2023 Annual Report
25%
10%
Average savings by switching
from comparable brand to
no name®
Amount fully-engaged
PC Optimum™ members can
save on their grocery bills
$1 billion +
Value of PC Optimum™ Points
redeemed by customers
2.4 million +
31
Prescribing services provided
by our pharmacists
New Hard Discount
stores opened
490
Carbon reduction
projects completed
$3.3 billion +
60%
64%
E-commerce revenue
for the year
PC Express™ delivery
coverage across the country
Compliance achieved relative
to 2025 Golden Design Rules
target for our control brand
and in-store plastic packaging
Helping
Canadians
Live Life Well ®
In 2023, we reaffirmed our commitment to tackling the
prevailing challenges of our time. Amidst the ongoing
inflationary environment, we awarded more than $1 billion in
PC Optimum™ point awards and redemptions. Responding to
Canadians’ increasing calls for greater involvement in issues
affecting them and their families, we took a stand – actively
fighting climate change and advancing social equity. We take
pride in our efforts as a purpose-led organization towards
addressing these important challenges.
Our 220,000 colleagues and employees play an indispensable
role, serving their communities with unwavering pride and
passion every day. Additionally, we extend our gratitude to the
millions of Canadians who consistently place their trust in us
week after week. To each and every one of you, we express
our sincere thanks.
Table of Contents
2 Our Stores, Our People, Our Strategy
12 Our Leading Assets
4 Financial Highlights
5 Chairman’s Message
14 Corporate Governance Practices
16 Board of Directors
8 Environmental, Social and Governance
16 Leadership
10 Our Divisions
17 Financial Review
1
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Our Stores, Our People,
Our Strategy
As a purpose-led organization, we exist to help Canadians
Live Life Well®. This commitment factors into how we operate
our stores and pharmacies day-to-day, and how we deliver
on our long-term organizational strategy.
Our strategy keeps us intently focused on the realities of today, the opportunities of
tomorrow, and the needs and expectations of consumers decades from now. Our efforts
are underpinned by a solid foundation – an energetic base of people working in great
stores and pharmacies that operate efficiently and effectively. From there, we layer on value
– everyday digital retail solutions, meaningful payment options, and outstanding loyalty
offerings. Increasingly we are connecting Canadians to healthcare solutions, both in our
stores and online.
Environment, Social and
Governance (ESG)
We have a number of commitments
within our two ESG priorities – fighting
climate change and advancing social
equity – that guide our support for the
communities we serve.
Colleagues, Culture and
CORE Values
An engaged and collaborative
workforce is key to our success,
which is why we welcome authenticity,
encourage strong connections, value
trust, and make daily decisions with
our CORE values – Care, Ownership,
Respect, Excellence – top of mind.
Retail Excellence
Through disciplined execution within our
core retail operations, and by leveraging
our scale and strategic assets, we are able
to grow sales, optimize gross margins,
and reduce operating costs – all while
captivating and engaging customers.
This requires promotional effectiveness,
personalized value, quality service,
and continued network investment and
optimization to not only meet customer
needs but deliver consistent results.
Driving Business Growth
We continue to invest in three targeted
growth areas to further differentiate
our portfolio of assets and generate
competitive advantage: Digital Retail,
Advance powered by Loblaw™, and
PC Optimum™.
Investing for the Future
Capital investments in the modernization
and automation of our supply chain, the
expansion of our retail network, and the
evolution of our Connected Healthcare
strategy are all examples of Loblaw
investing for long-term success.
care ownership respect excellence
CORE values
Our CORE values
guide how we think, act and
interact with one another.
2
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Shenaz gives
from the heart
Reflecting on the issue of violence against women,
Shenaz Singh, an Associate-Owner of three Shoppers
Drug Mart stores in British Columbia, sheds light on
the urgent need for awareness and support. Singh, a
dedicated supporter of philanthropy, shares a personal
tragedy involving a former employee, Amber Culley,
who fell victim to domestic violence. In response, Singh
and her store teams launched a fundraising initiative as
part of the Shoppers Foundation for Women’s Health™
Giving Shelter campaign, which aids women’s shelters.
