Loblaw Reports 2024 Fourth Quarter Results and Fiscal Year Ended December 28, 2024 Results

"We are very pleased to deliver another year of consistent operational and financial performance, reflecting our continuous focus on execution of our strategies and retail excellence," said Per Bank, President and Chief Executive Officer, Loblaw Companies Limited. "We are providing unmatched value which is resonating with Canadians. I am thankful for the commitment and contributions of our colleagues across the organization."

2024 FOURTH QUARTER HIGHLIGHTS

• Revenue was $14,948 million, an increase of $417 million, or 2.9%.
• Retail segment sales were $14,579 million, an increase of $422 million, or 3.0%.
  • Food Retail (Loblaw) same-stores sales increased by 2.5%, compared to 2.0% last year. Food retail same-store sales growth was approximately 1.5% after excluding the favourable impact of the timing of Thanksgiving.
  • Drug Retail (Shoppers Drug Mart) same-store sales increased by 1.3%, compared to 4.6% last year, with pharmacy and healthcare services same-store sales growth of 6.3%, partially offset by a decline in front store same-store sales of 3.1%.
• E-commerce sales increased by 18.4%.
• Operating income was $852 million, a decrease of $91 million, or 9.7%.
• Adjusted EBITDA⁽²⁾ was $1,698 million, an increase of $65 million, or 4.0%.
• Retail segment gross profit percentage⁽²⁾ was 30.9%, a decrease of 20 basis points.
• Net earnings available to common shareholders of the Company were $462 million, a decrease of $79 million or 14.6%.
• Diluted net earnings per common share were $1.52, a decrease of $0.20, or 11.6%. The decrease was primarily driven by a non-cash PC Optimum loyalty program charge of $129 million ($94 million, net of income taxes). This non-recurring charge represents the revaluation of the loyalty liability for outstanding points, reflecting higher PC Optimum member participation and higher redemption rates.
• Adjusted net earnings available to common shareholders of the Company⁽²⁾ were $669 million, an increase of $39 million, or 6.2%.
• Adjusted diluted net earnings per common share⁽²⁾ were $2.20, an increase of $0.20 or 10.0%.
• Net capital investments were $585 million, which reflects gross capital investments of $628 million, net of proceeds from property disposals of $43 million.
• Repurchased for cancellation 1.95 million common shares at a cost of $352 million. Free cash flow⁽²⁾ from the Retail segment was $828 million.

2024 SELECT ANNUAL HIGHLIGHTS

• Revenue was $61,014 million, an increase of $1,485 million, or 2.5%.
• Food Retail same-store sales increased by 1.5% and Drug Retail same-store sales increased by 2.4%.
• E-commerce sales were approximately $3.9 billion, an increase of 16.9%.
• Net earnings available to common shareholders of the Company were $2,155 million, an increase of $67 million or 3.2%.
• Diluted net earnings per common share were $6.99, an increase of $0.47, or 7.2%.
• Adjusted net earnings available to common shareholders of the Company⁽²⁾ were $2,637 million, an increase of $157 million, or 6.3%.
• Adjusted diluted net earnings per common share⁽²⁾ were $8.55, an increase of $0.80, or 10.3%.
• Net capital investments were $1,837 million, which reflects gross capital investments of $2,200 million, net of proceeds from property disposals of $363 million.
• Repurchased for cancellation, 11.0 million common shares at a cost of $1,754 million. Free cash flow⁽²⁾ from the Retail segment was $1,506 million.

CONSOLIDATED AND SEGMENT RESULTS OF OPERATIONS

The following table provides key performance metrics for the Company by segment.

The following table provides a breakdown of the Company's total and same-store sales for the Retail segment.

