Loblaw Companies Limited · TSX:L
Loblaw Companies — Investor Day (February 2012)
55 slides from Loblaw Companies's investor day presentation, Feb 28, 2012
Slide 1: Loblaw Investor Day
Loblaw Investor Day February 28, 2012 1
Slide 2: Forward looking statements
Forward looking statements This Investor Day presentation for Loblaw Companies Limited contains forward-looking • changes in economic conditions including the rate of inflation or deflation, changes in statements about the Company’s objectives, plans, goals, aspirations, strategies, interest and cur
Slide 3: Loblaw Investor Day
Loblaw Investor Day February 28, 2012 3
Slide 4: Vicente Trius, President
Vicente Trius President 4
Slide 5: Today's agenda
Today’s agenda My first six months A look at the last five years and where we are today Opportunities and the way forward Financial overview and outlook 5
Slide 6: It is a challenging environment
It is a challenging environment Unemployment Household Debt 8.5% 1.65 1.60 Trillion CAD 8.0% 1.55 1.50 7.5% 1.45 Source: Labour force survey, Statistics Canada Source: Household debt, National balance sheet, Statistics Canada 7.0% 1.40 J FMAM J J A SOND J FMAM J J A SOND Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 20
Slide 7: Consumer is changing
Consumer is changing loblaw.ca | 7—_
Slide 8: Healthy competitive environment – Good for consumers
Healthy competitive environment – Good for consumers 8
Slide 9: What I've heard so far
What I’ve heard so far Customers Colleagues Vendors Shareholders Positives Opportunities Brands Long-term Consistency Growth Pride Locations Execution 9
Slide 10: Strong brands are strategic differentiators driving loyalty into our stores
Strong brands are strategic differentiators driving loyalty into our stores 10
Slide 11: Brand strength extends beyond food - Joe a resounding success
Brand strength extends beyond food - Joe a resounding success 11
Slide 12: Store renewal delivering an enhanced experience
Store renewal delivering an enhanced experience 237 major renovations – representing 34% of total sales Portfolio performance exceeding hurdle rate Atlantic Superstore RCSS Zehrs 12
Slide 13: A world class supply chain
A world class supply chain • Warehouse and transport management systems implemented • Closed 11, opened 8 new strategically located distribution centers • Service levels improved by 360 bps 13
Slide 14: Key initiatives are driving meaningful operational improvements
Key initiatives are driving meaningful operational improvements Labour agreements Flexibility driving competitive edge 75 -100bps rate reduction 3 - 5 year payback Improved productivity 34bps YOY Best-in-industry availability 98.8% 14
Slide 15: Bench strength committed to building for the future
Bench strength committed to building for the future Vicente Trius President Peter Sarah Davis Grant Froese Mark Butler McMahon EVP, Hard Chief Financial EVP, Conventional EVP, Chief Discount and Officer Division Operating Officer Superstore Peter Garry Senecal Judy McCrie Robert Chant Barry Columb M
Slide 16: Last five years has delivered strong financial performance
Last five years has delivered strong financial performance Sales growth 4 YR CAGR*: 1.6% Gross margin improvement: 170 bps EBITDA growth 4 YR CAGR*: 12.5% Cash position: increased $1.0 billion * 5 Year range 2007 – 2011: 4 Year Compounded Annual Growth Return 16
Slide 17: 2011 saw a renewed focus on top-line – The shape of things to come
2011 saw a renewed focus on top-line – The shape of things to come Gross Margin Selling, General & Sales Growth Admin. Expenses 25% 25% 3.5% 22.9% 21.7% 18.4% 2.5% 17.5% 0% 0% 0% -0.5% -0.2% 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 2011 2011 2011 Retail metrics 17
Slide 18: The way forward
The way forward Consistent Growth Expense Leverage Strong Shareholder Value 18
Slide 19: Our strategy
Our strategy Mission: To be Canada’s best food, health, and home retailer by exceeding customer expectations through innovative products at great prices Customer Centric Strong Brands Best in Food Relentless Drive Growth with Consistent Efficiency Competitive Engines Execution Advantage Colleagues I