Despite the heart-wrenching circumstances, Singh’s
passion has inspired creative fundraising efforts,
resulting in over $15,000 raised last year. She calls on
employees and communities to unite against domestic
violence, emphasizing that collective contributions
can make a significant impact.
Environmental
solutions you won’t
see in our stores
Our commitment to sustainability is evident in strategic
measures to reduce our carbon footprint, but those
efforts are not always immediately visible to customers.
We’re actively addressing environmental concerns
at the store level, focusing on heating, cooling, and
refrigeration. For example, we’ve transitioned away from
hydrofluorocarbons (HFCs), potent greenhouse gases
contributing to ozone depletion. Since 2019, all new stores
now utilize eco-friendly refrigerants, resulting in a yearly
carbon reduction equivalent to keeping over 2,000 cars
off Canadian roads. Additionally, we’re advancing energy
efficiency by replacing incandescent and halogen lights
with LED lighting. Beyond these initiatives, we’re exploring
low-carbon stores, electric vehicle charging stations,
and adopting electric- and hydrogen-powered trucks for
our transport fleet, solidifying our commitment to fighting
climate change and enhancing the well-being of Canadians.
3
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Financial Highlights
+3.9%
+5.4%
FOOD RETAIL
SAME STORE SALES
DRUG RETAIL
SAME STORE SALES
+4.2%
FRONT OF STORE
+6.8%
PHARMACY AND
HEALTH SERVICES
+5.4%
REVENUE
($ millions)
31.0%
RETAIL SEGMENT GROSS
PROFIT MARGIN1
+7.5%
CONSOLIDATED
ADJUSTED EBITDA1
($ millions)
11.2%
CONSOLIDATED ADJUSTED
EBITDA MARGIN1
2021
53,170
2022
56,504
2023
59,529
2021
30.7%
2022
30.9%
2023
31.0%
2021
5,587
2022
6,181
2023
6,647
2021
10.5%
2022
10.9%
2023
11.2%
+13.6%
+10.3%
ADJUSTED DILUTED NET
EARNINGS PER COMMON
SHARE1
($)
DIVIDEND DECLARED
PER COMMON SHARE
($)
2021
5.59
2022
6.82
2023
7.75
2021
1.40
2022
1.58
2023
1.74
1 See the Non-GAAP and Other Financial Measures section of the 2023 Annual Report – Financial Review
4
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Chairman’s Message
Galen G. Weston
Chairman
Loblaw Companies Limited
Fellow Shareholders,
Loblaw’s purpose is to help Canadians Live Life Well®.
It begins with providing the essentials our customers
need every day, and over the last twelve months that
has never been more important as inflation continued
to put pressure on food affordability, and our healthcare
system strained under the weight of growing demand.
With an even sharper focus on providing value through choice, convenience, and quality
to more than 15 million families each week, we delivered against our purpose in 2023,
benefitting our customers, shareholders, and communities.
Already important health and wellness destinations for millions of Canadians, this past
year our Shoppers Drug Mart® pharmacies broadened their care offerings, providing
Canadians with more convenient access to the care they need, when they need it. We’ve
now opened more than 70 pharmacist-led clinics across Canada, while redesigning many
of our traditional pharmacies with the patient experience top of mind. The result is essential
healthcare is now available to those who would have otherwise waited days, or weeks.
Our supermarkets, now organized around Hard Discount and Market format stores,
maintained their momentum by offering the lowest prices despite inflationary pressures.
As consumers shifted to discount, we converted or opened 31 new No Frills and Maxi
stores, helping to grow our market share by showcasing the exceptional value of our control
brands, notably no name®. Our conventional Market stores also continued to perform well
against their peers, as we looked for new and improved ways to deliver the full-service
experience and value our customers have come to expect.
