November 12, 2014 / 12:12 PM / in 3 years

Shoppers Drug Mart buy helps Loblaw profit beat estimates

(Reuters) - Loblaw Cos Ltd, Canada’s largest grocer, reported a better-than-expected quarterly profit as it benefits from the Shoppers Drug Mart acquisition, and said it was on track to achieve the targeted savings from the deal.

A general view of Loblaw Companies Limited Executive Chairman Galen G. Weston speaking during the annual general meeting of shareholders is seen in Toronto, May 2, 2013. REUTERS/Mark Blinch

The company’s shares rose as much as 3 percent to a near nine-year high of C$59.82 on Wednesday.

Loblaw bought Shoppers Drug Mart last year to ward off rising competition as U.S.-based rivals such as Wal-Mart Stores Inc and Target Corp expanded their Canadian business.

The company said it remained on track to achieve C$100 million in savings in the first year following the closing of Shoppers Drug Mart acquisition.

The deal, which closed in March, helped Loblaw save about C$44 million in the third quarter, the company said.

Loblaw’s revenue increased 36 percent to C$13.6 billion ($12 billion) in the quarter ended Oct.4, with Shoppers Drug Mart accounting for a quarter of the sales.

The company, which cut 200 jobs during the third quarter, said it was looking to further reduce costs.

“We still have a few quarters of potential restructurings and things that are going to lead to one-time charges,” President Galen Weston said on a post-earnings conference call.

Weston, son of the founder of George Weston Ltd — Loblaw’s largest shareholder — was appointed president in July as part of a management shakeup.

Loblaw said it incurred C$46 million in costs related to the restructuring and reorganization.

Overall same-store sales, excluding Shoppers Drug Mart, grew 2.6 percent. Same-store sales at Shoppers Drug Mart rose 2.5 percent.

Adjusted basic net earnings was 90 Canadian cents per share.

Analysts on average had expected a profit of 87 Canadian cents on revenue of C$13.60 billion, according to Thomson Reuters I/B/E/S.

The company’s shares were trading at C$59.81 in late afternoon on the Toronto Stock Exchange.

Up to Tuesday’s close, Brampton, Ontario-based Loblaw’s stock had risen about 37 percent this year.

($1 = C$1.1311)

Reporting By Tanvi Mehta and Manya Venkatesh in Bangalore; Editing by Savio D'Souza, Joyjeet Das and Sriraj Kalluvila

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