RETAIL SEGMENT

• Retail segment sales in the fourth quarter of 2024 were $14,579 million, an increase of $422 million, or 3.0%.
  • Food Retail (Loblaw) sales were $10,138 million and same-store sales grew by 2.5% (2023 – 2.0%). Food retail same-store sales growth was approximately 1.5% after excluding the favourable impact of the timing of Thanksgiving.
    • The Consumer Price Index as measured by The Consumer Price Index for Food Purchased From Stores was 2.4% (2023 – 4.9%) which was higher than the Company's internal food inflation; and
    • Food Retail traffic increased and basket size increased.
  • Drug Retail (Shoppers Drug Mart) sales were $4,441 million, and same-store sales grew by 1.3% (2023 – 4.6%), with pharmacy and healthcare services same-store sales growth of 6.3% (2023 – 8.0%), partially offset by a decline in front store same-store sales of 3.1% (2023 – growth of 1.7%).
    • On a same-store basis, the number of prescriptions increased by 1.7% (2023 – 3.4%) and the average prescription value increased by 4.0% (2023 – 3.4%);
    • The decline in front store same-store sales was primarily driven by the decision to exit certain low margin electronics categories, the impact of the closure of postal services during the Canada Post strike, and lower sales of food and household items, partially offset by the continued strength in beauty products.
• Operating income in the fourth quarter of 2024 was $777 million, a decrease of $66 million, or 7.8%. The decrease included the PC Optimum loyalty program charge of $99 million (see "Other Business Matters" below).
• Gross profit⁽²⁾ in the fourth quarter of 2024 was $4,505 million, an increase of $96 million, or 2.2%. The gross profit percentage⁽²⁾ of 30.9% decreased by 20 basis points, primarily driven by changes in sales mix, including the impact of the closure of postal services during the Canada Post strike and the Thanksgiving shift, partially offset by improvements in shrink.
• Adjusted EBITDA⁽²⁾ in the fourth quarter of 2024 was $1,579 million, an increase of $47 million, or 3.1%. The increase was driven by an increase in gross profit⁽²⁾, partially offset by an increase in selling, general and administrative expenses ("SG&A"). SG&A as a percentage of sales was 20.1%, a favourable decrease of 20 basis points, primarily due to the year-over-year impact of labour costs including expenses related to the ratification of union labour agreements in the prior year, and operating leverage from higher sales, partially offset by the year-over-year impact of certain real estate activities.
• Depreciation and amortization in the fourth quarter of 2024 was $680 million, an increase of $14 million or 2.1%, primarily driven by an increase in leased assets and an increase in depreciation of fixed assets related to conversions of retail locations, partially offset by the impact of prior year accelerated depreciation as a result of network optimization. Included in depreciation and amortization was the amortization of intangible assets related to the acquisitions of Shoppers Drug Mart Corporation ("Shoppers Drug Mart") and Lifemark Health Group ("Lifemark") of $115 million (2023 – $115 million).

FINANCIAL SERVICES SEGMENT

• Revenue in the fourth quarter of 2024 was $476 million, a decrease of $11 million or 2.3%. The decrease was primarily driven by lower sales attributable to The Mobile Shop™.
• Earnings before income taxes in the fourth quarter of 2024 were $38 million, a decrease of $23 million. The decrease was primarily driven by lapping of prior year benefits associated with the renewal of a long-term agreement with Mastercard, and a PC Optimum loyalty program charge of $30 million (see "Other Business Matters" below). This decrease was partially offset by the year-over-year favourable impact of the expected credit loss provision.

OTHER BUSINESS MATTERS

PC Optimum loyalty program In the fourth quarter of 2024, the Company recorded a charge of $129 million, of which $99 million was recorded in the Retail segment and $30 million was recorded in the Financial Services segment. This charge represents the revaluation of the loyalty liability for outstanding points, reflecting higher PC Optimum member participation and higher redemption rates.

Sale of Wellwise In the fourth quarter of 2024, the Company entered into an agreement with a third party to sell all of the shares of its Wellwise by Shoppers™ ("Wellwise") business for cash proceeds. Accordingly, the Company recorded a net fair value write-down of $23 million in the Retail segment in SG&A. The transaction is expected to close in the first quarter of 2025.

STRATEGIC UPDATE AND OUTLOOK⁽³⁾

Strategic Update Loblaw's portfolio of businesses remains strong and well-positioned as economic pressures continue to drive consumers to its banners, in search for value, quality, service and convenience. The Company's best in class assets continue to meet customers' everyday needs for food, health and wellness – supporting Loblaw's purpose: helping Canadians Live Life Well. The Company will continue to focus on three strategic pillars in 2025: delivering retail excellence; driving growth; and investing for the future.