As our store network continues to grow, we are bringing customers even more value
through essential style at exceptional prices in Joe Fresh® apparel, no-fee banking offerings
like the PC Money™ Account, and the newly launched and exceptionally rewarding PC
Insiders® World Elite Mastercard® from PC Financial®. The world-renowned PC Optimum™
loyalty program now boasts more than 16 million active users, and our e-commerce
platforms – PC Express™, shoppersdrugmart.ca, among others – collectively drove
$3.3 billion in revenue in 2023.
It’s through that focus on our purpose of helping Canadians Live Life Well® that we delivered
consistent sales and earnings growth in line with our well-established financial framework.
This year especially, it is important to highlight that amid strong results, grocery retail gross
margins remained flat compared to 2022. As inflation soared, we worked hard to offer our
customers better service, better promotions, better stores, and better products – all while
intentionally lowering our buying and operating costs.
5
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Doing so required a commitment to productivity and efficiency – an effort we refer to
as Retail Excellence. Our success in this regard is clearly reflected in our 2023 financial
results. We achieved same store sales growth of +3.9 per cent in food retail and +5.4
per cent in drug retail, with revenue of $59.5 billion, growing +5.4 per cent. Consolidated
adjusted EBITDA was $6.65 billion, or +7.5 per cent. Adjusted diluted net earnings per share
were $7.75 or +13.6 per cent. We generated $1.70 billion in free cash flow and continued
to return capital to shareholders by increasing our dividend per share by 10.3 per cent and
by repurchasing 15.1 million shares under a common share repurchase program. We also
invested a record $2.1 billion dollars in total capital investments in 2023. This significant
investment reflects Loblaw’s commitment to enhancing its current businesses and building
to meet the future needs of Canadians. It also represents a significant growth driver for the
Canadian economy, creating job opportunities across the country.
In the years ahead, we see even more opportunities for Investing in Growth. Our network
of Hard Discount stores is gearing up to serve a growing demographic of value-seeking
consumers, with dozens of store conversions and new store openings planned for the
communities that need them most. Our approach to delivering healthcare solutions is
broadening, be it through the growing adoption of the PC Health™ app, or expanded scope
of responsibility to improve access to care. And, our ability to connect our business partners
with retail insights and analytics is accelerating rapidly, as Advance powered by Loblaw™ is
enabling the country’s largest brands to reach customers at just the right moment in their
purchase journey.
Even as the current economic environment proves uniquely challenging, we are putting the
resources and capabilities we need to work to set our organization up for long-term success.
That outlook towards the future isn’t complete without a recognition of the responsibility we
feel towards Improving the Communities We Serve. Roughly 90 per cent of Canadians
live within 10 kilometers of one of our stores or pharmacies. Our network extends to virtually
every town, big or small, where we are often one of the largest employers in the area.
It reflects both our strength, and our obligation, which we take deeply to heart.
6
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED For our customers and our communities, that sense of responsibility comes to life through
two Environmental, Social and Governance (ESG) focus areas: fighting climate change
and advancing social equity. Our commitments around these priorities are helping to ensure
that we drive meaningful change as quickly as possible.
Fighting Climate Change
• Achieve net-zero greenhouse gas emissions for our enterprise operations Scope 1 and
Scope 2 by the end of 2040, and Scope 3 by 2050;
• Ensure all of our control brand and in-store plastic packaging is either reusable or
recyclable by 2025;
• Send zero food waste to landfill by the end of 2030.
Advancing Social Equity
• Be Canada’s most diverse and inclusive employer and deploy inclusion training across
our entire workforce by 2024;
• Support the health of women and children, by feeding 1 million kids a year by 2025;
providing nation-leading support for women’s health and access to care; and donating
1 billion pounds of food to charities by 2028 through Feed More Families™.
The pages that follow, as well as our annual ESG Report available at Loblaw.ca, offer more
details on our progress. And as you will see, we are proud to be pursuing goals that are
clear, ambitious yet achievable. The delivery of these objectives, and our belief that we are a
purpose-led organization, are inextricably linked. And so from our perspective, there is
no room for falling short.
