Loblaw Companies Limited · TSX:L
Loblaw Companies — Scotia Capital Back to School Conference 2007
38 slides from Loblaw Companies's conference presentation, Sep 18, 2007
Slide 1: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN BILL WELLS CFO, LOBLAW COMPANIES LIMITED Scotia Capital Back to School Conference SEPTEMBER 18, 2007
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation for Loblaw to a number of factors that could decreased costs associated with the Companies Limited and its cause actual results to vary announced initiatives, including those subsidiaries (collectively, the significantly from the estimates, related to com
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS The assumptions applied in making the Company’s assumptions Risks and Risk Management the forward-looking statements regarding average compensation section of the MD&A included in contained in this presentation costs and average years of the Company’s 2006 Annual include t
Slide 4: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 3
Slide 5: Loblaw Companies Limited Overview
LOBLAW COMPANIES LIMITED OVERVIEW Canada’s largest food distributor At the end of Q2 2007, 73% of corporate store square footage was owned2 Also, leading provider of: – General merchandise Offers one of Canada’s strongest control – Drugstore label programs, including: – Financial products &
Slide 6: Impetus for Change: Declining returns indicated a need for change
IMPETUS FOR CHANGE Declining returns indicated a need for change Return on Invested Capital1 % 12.5 11.7 11.1 9.2 7.4 2 '02 '03 '04 '05 '06 1 ROIC = [Operating Income*(1 - effective income tax rate)]/(total current assets – total current liabilities + fixed assets + goodwill) 2 Excludes $800 million
Slide 7: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 6
Slide 8: Mission
MAKING LOBLAW THE BEST AGAIN MISSION To be Canada’s best food, health and home retailer by exceeding customer expectation through innovative products at great prices. 7
Slide 9: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN We REACHING THE We are are here here DESTINATION: LOBLAW IS BEST AGAIN NEXT 2 YEARS: INNOVATE THROUGH THE FORMULA FOR GROWTH 1 NEXT 12 MONTHS: 7 2 SIMPLIFY ORGANIZATION 8 & FIX THE BASICS ▪ Drive innovation in 6 3 customer experience – 5 4 ranging both in food & FINANCIA
Slide 10: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 9
Slide 11: Progress to Date: Simplify the Organization
PROGRESS TO DATE: SIMPLIFY THE ORGANIZATION New roles & people in place; ~80% of 1,000 colleagues have exited business; period of maximum risk during ‘settle-in’ period EXECUTIVE CHAIRMAN DEPUTY CHAIRMAN CHIEF CHIEF PRESIDENT OPERATING FINANCIAL AND CHIEF MERCHANDISING OFFICER OFFICER OFFICER CENTRA
Slide 12: Progress to Date: Simplify the Organization
PROGRESS TO DATE: SIMPLIFY THE ORGANIZATION Centralization and standardization well underway Centralization of food merchandising and replenishment teams – Atlantic and Ontario finished – Quebec completing – West underway Reducing work through fundamental process re-design Effect of standardiz
Slide 13: Progress to Date: Fix the Basics
PROGRESS TO DATE: FIX THE BASICS Pricing and front-end improvements are in progress to enhance customer perceptions OBJECTIVES ACCOMPLISHMENTS TO DATE Significantly improve price perception 1. Defined target price position – Stronger shelf pricing (investing in 2. KVI lists KVI’s and KVC’s) 3. Nat
Slide 14: Progress to Date: Fix the Basics
PROGRESS TO DATE: FIX THE BASICS Programs designed to increase on-shelf availability and enhance freshness & reduce produce shrink started OBJECTIVES ACCOMPLISHMENTS TO DATE Significantly improve on-shelf availability 1. Tested at Weston Road Superstore through: – 7~15% improvement in in-stock – S
Slide 15: Progress to Date: Fix the Basics
PROGRESS TO DATE: FIX THE BASICS Continuing progress on improving storekeeping, supply chain, and IT First Learning Store opened May ‘07. Rolling out to have a store per market by end of ’07 Supply Chain 2010: new strategic plan completed and implementation is commencing IT strategy and roadma
Slide 16: Progress to Date: Innovate Through the Formula for Growth
PROGRESS TO DATE: INNOVATE THROUGH THE FORMULA FOR GROWTH Begun working on objectives for the next two years Excellent collaboration with Joe Mimran – Launched Joe Kids in August 2007 – successful first response – Extended into intimates – Expanding presence to 350 stores, from current 100 store p
Slide 17: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 16
Slide 18: Future Business Priorities
FUTURE BUSINESS PRIORITIES Continue progress on turnaround strategy – Innovation through the formula for growth Invest in value for customers to grow same-store sales growth Generate efficiencies in operations, supply chain and overhead to fund pricing investment Improve integrated supply ch
Slide 19: Future Business Priorities
FUTURE BUSINESS PRIORITIES 1 7 2 6 8 3 REACHING THE DESTINATION: LOBLAW IS BEST AGAIN 5 4 1. Best formats: truly distinctive formats meeting customers’ different needs 2. Fresh first: best fresh in Canadian grocery 3. Control label advantage: Heart of our innovation agenda and 35% of total sales 4.
