Loblaw promises more actions after Bangladesh tragedy
REUTERS - Loblaw Cos Ltd (L.TO), Canada's largest food retailer, said it would soon announce more actions in the wake of the collapse of a building in Bangladesh where some of its "Joe Fresh" garments were manufactured.
More than 400 people died in the collapse of the illegally constructed building in Dhaka, which housed a number of apparel factories.
"I am deeply shaken by the event. Our hearts and prayers continue to go out to those who were injured, to all the families who have lost loved ones," Executive Chairman Galen Weston said on a conference call after the company reported strong quarterly results.
"We have taken action to address the situation including the announcement of a fund to provide relief to the victims of this tragedy. There is more we will do and we will make that public over the next few days."
He did not specify what further measures Loblaw would take.
The company said it had not seen any impact on sales of its "Joe Fresh" affordable casual clothing line after the building collapse. The brand, launched in 2006, is a key part of Loblaw's growth strategy.
Loblaw is majority-owned by George Weston Ltd (WN.TO), which is controlled by the Weston family.
The supermarket operator reported better-than-expected quarterly revenue on Wednesday despite growing competition and raised its dividend for the second time in six months, sending its shares to a five-and-half year high.
Loblaw, which also sells clothing, footwear and drugs, reiterated its outlook for 2013 despite the rapid Canadian expansion of U.S. discount retailer Target Corp (TGT.N).
Target opened its first three Canadian stores in March and plans to have more than 100 by the end of this year.
Canadian supermarket operators such as Loblaw, Metro Inc (MRU.TO) and Empire Co's (EMPa.TO) Sobeys have also come under pressure as Wal-Mart Stores Inc (WMT.N) expands its grocery business in Canada.
However, analysts said Target's entry has not really been able to stifle Loblaw's growth so far.
"Target's entry does not seem to be having an impact over the near term although, in our view, it is a little too early to tell, given that it only started opening stores in March," analyst Ken Perkins of Morningstar said.
Metro, Canada's No. 3 grocer, last week reported a quarterly profit that more than tripled, but warned of a challenging competitive environment.
Loblaw reported a 4 percent rise in revenue of C$7.20 billion, topping analysts' average expectation of C$7.00 billion, according to Thomson Reuters I/B/E/S.
"Probably the biggest takeaway was the surprise on the topline. It is probably the best topline we have seen close to five years," said Bobby Hagedorn, an equity analyst with Edward Jones. "I don't think anyone saw this coming."
Hagedorn said Target is a great competitor on the general merchandise side of the business, but from "what we see so far, their grocery offering appears to be pretty limited."
He said Target does not have a lot of fresh groceries and fresh produce.
Loblaw said on Wednesday it plans to complete the initial public offering of its real estate investment trust (REIT) in early to mid-July. It expects to file a preliminary prospectus for the REIT in late May.
Loblaw said in December it planned to contribute about 35 million square feet of property worth about C$7 billion to its proposed REIT, which will allow it to reinvest in its core business and boost shareholder value.
The company also raised its quarterly dividend by 9 percent to 24 Canadian cents per share, a move that surprised analysts.
Loblaw shares closed up 5 percent at C$44.75 on the Toronto Stock Exchange. They touched a high of C$45.06 earlier.
First-quarter profit rose 40 percent to C$171 million, or 60 Canadian cents per share. The latest results included a gain of 13 Canadian cents per share related to defined benefit plan amendments.
Sales at established locations, a key measure for retailers, rose 2.8 percent, driven by its core food and drug business. Retail sales grew 3.4 percent. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Saumyadeb Chakrabarty)
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