Looking ahead, we are moving forward with confidence. Our financial framework is solid,
as is our plan to achieve it. Our 220,000 colleagues and employees are invested in our
success, and in our purpose. And our company, now led by Per Bank as President and
Chief Executive Officer, is more representative of the customers we serve. We’re working
hard to help Canadians Live Life Well®, and it shows in our results.
Galen G. Weston
Chairman
Loblaw Companies Limited
7
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Environmental, Social
and Governance
Our purpose-led approach strongly influences our Environmental,
Social and Governance (ESG) priorities, guiding us as we work to
fight climate change and advance social equity.
Fighting Climate Change
Net-zero by 2040 for our enterprise
operating footprint, and 2050 for our
scope 3 emissions
• Entered into a renewable energy plan
to eliminate carbon emissions from
electricity purchases in Alberta,
and reduce nationwide emissions
by 17% starting in 2025
• Completed 490 carbon reduction
projects.
• Achieved major milestone toward our
goal of decarbonizing our fleet, by
rolling out four heavy-duty fully electric
transport trucks.
Tackling Plastic Waste
• Achieved 64% compliance relative to the
Golden Design Rules for control brand
and in-store plastic packaging, with clear
path to achieve 100% by 2025
• Quo Beauty™ converted 100% of bath
poufs to recycled mesh, and began
transitioning cosmetic brush packaging
to plastic-free alternatives.
• Eliminated front-end singe-use plastic
bags nationally.
Eliminating Food Waste Sent to
Landfill by 2030
• 100% of our eligible corporate, food
franchise, associate-owned Shoppers
Drug Mart® stores and distribution
centres reduced their food waste sent
to landfill by actively donating to food
recovery programs.
Be Canada’s Most Diverse and
Inclusive Employer
• Increased women represented
in Executive roles to 39%, on
track to achieve our 2024 goal
of 40% representation and surpassed
our target of 43% in Management roles.
• Surpassed our visible minorities goals
of 25% in Executive roles and 30% in
Management roles by achieving 28%
and 32% representation, respectively.
• Have trained over 165,000 colleagues
nationally on two courses covering
fundamental DEI topics.
• Launched Loblaw Community Grants
program, supporting five organizations
over four years for a total contribution
of $1 million.
Support the Health and Well-Being
of Children and Women
• Raised and donated almost
$180 million to support research,
charities and non-profits across Canada.
• Donated more than 46 million pounds
of food to food charities across Canada,
in support of Feed More Families™.
• Contributed $1 million to the Women’s
Health Collective Canada whose goal is
to raise awareness and address gaps in
women’s health research.
• Helped President’s Choice Children’s
Charity to feed more than 990,000 kids
as part of their mission to tackle
childhood hunger.
To demonstrate our commitment to future alignment with the International
Sustainability Standards Board (ISSB) and to provide more timely and
relevant information to our stakeholders we are pleased to provide an
early release of priority 2023 ESG disclosures at loblaw.ca/en/responsibility
490
Number of completed
carbon reduction projects
8
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED No plastic stone
left unturned
We are committed to reducing plastic waste by making
all of our control brand and in-store plastic packaging
recyclable or reusable by 2025. We have adopted the
Golden Design Rules (GDR) for plastic packaging,
developed by the Consumer Goods Forum’s global
Plastic Waste Coalition of Action. The GDRs include
guidelines such as using clear or light blue/green bottles,
avoiding hard-to-recycle materials, reducing packaging,
and making recycling instructions easier to understand.
We are pleased that Loblaw has already achieved
64% compliance with the GDRs and we are on track to
reach 100% compliance by 2025. We have already made
progress in various areas, such as converting PC® shrimp
rings and fresh meat and seafood to clear plastic trays
and moving frozen PC® fruits and vegetables to recycle-
ready packaging.
Joe Fresh® is
championing
diversity
This past spring, Joe Fresh® took a different approach
to its spring activewear campaign by featuring a diverse
range of models, including athlete Allison Lang, who
wears a prosthetic leg. The campaign aimed to speak
to customers who want good-quality, affordable, and
stylilsh workout clothes to feel good and move in. The
theme of the collection focused on self-love and self-care,
reflecting the importance of physical and mental well-being.
