Loblaw warns on profit outlook
Investing in technology to compete with Wal-Mart
Loblaw Companies Ltd. warned Tuesday its operating profit would be under more pressure later this year as it invests in new information technology.
The alert came as the country's largest grocery retailer announced its first-quarter net profit rose nearly 26 per cent over last year, to $137 million, or 50 cents per share.
That was up from $109 million, or 40 cents per share, in the same period of 2009.
Revenue rose 3.1 per cent — to $6.9 billion from $6.7 billion — due mainly to the acquisition of T&T Supermarket Inc., a chain that caters to ethnic Chinese customers.
The Brampton, Ont.-based company has had years of difficulties in updating its distribution and merchandise management as it moved to compete with Wal-Mart by offering a broader range of non-grocery items including furniture, clothing and consumer electronics.
"Our major investment in information technology and supply chain will now start to ramp up," executive chairman, Galen Weston Jr., said in a statement.
"As previously announced, we expect these investments to negatively impact 2010 operating income," Weston said.
Loblaw shares closed higher by 35 cents to $38.15 Tuesday on the Toronto Stock Exchange.
With files from The Canadian Press