Slide 20: Best in food with consistent execution
Best in food with consistent execution Loblaw’s at Maple Leaf Gardens® No Frills Lead in innovation – Loblaw’s at Maple Leaf Gardens® 20
Slide 21: Localizing assortment to our customers
Localizing assortment to our customers 21
Slide 22: Building loyalty with the power of our control brands
Building loyalty with the power of our control brands 22
Slide 23: Truly delivering a world of international foods
Truly delivering a world of international foods 23
Slide 24: Catering to our customers' health-conscious choices
Catering to our customers’ health-conscious choices 24
Slide 25: Sustainable and competitive pricing
Sustainable and competitive pricing 25
Slide 26: Welcoming stores with an exceptional experience
Welcoming stores with an exceptional experience “It tarts with Me” “It’s My Store” 26
Slide 27: Resources where it matters
Resources where it matters 27
Slide 28: Flow end-to-end
Flow end-to-end B a C) loblaw.ca | 28 ——
Slide 29: SAP so far – Important groundwork laid
SAP so far – Important groundwork laid Completed Master data, “The Loblaw SAP Categories pricing and listing 2011 retail solution is the Ready for largest deployment PC Financial systems 2010 integration of this solution in the industry and Loblaw Ready for systems 2010 Properties integration unp
Slide 30: SAP done
SAP done 2012 Merchandising Supply Chain Store Pilot 2013 2014 Store Roll Out 30
Slide 31: Leverage non-food brands – Drive excitement and differentiation
Leverage non-food brands – Drive excitement and differentiation 31
Slide 32: Element of surprise at attractive price points – Home & Beauty
Element of surprise at attractive price points – Home & Beauty 32
Slide 33: Driving organic growth – Net new: 500,000 square feet
Driving organic growth – Net new: 500,000 square feet Queen & Portland Small No Frills 33
Slide 34: Continuing to invest in new growth opportunities
Continuing to invest in new growth opportunities Connecting with our Grow Continued Growth in Customers PC Financial Joe 34
Slide 35: Do what's right for our customers – financial results will follow
Do what’s right for our customers – financial results will follow Best in food Leverage our strong brands Excellence in execution Relentlessly leverage expenses Comp sales growth equal to or better than the market Sustainable earnings growth with EBITDA > 7% Generate positive free cash
Slide 36: Sarah Davis, Chief Financial Officer
Sarah Davis Chief Financial Officer 36
Slide 37: Our financials
Our financials The last five years What to expect in 2012 2013 and beyond 37
Slide 38: Sales growth has been positive but has been inconsistent
Sales growth has been positive but has been inconsistent Published Revenue CGAAP IFRS 30.8 30.7 31.0 29.4 31.3 Billions $ 30.8 2007 2008 2009 2010 2011 Same Store Sales Growth 2.4% 2.3% Percent 0.9% 0.7% -0.6% 2007 2008* 2009* 2010 2011 38 * Adjusted for the 53rd selling week in 2008
Slide 39: STM footage growth has not kept pace with the market
STM footage growth has not kept pace with the market Supermarket type merchandise footage change between 2007 and 2011 50 120 100 T&T = 0.8 98.7 STM Footage (MM sq ft) STM Footage (MM sq ft) 40 90.4 40.0 80 39.1 60 30 40 20 20 2007 2011 2007 2011 LCL Rest of Industry •LCL footage includes affiliates
Slide 40: Capital investment balanced between retail and systems
Capital investment balanced between retail and systems Capital Investment Retail 1,190 Infrastructure 1,067 987 46% Millions $ 750 53% 51% 613 26% 46% 54% 47% 49% 74% 54% 2007 2008 2009 2010 2011 CGAAP IFRS 40
Slide 41: Gross profit has grown consistently with significant improvement in margins
Gross profit has grown consistently with significant improvement in margins Consolidated Gross Profit CGAAP IFRS 24.5% 23.7% 23.5% 23.4% 22.6% 22.4% 7,604 Millions $ 7,356 7,302 7,196 6,911 6,631 2007 2008 2009 2010 2011 41
Slide 42: Driven by profitability improvements in control brands