The decision to feature models with different body types,
racial backgrounds, and disabilities was made early in the
creative process, aligning with Joe Fresh®’s commitment
to diversity, equity, and inclusion. The campaign’s use of
bright, punchy colors tapped into the current retro revival
trend. Joe Fresh®’s dedication to representation and
diversity is part of Loblaw’s overall commitment to helping
Canadians Live Life Well™, and the brand’s win of the 2023
Canadian Grocer Impact Award in the DEI category reflects
the positive response from audiences and customers.
9
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Our Divisions
We operate more than 2,500 locations across Canada, employing
directly or through our franchisees and associates approximately
220,000 Canadians in full-time and part-time positions. With 90%
of Canadians living within 10 kilometers of one of our stores,
we are immersed in the communities we serve, and welcome the
opportunity to help our customers lead better and healthier lives.
Market
Passionate about food and about creating
exceptional customer experiences, our
Market division operates a variety of
banners – including Loblaws®, Loblaw
City Market®, Your Independent Grocer®,
Atlantic Superstore®, Zehrs®, Provigo®,
Provigo Le Marché®, Real Canadian
Superstore®, Real Canadian Wholesale
Club®, Real Canadian Liquorstore™,
Fortinos® and T&T® stores – and ultimately
helps Canadians bring the best to
their tables.
Hard Discount
Our Hard Discount division, which
includes No Frills® and Maxi®, proudly
offers Canadians easy and affordable
access to life’s necessities. With a strong
range of products and assortment,
which flexes based on the needs and
expectations of local demographics,
our hard discount stores exist to help
Feed Everyone.
Joe Fresh® provides uniquely accessible
shopping to Canadians, mixing modern
designs with incredible value. With
collections for women, men and children,
shopping is made more convenient and
cost-effective for the entire family. Joe
Fresh® is also proud to offer extended
sizes with select women’s styles ranging
from XS to 3X.
With more than 1,300 Associate-owned
Locations, Shoppers Drug Mart® is
Canada’s leading pharmacy retailer,
delivering care and wellness to millions
of Canadians weekly – in-store and
virtually. We operate home healthcare
and luxury beauty retail outlets, a
specialty drug distribution network,
pharmacy services for long-term care
and retirement communities, a generic
drug manufacturer, a unique health
app, and an electronic medical records
platform. We also own Canada’s leading
provider of outpatient physiotherapy,
massage therapy, occupational therapy,
chiropractic, mental health, and other
ancillary rehabilitation services.
PC Financial® provides unprecedented
value to customers, simplifying financial
products to help Canadians Live Life Well®.
Through the PC® Mastercard® and the
PC Money™ Account, more than 2.4 million
cardholders have earned millions in
PC Optimum™ points to redeem for beauty,
groceries, gas, apparel, and more. In
2023 we expanded our portfolio, launching
the PC Insiders™ World Elite Mastercard®,
our most rewarding card ever. With our
Services business, we meet the needs of
Canadians through The Mobile Shop™,
The Gift of Choice, and PC® Insurance.
1 Billion
Customer transactions
annually across grocery,
pharmacy and
financial services.
10
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Ali is feeding
hungry community
members
Ali’s No Frills® in Toronto, led by franchise owner
Ali Khan, has donated 84,000 pounds of food to Faith
Outreach Worship Centre’s food bank over six months.
Ali focuses on addressing food insecurity, with a
particular focus on the Greater Toronto and Hamilton
Area. Despite the growing demand for food banks in
the city, Ali emphasizes their commitment to resolving
small problems within the community. The Retail Food
Recovery Program and participation in Feed More
Families™ annual food drives showcase the store’s
efforts in supporting local organizations and reducing
food waste.
