TORONTO — Rapid product price inflation and reduced costs helped Loblaw here post earnings that exceeded analyst estimates during its fiscal first quarter. But executives were cautious Tuesday, citing the potential for additional volatility in the economy and margin challenges when prices recede.
“This was an OK quarter, maybe OK-plus,” Allen Leighton, president and deputy chairman, said in a conference call with analysts. “I think we’re getting more of the basics right, but we’re flattered by inflation.”
For the first quarter, which ended March 28, Loblaw posted net earnings of $93.2 million (U.S.) — up 73% — on sales of $5.7 billion. Earnings per share of 40 Canadian cents per share exceeded analyst estimates of 35 cents. Sales grew by 2.9%, and same-store sales improved 2.1%.
Leighton said Loblaw’s product price inflation during the quarter was slightly lower than nationwide estimates of 9%, but provided a sharp contrast with the food price deflation it experienced in the same period a year ago. Those increases helped Loblaw drive sales gains despite “modest” increases in volume, officials said, with food, drug and apparel sales strong and general merchandise showing significant declines.
Gross profit as a percentage of sales was 24%, compared with 22.8% in the same period a year ago. This improvement also reflected price inflation as well as better cost management, including improved shrink, officials said.
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