Retail Excellence Loblaw creates value through disciplined execution of core retail operations and by leveraging its scale and strategic assets. This retail excellence is underpinned by process and efficiency initiatives and helps grow sales, optimize gross margins, and reduce operating costs. The Company remains focused on strategic procurement opportunities to deliver reliability, improve product selection and drive economies of scale across its grocery and pharmacy network. Leveraging its customer loyalty program and more than one billion customer transactions across food, pharmacy, apparel, and financial services, Loblaw will increase its promotional effectiveness while delivering personalized value and unmatched service to Canadians. The Company will continue to invest in and refine its retail network to better meet customer needs and improve its overall profitability. This includes an increased focus on its Hard Discount business, where Loblaw has a unique opportunity to bring its NoFrills and Maxi stores to more communities and neighbourhoods across Canada. Management's clear commitment to food and drug retail excellence, together with a sense of urgency, is focused on delivering consistent strong operational and financial performance.

Driving Growth Loblaw continues to invest in targeted growth areas to further evolve and differentiate its portfolio of assets and generate competitive advantage. A differentiator and area of focus is Loblaw's ability to digitally engage customers with a suite of proprietary assets – Loblaw Digital (including PC Express™), Loblaw Advance™, and PC Optimum, Canada's strongest loyalty program. The Company will focus on enhancing these platforms across each of its businesses, improving the customer experience and functionality. In particular, the Company's PC Optimum loyalty program continues to evolve, with more meaningful personalized offers, and more effective promotions, all toward strengthening the loyalty loop and increasing the share of customer wallet. The Company is also evolving and tailoring its store network to better serve customers. In 2024, the Company converted 38 stores to Hard Discount banners, opened 52 new food and drug retail locations, and added 78 new pharmacy care clinics across Canada, driving sales growth across its divisions.

Investing For The Future Loblaw will continue to make capital investments towards the modernization and automation of its supply chain and the expansion of its retail network. These investments will be partially funded by proceeds from real estate dispositions. Loblaw will continue to invest in its Connected Healthcare strategy with the goal of growing its healthcare ecosystem by connecting patients and providers through an unmatched network of pharmacies, healthcare professionals and technology solutions. Pharmacies will play an increasing role in the delivery of healthcare services to Canadians through expanded scope of practice changes and the expansion of pharmacist care clinics. In 2025, Loblaw plans to further invest in its network by opening approximately 80 new food and drug stores, and 100 new pharmacist care clinics. In January 2025, the Company began migrating operations to its 1.2 million square foot, multi-temperature, fully automated distribution centre in East Gwillimbury, Ontario. The Company will begin construction of a similar fully automated facility in Caledon, Ontario in 2025. Together these investments reflect the Company's continued drive to advance its supply chain to better serve customers and meet their evolving needs.

Outlook⁽³⁾ Loblaw will remain focused on retail excellence while advancing its growth initiatives with the goal of delivering consistent operational and financial results in 2025. The Company's businesses remain well positioned to meet the everyday needs of Canadians.

In 2025, the Company's results will include the impact of a 53^rd week, which is expected to benefit adjusted net earnings per common share⁽²⁾ growth by approximately 2%. On a full-year comparative basis, excluding the impact of the 53^rd week, the Company expects:

• its Retail business to grow earnings faster than sales;
• adjusted net earnings per common share⁽²⁾ growth in the high single-digits;
• to continue investing in our store network and distribution centres by investing a net amount of $1.9 billion in capital expenditures, which reflects gross capital investments of approximately $2.2 billion, net of approximately $300 million of proceeds from property disposals; and
• to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")

In 2024, the Company continued to progress its ESG priority pillars:

Fighting Climate Change: The Company advanced its carbon reduction plan and completed more than 500 carbon reduction projects and achieved a 16% reduction on scope 1 and 2 emissions (compared to a 2020 baseline).

