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6 two thirds of loblaw sales are from ontario and the

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Unformatted text preview: s are from Ontario and the Atlantic Provinces (the four eastern-most provinces) with strong growth in all regions. Loblaw’s 1997 Annual Report was bullish on the company’s accomplishments and future prospects: Loblaw Companies strives to provide superior returns to its shareholders through a combination of share price appreciation and dividends. To this end, it follows certain fundamental operating principles. It concentrates on food retailing, with the objective of providing consumers with the best in one-stop shopping for everyday household needs. It maintains a significant program of reinvestment in and expansion of its existing markets. It is highly selective in acquisitions and continues to invest in products and technology. Loblaw seeks long term, stable growth, taking managed operating risks from a strong balance sheet position… …The year 1997 was an outstanding one for Loblaw Companies by any measure. Sales were up 12% from 1996, at $11.01 billion, with operating income of $426 million, net earnings of $213 million and earnings per share of $.88 all setting new highs. Earnings per share have tripled ($.88 from $.29) in the last five years. Sales throughout the Canadian business are now increasing rapidly, at the rate of about $1 billion in 1997, following a $.7 billion growth in 1996, as stores in existing markets are enlarged and modernised and as we enter new markets. This growth follows a six year period (1990-1995) of flat sales in the West of approximately $2.9 billion per year, during which time, store and customer rationalizations in wholesale operations were completed. In fact, sales is the “big story” in Loblaw Companies today. In a total market (food sold through stores of any type) that is growing about 3 percent a year, our Canadian sales have grown by 20 percent in the last 2 years (26 percent in the West and 17 percent in the East). We expect sales to at least match these growth rates in 1998 and 1999… While the market value of Loblaw Companies has increased by over 150 times [over the last 20+ years], we think its best days are still ahead. Annual Report 1997 Industry analysts echoed these sentiments. One analyst regarded Loblaw’s position as “increasingly unassailable,” while the Canadian Business Service rated Loblaw “a buy for longterm growth.”7 5 Subsequent to the events reported in this case, Loblaw acquired Provigo, which has a major presence in Quebec. First Marathon Securities Ltd. Loblaw Companies – Company Report, July 22, 1997. 7 First Marathon Securities Ltd. Loblaw Companies – Company Report, July 22, 1997. 6 4 n KPMG/University of Illinois Business Measurement Case Development and Research Program July 1999o Recent financial performance of Loblaw Companies Ltd. is summarized in Table 2. Table 2 Financial Performance of Leading Canadian Grocery Chains Net Earnings/ Equity Net Earnings/ Assets Loblaw Companies Ltd. 1.9¢ 14.2 5.3 0.87 5.21 Oshawa Group 0.9¢ 6.7 3.7 0.17 2.37 Provigo Inc. 1...
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