November 13, 2008 / 1:57 PM / in 9 years

UPDATE 3-Loblaw shares jump after earnings, sales gain

* Earnings per share C$0.56 vs C$0.43

* Revenue rises to C$9.49 bln from C$9.14 bln

* Same store sales rise 3 percent

* 2008 capex seen at about C$700 million

* Shares jump 9.5 percent to C$29.65 (Adds details and company comments, updates share price)

By Scott Anderson

TORONTO, Nov 13 (Reuters) - Loblaw Cos Ltd L.TO, Canada’s largest supermarket chain, said its earnings, sales and profit margin rose in the third quarter, pushing its shares up as much as 12 percent, but it warned that a slowing economy could hold back its performance for the rest of the year.

The company, with more than 1,000 stores across the country, said earnings rose 32 percent to C$155 million ($125.5 million), or 56 Canadian cents a share -- more than analysts had expected. That compares with earnings of C$117 million, or 43 Canadian cents, for the same time last year.

The results included charges totaling 5 Canadian cents a share related to restructuring costs and stock-based compensation.

Revenue rose 3.9 percent to C$9.49 billion from C$9.14 billion.

Analysts had expected earnings of 54 Canadian cents before items and revenue of C$9.38 billion.

Sales in stores opened at least a year rose 3 percent, more than double the same-store sales of the year-earlier period.

Operating margin was 3.3 percent compared with 2.7 percent.

“This was a pretty good quarter,” said Brian Yarbrough, a consumer research analyst at Edward Jones, in St. Louis, Missouri. “It looks like they are starting to gain some strength in same-store sales.”

Loblaw shares were up C$2.55 or 9.5 percent at C$29.65 on the Toronto Stock Exchange shortly after midday, after rising as high as C$30.20.

The company launched a five-point plan earlier this year aimed at boosting sales, including improvements to its supply chain and systems programs, while relaunching its President’s Choice private-label brand.

Loblaw has also adopted a strategy of cutting prices to spark revenue growth and to retain its customers as Wal-Mart Stores WMT.N expands food sales in Canada. It is also trying to pinch expenses to offset lower margins.

The company expects capital expenditures to be about C$300 million for the remainder of the year.

It also expects its full-year capital expenditures to total about C$700 million, down from its earlier estimate of C$800 million, as it focuses on store renovations and upgrades its infrastructure and supply chains, Bob Vaux, Loblaw’s chief financial officer, said on a conference call to analysts.

Vaux also said the 2009 capex estimate would not be “materially different from this year.”

“We’re making sure that we do things at the right pace, instead of rushing them,” he said.

But the company warned it could face a tough retail market in the fourth quarter and into next year as the slowing economy saps consumer confidence.

“We are pleased with the quarter, but I wouldn’t read anything into it more than this is just a business still in transition, still in renewal and still with a lot to do, and only edging forward,” Allan Leighton, the company’s president and deputy chairman, said during the call. ($1=$1.23 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson)

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