Slide 20: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 19
Slide 21: Milton Store Update
MILTON STORE UPDATE Based on significant economic and consumer analysis of existing Superstore network Intended to address issues: – Department profitability (sales productivity, gross profit & inventory) – Value communication and simplified sign package – Shopability and flow – Category adjacen
Slide 22: Milton Store Update: Improved shopability and merchandising
MILTON STORE UPDATE Improved shopability, category adjacencies, merchandising, and GM traffic conversion Completely redesigned home assortment and Photo/electronics layout to improve moved to back wall ease of shop Stronger counters and fresh Improved flow merchandising from food into general mercha
Slide 23: Milton Store Update: Store Name & Exterior Signage
MILTON STORE UPDATE: STORE NAME & EXTERIOR SIGNAGE CURRENT Loblaw SS logo marriage of Loblaw umbrella and NEW Superstore name New tag line that states clearly what we’re about: Food Health Home Save Cleaned up the outside visually 22
Slide 24: Milton Store Update: Improved Shopability
MILTON STORE UPDATE: IMPROVED SHOPABILITY CURRENT NEW Redesigned shorter aisles with easy-to-find horizontal product signage Improved shopability and flow through intuitive category adjacencies * See Forward-Looking Statements 23
Slide 25: Milton Store Update: Clearer Value Signage
MILTON STORE UPDATE: CLEARER VALUE SIGNAGE CURRENT Clear, simple, consistent value signage – Amplified by monochromatic colour palette in rest of store Power aisle positioned in store to connect food to GM side of store NEW 24
Slide 26: Milton Store Update: Revitalized Home Offering
MILTON STORE UPDATE: REVITALIZED HOME OFFERING Focus on PC Home collection – 35% SKU reduction CURRENT – Improved presentation Seeking to improve sub-10% customer conversion rates to typical Superstore 20-30% 35% increase in sales per square foot 500 bp improvement in gross margin NEW * See
Slide 27: Milton Store Update: Expanded Baby & Beauty Offering
MILTON STORE UPDATE: EXPANDED BABY & BEAUTY OFFERING Baby: Build destination depth for target consumer CURRENT – Have doubled SKU count (mainly in hard lines) for competitiveness, with differentiated soft line (Joe) and feeding/nursing – Seeking 40% sales increase and 300 bp improvement in gross m
Slide 28: Milton Store Update: Checkout Enhancements
MILTON STORE UPDATE: CHECKOUT ENHANCEMENTS Checkout: Enhance front-end to increase speed and CURRENT decrease congestion – No food or GM at registers – Extended intake belt – 166% more space – Lead to 10% improvement in front-end efficiency Bagless: Canada’s 1st grocery bagless store – ‘Ambassad
Slide 29: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN 1 IMPETUS FOR CHANGE 2 MAKING LOBLAW THE BEST AGAIN 3 PROGRESS TO DATE 4 FUTURE BUSINESS PRIORITIES 5 MILTON STORE UPDATE 6 FINANCIAL PERFORMANCE 28
Slide 30: Financial Performance: Sales Growth
FINANCIAL PERFORMANCE: SALES GROWTH Total and same-store sales growth increased over prior year Legend: Total Same-store Q2 YTD Sales Growth Food CPI1 % growth over prior year 5.3 4.1 3.9 3.1 1.9 -0.4 2 2006 2007 1 Source: Statistics Canada – “The Consumer Price Index for Food Purchased from Stores”
Slide 31: Financial Performance: Operating Income
FINANCIAL PERFORMANCE: OPERATING INCOME 586 Q2 YTD ‘06 (Cdn$ million): Q2 YTD ‘07 (Cdn$ million): 352 Operating Income $586 Operating Income $352 Stock comp & equity forwards 12 Project Simplify 145 Supply Chain network 7 Store operations restructuring 16 Office move of ops support 1 2006 Inventory
Slide 32: Financial Performance: Cash Flow
FINANCIAL PERFORMANCE: CASH FLOW Free cash flow notably improved over last year due to working capital decreases and capital expenditure reduction Q2 YTD Free Cash Flow Cdn$ million 2006 2007 50 412 Free Cash Flow Improvement: Working capital decrease 286 Capital expenditure reduction 139 Dividend p
Slide 33: Snapshot - President's Choice Financial
SNAPSHOT - PRESIDENT’S CHOICE FINANCAL PC Financial has been experiencing steady growth – both in customers and assets under management Number of Customers Index 2002 = 100 133% % AG CCA GRR == 1 163 147 Insurance 140 123 Steady, strong growth 100 Banking in Mastercard, banking, and insurance cust
Slide 34: Making Loblaw the Best Again - Key Takeaways
MAKING LOBLAW THE BEST AGAIN – KEY TAKEAWAYS 1 We have a clear vision of what we need to do and how we will do it 2 We are working diligently to implement our plan; although now is the period of maximum risk 3 It will take time for us to fully turnaround Æ 3-5 years 4 We are doing what is right for
Slide 35: Making Loblaw the Best Again
MAKING LOBLAW THE BEST AGAIN Scotia Capital Back to School Conference SEPTEMBER 18, 2007
Slide 36: Appendix
APPENDIX 35
Slide 37: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The Company reports its financial Sales and Sales Growth Excluding interim period consolidated statements results in accordance with Canadian the Impact of Tobacco Sales and of earnings for the twelve and twenty- GAAP. However, the Company has VIEs These financial measure
Slide 38: Snapshot - Real Estate
SNAPSHOT - REAL ESTATE* Number of Retail Stores (Fran/Corp) Number of Stores (#) (#) 946 967 980 965 946 967 980 965 Hard Discount 307 332 346 346 552 568 578 564 Great Food 512 505 479 453 394 399 402 401 Superstore 127 130 155 166 '04 Q2 '05 Q2 '06 Q2 '07 Q2 '04 Q2 '05 Q2 '06 Q2 '07 Q2 Retail Squa
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