Making Healthcare
Accessible and
Convenient
for Canadians
With a network of thousands of established healthcare
professionals and a national infrastructure to support
a variety of healthcare services, Shoppers Drug Mart®
delivers care and wellness to millions of Canadians
every day – both in-store and virtually. Today, pharmacy
care goes well beyond filling prescriptions. Pharmacists
across Canada can often be a patient’s first point of
care for minor ailments and injuries and support with
chronic disease management. Having opened more than
70 Pharmacy Care Clinics across the country – including
Fabio De Rango’s Headen Plaza store in Burlington,
Ontario, which opened in July 2023 – Shoppers Drug Mart®
is making healthcare accessible, seamless and convenient
for millions of patients while helping to reduce the burden
on the public system.
11
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Our Leading Assets
We deliver on our purpose – to help Canadians Live Life Well®
– through an exceptional internal infrastructure, a unique and
customer-centric culture, and a clear set of expectations for
colleagues at all levels of the organization.
Brands
Supply Chain
Our control brands – including President’s
Choice®, no name®, Farmer’s Market™ and
Life Brand™ – positively impact the lives of
consumers each day, with award-winning
products that consistently push the
boundaries of what is possible to elevate
the life experiences of Canadians.
PC Optimum™
With over 16 million active annual
members, PC Optimum™ is unique in
its reach and customer engagement.
The program is continually refined
and enhanced, to provide our
customers with greater value and
the personalization they seek.
Technology and Analytics
We use technology and analytics to
connect our customers to the things that
matter most: food, health, and money.
We enable our business strategy with
world-class data products and services,
including: our agile framework, artificial
intelligence and machine learning
programs, and an ongoing journey to the
cloud – all in an attempt to enhance our
customers’ experience.
As one of the largest supply chain
networks in North America, we are
committed to efficiency, responsiveness,
and serving the evolving needs of our
stores and customers. Continually
adopting new technology, embracing
automation, and refining our processes
allow us to increase our capacity,
source with integrity, and reliably serve
Canadians across the country.
Compliance and Ethical Conduct
Loblaw is committed to conduct business
ethically, honestly and in compliance
with the law. We ensure our colleagues
and employees understand and follow
regulatory and legal obligations through
clear policies, continuous training, and
regular communication. We empower
colleagues and vendors to report unethical
or non-compliant behaviour using
the Integrity Action Line (IAL), and we
take action while prohibiting retaliation
against those who report in good faith.
Our approach creates a culture where
colleagues/employees and vendors
conduct themselves ethically and
remain compliant with applicable rules
and regulations.
3
of the country’s top ten brands –
President’s Choice®, no name®
and Farmer’s Market™.
12
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Embracing
diversity and
leading change:
Bobby’s Journey
of Success
Bobby Gale takes centre stage as a diversity champion
at Loblaw, sharing their transformative journey from
store-level work in 2006 to becoming Director of
Analytical and Data Platforms within the Loblaw
Technology and Analytics team. Bobby’s leadership
has been instrumental in advancing gender equity.
Their advocacy has helped introduce initiatives
such as gender-inclusive bathrooms and promoting
pronoun usage in email signatures. Recently Bobby
was acknowledged with the Catalyst Next Generation
Leader award. Bobby’s narrative encourages
employees to actively engage in diversity pillars,
learn from others, and act as allies.
New and improved
PC Express™
experience
PC Express™ has implemented significant
enhancements based on feedback from store teams
in the Hard Discount and Market divisions, aiming to
improve the colleagues’ experience in fulfilling orders.
Vanessa Ogden and Hufsa Akbar, Directors in the Hard
Discount and Market divisions respectively, utilized
their store-level experience to drive positive changes.
The improvements include a real-time dashboard
for picker performance, batched produce orders for
efficiency, enhanced handling of large fridge/freezer
items, barcode additions to item exception reports,
time zone updates, and more. The collaborative effort
has resulted in increased perfect orders, improved
found rates, and heightened customer satisfaction
across Market and Hard Discount stores.
13
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED Corporate Governance
Practices
The Board of Directors and senior executives of Loblaw Companies
Limited are committed to strong corporate governance practices
as a foundation to the effective management of the Company and
its achievement of strategic, financial, and operational objectives.
