The Successful Investor Hotline – Friday, November 20, 2009

Article Excerpt

LOBLAW COMPANIES LTD., $32.52, Toronto symbol L, gained 7% this week after it reported better-than-expected earnings. However, the food retailer’s sales fell short of analysts’ predictions. Loblaw earned $0.69 a share in the three months ended October 10, 2009, up 21.1% from $0.57 a year earlier. That beat the $0.62 a share that analysts were expecting. Savings from Loblaw’s restructuring plan were behind the gain. The company’s restructuring included fixing its supply networks, improving productivity at its distribution centres and installing new inventory-information systems. Sales fell 0.2%, to $9.47 billion from $9.49 billion. That fell short of the $9.62 billion that analysts were expecting. Same-store sales fell 0.6%, mainly because strong competition from other supermarkets, as well as discount retailers such as Wal-Mart and Costco, is forcing Loblaw to cut its prices. However, the company should continue to benefit from its lower operating costs. Moreover, well-known private-label brands, such as President’s Choice and Joe Fresh, will help Loblaw maintain its market share. Loblaw…