Driven by profitability improvements in control brands Control Brand Control Brand Margin Gap vs. Sales Penetration National Brand 8.3 27% 8.3 8.3 Billions $ Percent Points 6.6 24% 2.6 2.6 2007 2011 2007 2011 2007 2011 42
Slide 43: Profitability improvements in general merchandise and apparel
Profitability improvements in general merchandise and apparel Apparel Sales Apparel Contribution Millions $ Percent 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 GM Sales x-Apparel GM x-Apparel Contribution Millions $ Percent 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 43
Slide 44: Heavy spending in IT and supply chain project costs
Heavy spending in IT and supply chain project costs IT Expense Supply Chain Project Cost Depreciation & 1.5% Depreciation & 0.35% 0.33% Amortization Expense 1.26% Amortization Expense Cash Expense Cash Expense 0.32% % Revenue % Revenue 0.98% 32% 44% % of Revenue % of Revenue 37% $ Millions $ Million
Slide 45: Gross profit expansion covered incremental spending and contributed to EBITDA growth
Gross profit expansion covered incremental spending and contributed to EBITDA growth EBITDA 6.7% CGAAP 6.4% 6.2% IFRS 5.8% 2,083 1,975 5.2% 1,924 Millions $ 4.4% 1,794 1,602 1,300 2007 2008 2009 2010 2011 45
Slide 46: And similarly EBIT growth
And similarly EBIT growth EBIT 4.4% CGAAP 4.4% IFRS 4.1% 3.9% 1,384 1,347 3.4% 1,269 Millions $ 1,205 2.5% 1,052 744 2007 2008 2009 2010 2011 46
Slide 47: Growing cash position while reducing debt – a strong balance sheet
Growing cash position while reducing debt – a strong balance sheet Cash and Short Term Investments Adjusted Net Debt CGAAP 1,720 CGAAP IFRS 1,667 IFRS 1,611 3,569 Millions $ 1,390 Millions $ 3,293 2,912 2,783 2,642 2,513 753 655 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 47
Slide 48: Driven by improved working capital with more efficient assets and management of liabilities
Driven by improved working capital with more efficient assets and management of liabilities Inventory vs. AP & Accrued Liabilities 3,677 3,522 3,279 3,416 2,860 2,823 1,652 $ Millions 828 2,114 2,188 2,112 2,032 1,956 2,025 Inventory Inventory (IFRS) AP & Accrued Liabilities AP & Accrued Liabilities
Slide 49: Loblaw total return – outperforming indices but underperforming peers
Loblaw total return – outperforming both S&P/TSX Composite and S&P/TSX Consumer Staples, but underperforming compared to peers $100 Invested on Dec. 28, 2007 Loblaw S&P/TSX Capped Consumer Staples Index S&P/TSX Composite Index 140 $127 $124 120 $113 $112 $106 $105 $108 $109 $100 $99 100 $97 $92 $92
Slide 50: What to expect in 2012
What to expect in 2012 Capex of $1.1 billion 60% Retail 40% IT and supply chain Net new square footage: 500,000 Labour agreement cost: $30 - $40 million Information technology: $90 million to 1.5% of revenue Supply chain project cost: $20 million to 0.3% of revenue Investment i
Slide 51: Looking Forward
Looking Forward Net Sq Footage Growth 500,000 per year Capex $1.1B $850 -900M IT Expenses (% of Revenue) 1.5% 1.2% SC Project Costs (% of Revenue) 0.3% 0.0% Labour productivity Supply Chain improvements Shrink improvements Pricing and promo effectiveness Benefits Inventory reductions Better expense
Slide 52: Well Positioned for the Future
Well Positioned for the Future Strong EBITDA margin Solid balance sheet Cash generation Great asset portfolio 2012 is a pivotal year Setting the stage for 2013 and beyond Positive SSS IT/SC costs decrease Capital expenditures will start to decline Benefits start to materialize in
Slide 53: Vicente Trius, President
Vicente Trius President 53
Slide 54: Do what's right for our customers – financial results will follow
Do what’s right for our customers – financial results will follow Best in food Leverage our strong brands Excellence in execution Relentlessly leverage expenses Comp sales growth equal to or better than the market Sustainable earnings growth with EBITDA > 7% Generate positive free cash
Slide 55: Thank You
Thank You Company reports are available online at www.loblaw.ca For any investor inquiries, please e-mail investor@loblaw.ca 55