The Governance Committee regularly reviews the Company’s corporate governance
practices to ensure they reflect evolving best practices in a rapidly changing environment.
The Company’s website, loblaw.ca, includes additional governance information, including
the Company’s Code of Conduct (the “Code”), Disclosure Policy, Majority Voting Policy,
the position description for the Chairman and mandates of the Board of Directors
(the “Board”) and its committees.
Director Independence
The Canadian Securities Administrators’ Corporate Governance Guidelines provide that
a director is independent if he or she has no material relationship with the Company or its
affiliates that could reasonably be expected to interfere with the exercise of the director’s
independent judgement. Approximately 83% (10/12) of the directors on the Board are
independent. The independent directors meet separately following each Board meeting.
Information relating to each of the directors, including their independence, committee
memberships, other public company boards on which they serve as well as their attendance
record for all Board and committee meetings, can be found in the Company’s Management
Proxy Circular.
Board Leadership
Galen G. Weston is the Chairman of the Board. The Chairman directs the operations of
the Board. He chairs each meeting of the Board, is responsible for the management and
effective functioning of the Board generally and provides leadership to the Board in all
matters. These and other key responsibilities of the Chairman are set out in a position
description established by the Board. The Board has also appointed an independent
director, William A. Downe, to serve as lead director. The lead director provides leadership
to the Board and particularly to the independent directors. He ensures that the Board
operates independently of management and that directors have an independent
leadership contact.
Board Responsibilities and Duties
The Board, directly and through its committees, supervises and oversees the management
of the business and affairs of the Company. A copy of the Board’s mandate can be found on
the Company’s website, loblaw.ca. The Board reviews the Company’s strategic direction,
assigns responsibility to management for the achievement of the strategy, approves major
policy decisions, delegates to management the authority and responsibility of handling
day-to-day affairs, and reviews management’s performance and effectiveness. The Board’s
expectations of management are communicated to management directly and through
committees of the Board.
14
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED The Board regularly receives reports on the operating results
of the Company as well as reports on certain non-operational
matters, including insurance, pensions, corporate governance,
environmental, social and governance (ESG), workplace health
and safety, legal, compliance and treasury matters. The Board
also oversees the enterprise risk management (ERM) process,
which is designed to assist all areas of the business in managing
appropriate levels of risk tolerance by bringing a systematic
approach, a methodology and tools for evaluating, measuring and
monitoring key risks. The results of the ERM program and other
business planning processes are used to identify emerging risks
to the Company, prioritize risk management activities and develop
a risk-based internal audit plan.
Ethical Business Conduct
The Code reflects the Company’s long-standing commitment to
high standards of ethical conduct and business practices. The
Code is reviewed annually to ensure it is current and reflects best
practices in the area of ethical business conduct and integrity
and includes a strong “tone from the top” message. All directors,
officers, employees/colleagues and contractors of the Company
are required to comply with the Code and must acknowledge
their commitment to abide by the Code on a periodic basis. The
Company encourages the reporting of violations and potential
violations and has established an Integrity Action Line, a toll-free
number that any director, officer, supplier or employee may use
to report conduct which he or she feels violates the Code or
otherwise constitutes fraudulent or unethical conduct. A fraud
reporting protocol has also been implemented to ensure that fraud
is reported to senior management in a timely manner. In addition,
the Audit Committee has endorsed procedures for the anonymous
receipt, retention and handling of complaints regarding accounting,
internal control or auditing matters. These procedures are available
on the Company’s website, loblaw.ca.
Board Committees
The following is a brief summary of some of the responsibilities of
each committee of the Board.
Audit Committee
The Audit Committee is responsible for the oversight of the
integrity of the Company’s financial statements and related
public disclosure, as well as the adequacy and effectiveness of
applicable controls related to its ESG disclosures. In doing so,
the Audit Committee reviews management’s administration of the
Company’s internal controls over financial reporting, disclosure
controls and procedures and internal audit function and related
party transactions. The Audit Committee also oversees procedures
for the receipt, retention and follow-up of any complaints regarding
the Company’s accounting, internal controls and auditing matters.