The Company also continued to make progress in its efforts to address plastic and food waste. The Company achieved more than 90% compliance of its control brand and in-store plastic packaging to the in-scope Consumer Goods Forum's Golden Design Rules⁽⁴⁾ (a set of internationally accepted rules to improve plastic packaging design and reduce plastic waste) and diverted more than 82,500 metric tonnes of food waste from landfill which includes more than 17,500 metric tonnes of food to food charities.

Advancing Social Equity: The Company is proud of its ongoing commitment and achievements in advancing social equity, and reflecting the community that it serves. In 2024, donations (including donations in kind) of more than $212 million were made to charitable programs nationwide. This includes supporting the President's Choice Children's Charity ("PCCC") target to reach more than 997,000 students nationwide this school year (2024/2025), to support PCCC's mission of feeding one million children annually by the end of 2025. The Shoppers Foundation for Women's Health™ contributed more than $12 million in 2024 to support initiatives that improve women's access to care. From coast-to-coast, the Company trained 198,000 colleagues on fundamental Diversity, Equity, and Inclusion ("DEI") topics cumulatively between 2020 and 2024.

Governance: In 2024, Loblaw completed a Human Rights Impact Assessment related to the production of Broccoli and Cauliflower in Mexico, the United States, and Canada; geographies from which the Company sources such produce, and the results of the report have been published online.

To demonstrate Loblaw's commitment to future alignment with the International Sustainability Standards Board ("ISSB") and to provide more timely and relevant information to stakeholders, the Company has provided an early release of priority 2024 ESG disclosures.

NORMAL COURSE ISSUER BID PROGRAM ("NCIB")

On a full-year basis, the Company repurchased 11.0 million common shares for cancellation at a cost of $1,754 million.

From time to time, the Company participates in an automatic share purchase plan ("ASPP") with a broker in order to facilitate the repurchase of the Company's common shares under its NCIB. During the effective period of the ASPP, the Company's broker may purchase common shares at times when the Company would not be active in the market. 

FORWARD-LOOKING STATEMENTS

This News Release contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this News Release include, but are not limited to, statements with respect to the Company's anticipated future results, events and plans, strategic initiatives and restructuring, regulatory changes including further healthcare reform, future liquidity, planned capital investments, and the status and impact of information technology systems implementations. These specific forward-looking statements are contained throughout this News Release including, without limitation, in the "Consolidated and Segment Results of Operations" and "Strategic Update and Outlook" section of this News Release. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may", "should" and similar expressions, as they relate to the Company and its management.

Forward-looking statements reflect the Company's estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The Company's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions will prove to be correct.

Numerous risks and uncertainties could cause the Company's actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including those described in the Company's Management Discussion & Analysis ("MD&A") in the 2024 Annual Report, and the Company's Annual Information Form ("AIF") for the year ended December 28, 2024.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this News Release. Except as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

DECLARATION OF DIVIDENDS

Subsequent to the end of the fourth quarter of 2024, the Board of Directors declared a quarterly dividend on Common Shares.

Common Shares    $0.513 per common share, payable on April 1, 2025 to shareholders of record on March 15, 2025.

EXCERPT OF NON-GAAP AND OTHER FINANCIAL MEASURES

The Company uses non-GAAP and other financial measures, as reconciled and fully described in Appendix 1 "Non-GAAP and Other Financial Measures" of this News Release.

These measures do not have a standardized meaning prescribed by International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "GAAP"), and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with GAAP.

The following table provides a summary of the differences between the Company's consolidated GAAP and Non-GAAP and other financial measures, which are reconciled and fully described in Appendix 1.

The following table provides a summary of the Company's adjusting items which are reconciled and fully described in Appendix 1.

SELECTED FINANCIAL INFORMATION

The following includes selected quarterly and annual financial information, which is derived from the Company's annual consolidated financial statements for the year ended December 28, 2024 that were prepared in accordance with IFRS Accounting Standards. This financial information does not contain all disclosures required by IFRS Accounting Standards, and accordingly, should be read in conjunction with the Company's 2024 Annual Report, which is available in the Investors section of the Company's website at loblaw.ca and on sedarplus.ca.

Consolidated Statements of Earnings

Consolidated Balance Sheets

Consolidated Statements of Cash Flows