Loblaw Companies (L) Q3 2024 earnings summary

Executive summary

• Adjusted diluted EPS grew 10.6% to CAD 2.50, with GAAP net earnings up 25% due to a CAD 125 million tax recovery related to a PC Bank commodity tax matter.

• Revenue rose 1.5% to CAD 18.5 billion, with adjusted EBITDA up 7.4%.

• Drug retail outperformed food retail, with strong beauty, pharmacy, and healthcare services sales.

• Food retail saw higher customer traffic and tonnage growth, especially in discount and multicultural banners, despite Thanksgiving sales shift to Q4.

• Online sales posted the highest growth rate in 2.5 years, up 18.5%.

Financial highlights

• Consolidated revenue: CAD 18.5 billion, up 1.5% year-over-year.

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

• Adjusted diluted EPS: CAD 2.50, up 10.6% year-over-year.

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

• Operating income increased 24% to CAD 1,321 million.

Outlook and guidance

• Full-year 2024 adjusted EPS growth guidance raised to low double-digits.

• Gross capital expenditures for 2024 now expected at CAD 2.3 billion (CAD 1.9 billion net of property disposals).

• 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.

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

• Significant free cash flow to be allocated to share repurchases.