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Loblaw Earnings Sink on Restructuring as Pricing Sparks Sales

Aggressive price investment is sparking sales increases for Loblaw Cos., but the growth is coming at a price and difficult times lay ahead, officials of the retailer said.

TORONTO — Aggressive price investment is sparking sales increases for Loblaw Cos., but the growth is coming at a price and difficult times lay ahead, officials of the retailer here said yesterday. Overall sales grew by 3.5% to $6.6 billion (U.S.), and same-store sales increased by 4.2% during Loblaw’s fiscal second quarter, which ended June 16. But operating margins were down sharply from the same period a year ago, and earnings fell by 39.4% to $113 million as the company held the line on prices despite cost increases and absorbed millions in restructuring costs involving employee severance, inventory liquidation, consulting fees and store closures. In a conference call yesterday, Mark Foote, president, said he expected price investments would continue for the foreseeable future. Loblaw, he added, is approaching a “critical stage” in its restructuring as employees transition to new roles. “Some level of disruption is expected,” Loblaw said in a statement.

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