Company Overview

Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's largest food retailer and a leading provider of drugstore, general merchandise and financial products and services. Loblaw is one of the largest private sector employers in Canada. With more than 1,000 corporate and franchised stores from coast to coast, Loblaw and its franchisees employ more than 136,000 full-time and part-time employees. Through its portfolio of store formats, Loblaw is committed to providing Canadians with a wide, growing and successful range of products and services to meet the everyday household demands of Canadian consumers. Loblaw is known for the quality, innovation and value of its food offering. It offers Canada's strongest control (private) label program, including the unique President's Choice® no name® and Joe Fresh® brands.
The company operates its owned stores under the Atlantic Superstore, Dominion, Extra Foods, Superstore, Loblaws, Loblaw Great Food, Maxi, Maxi et Cie, Provigo, The Real Canadian Superstore, T&T Supermarket, and Zehrs banners; wholesale outlets under the Cash & Carry, Presto, and The Real Canadian Wholesale Club; and franchised and affiliated stores under the Atlantic SaveEasy, Fortinos, Extra Foods, nofrills, SuperValu, Valu-mart, Provigo, and Your Independent Grocer trade names.
In addition, the Company makes available to consumers President's Choice financial services and offers the PC points loyalty program.
Over 13 million Canadians shop at Loblaws stores each week. The grocery chain has a 40% market share in Canada (November 2010 interview with Galen Weston, Lang & O'Leary Exchange, CBC). In 2010 Loblaws accounted for 31% of Canadian food sales

Consolidated Statement of Earnings

Consolidated Balance Sheet

Financial Ratio Analysis

Analysis on Financial Ratios

PROFITABILITY RATIO
Profit Margin: Loblaw is since 2006 has been improving profit margin from -0.76 in 2006 and positive increasing trend from 2007 to 2010. Loblaw competitors, Sobeys and Metro for 2010 profit margins are, 1.94 and 3.46, respectively. Compared to Loblaw 2.20 for 2010. Food retail can run satisfactory around 3%. As such, retailers generally have a lower profit margin than most industries.
Return on Assets: Loblaw reveals 4.28% for 2010 and has been somewhat stable for the past three years. Loblaw competitors, Sobeys and Metro for 2010 are 4.80% and 8.10%, respectively. Loblaw is within the average for retail industry which is normal of 2% to 8% being average.
Return on Equity: Loblaw 2010 at 9.90% from 2009 of 10.46%. Sobeys and Metro for 2010 was 10.78% and 16.0%, respectively.

ASSET UTILIZATION
Receivable Turnover: Noted that calculation of this ratio implied that Sales where all on credit, and hence the outcome of 42.81 for Loblaw. The same calculation was performed for Sobeys and Metro 46.1 and 36, respectively.
Average Collection Period: It is noted that this ratio implied that Sales where all on credit, and hence the outcome of 8.53 for 2010 for Loblaw. The same calculation was performed for Sobeys and Metro of 7.9 and 10.13, respectively. This number suggests that collection on credit is approximately less than 11 days in this industry.
Inventory Turnover: Loblaw reveals 11.07 in 2010 and 11.15 in 2009, fairly similar steady numbers. Ratios for Sobeys and Metro were 16.7 and 15.16, respectively for 2010.
Inventory Holding Period: Loblaw revealed for 2010 was 32.97 and for 2009 was 32.74. Competitors Sobeys and Metro for 2010 was 21.8 and 24, respectively. This reveals that Loblaw is behind in getting inventory out of its stores quicker that its peers.
Accounts Payable Turnover: Loblaw reveals for 2010, 6.85 and for 2009, 7.18. Sobeys and Metro for 2010 was 9.06 and 9.87, respectively.
Accounts Payable Period: Loblaw trend is an increase in the number of days to pay its suppliers from approximately 35 days in 2006 to approximately 53 days in 2010. Sobeys and Metro for 2010 was approximately 40 and 37 days, respectively.
Capital Asset Turnover: Loblaw is reasonably stable at 3.40 for 2010 and this ratio fluctuated between 3.40 to 3.83 for the years between 2006 to 2010. Sobeys and Metro for 2010 was 6.09 and 8.60, respectively.
Total Asset Turnover: Loblaw reports for 2010 of 1.95. Sobeys and Metro for 2010 was 2.48 and 2.35, respectively.

LIQUIDITY
Current Ratio: Loblaw seems to have a stable trend of 1.20. Sobeys and Metro for 2010 was 0.85 and 1.09, respectively.
Quick Ratio: Loblaw for 2010 was 0.65 and for 2009 was 0.63. Sobeys and Metro for 2010 was 0.43 and 0.48, respectively.
DEBT UTILIZATION RATIO
Debt to Total Assets: Loblaw for trends are stable 0.57, minimal fluctuation between the years 2006 to 2010 from 0.57 to 0.59. Sobeys and Metro for the year 2010 was 0.53 and 0.49, respectively.
Times Interest Earned: Loblaw from 2006 to 2010 has been increasing from 1.12 to 4.65. Sobeys and Metro for 2010 year was 6.60 and 3.91, respectively.
Fixed Charge Coverage: Loblaw reports for 2010 3.02 and for 2009 2.91.

Conclusion

On outlook as a Shareholder’s point of view, Loblaw reveals a stable trend. As noted on 2007 Annual Report, Making Loblaw the Best Again, financial numbers are showing a continuous stable and a hopeful upward trend. Current financial statements reveal the focus on implementing new system, expansion on Private Label, Loyalty program and Strengthen Brand.
The implementing of SAP and possible outsourcing will cut costs. The benefits in the future will be noticed. “We have a solid base to build from,” new president Vincente Trius said of the company’s multi-year strategy to improve its supply chain and systems management, part of a $1-billion capital expenditure this year.
Loblaw said spending on the overhaul will hit a high mark in 2012 and weigh down future operating income. All merchandising categories have been converted over to SAP and the next year is about integrating merchandising systems with the supply chain, he said. The new systems should be up and running in all stores by 2014.
The launch of President’s Choice Black Label is the new higher-end tier. This product reaches out to the reaches after the country’s gourmet palates and ethnic offerings. Loblaw Private Labels are well established and a brand within itself. In addition, Joe Fresh is expanding in the USA and the company is estimating 500 to 800 new stores, thus expanding market.
Loblaw has it’s PC points loyalty program. In addition, PC Financial Services that offer core banking, a popular Mastercard, PC Financial Auto, home, travel and pet insurance and PC mobile phone service. The Toronto Star reported November 24, 2011 that Loblaw profits increase partly resulting from financial services revenue.
Increase Brand awareness and Brand message is revealed in current Loblaw commercials and current Food Network program, “Recipes to Riches” with Mr. Galen Weston Jr. himself. The commercials puts a face to the Brand and the TV program engages Canadians and communities.
Based to the financial results and the key focuses stated above, Loblaw mission statement of Making Loblaw the Best Again, it revealed in the financial statements