• 2025 earnings growth expected within the 8%-10% financial framework, despite new store and DC openings.

• Net capital investment guidance raised to CAD 1.9 billion for 2024.