Governance, Employee Development, Nominating and
Compensation Committee
The Governance Committee is responsible for the oversight of the
Company’s governance practices, including the development and
implementation of good governance principles, consistent with high
standards of corporate governance. The Governance Committee
oversees the succession planning and compensation for the Board
and senior management. The Chair of the Governance Committee,
who is an independent director, has also been appointed by the
Board to serve as lead director.
Pension Committee
The Pension Committee is responsible for the oversight of the
administration, management, design and governance of the
Company’s pension plans, as well as the administration and
management of the Company’s benefit programs.
Risk and Compliance Committee
The Risk and Compliance Committee is responsible for the
oversight of the Company’s legal and regulatory compliance and
ethics compliance program, ERM program, ESG program, policy,
pharmacy and drug safety matters, food safety and product safety
matters and information systems and technology matters.
ESG Governance
The Board oversees and monitors the Corporation’s approach,
policies and practices related to ESG matters. Management has
established an ESG Steering Committee, comprised of senior
leaders, responsible for setting priorities, tracking metrics and
championing program initiatives across the Corporation. Various
management committees are responsible for setting priorities
and implementing and monitoring ESG-related initiatives across
the organization.
15
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED JANICE FUKAKUSA, F.C.P.A., F.C.A.,
B.A., M.B.A.1, 4*
Corporate Director; Former
Chief Financial Officer and Chief
Administrative Officer, Royal Bank
Of Canada; Director, Cineplex Inc.,
Brookfield Corporation (formerly
Brookfield Asset Management Inc.),
RioCan REIT; Chancellor, Toronto
Metropolitan University.
M. MARIANNE HARRIS, B.Sc., J.D.,
M.B.A.1, 2, 3
Corporate Director; Former Managing
Director and President, Corporate
and Investment Banking, Merrill Lynch
Canada Inc., Former Head of Financial
Institutions Group Americas, Merrill
Lynch Pierce Fenner & Smith; Director,
George Weston Limited, Sun Life
Financial Inc., Public Sector Pension
Investment Board; Former Director,
Hydro One Inc./ Hydro One Limited;
Former Chair, Investment Industry
Regulatory Organization of Canada
(IIROC); Member of Dean’s Advisory
Council, Schulich School of Business;
Advisory Council, Hennick Centre for
Business and Law.
KEVIN HOLT, B.Sc.1,4
Corporate Director; Former Chief
Executive Officer of Ahold Delhaize
USA; Former Chief Operating Officer
of Ahold USA; Former Chief Operating
Officer of Delhaize America; Former
Executive Vice President of Delhaize
Group; Former Chief Executive Officer
of Delhaize America; Former Director,
Ahold Delhaize USA Inc. and Ahold
Delhaize NV.; Former Director and
Vice Chair, Industry Relations of Food
Marketing Institute.
CLAUDIA KOTCHA, B.B.A., C.P.A.2, 4
Corporate Director; Former Vice President,
Design Innovation & Strategy, Procter &
Gamble; Former Trustee, Cooper Hewitt
Smithsonian Design Museum; Director,
American Red Cross, Los Angeles Region;
Former Director, American Red Cross,
Greater Miami and the Keys; Former
Trustee of the Cooper Hewitt Smithsonian
Design Museum.
SARAH RAISS, B.S., M.B.A.2, 3*
Corporate Director; Former Executive,
TransCanada Corporation; Lead Director,
Commercial Metals Company; RB Global,
Inc. (formerly Ritchie Bros Auctioneers
Inc.); Former Chair, Alberta Electric
Systems; Former Director, Canadian
Oil Sands Limited, Shoppers Drug Mart
Corporation, Vermillion Energy Inc.
CORNELL WRIGHT, B.A., J.D., M.B.A.4
President and Director of Wittington
Investments, Limited; Director, George
Weston Limited, BCE, Inc.; Trustee,
Choice Properties Real Estate Investment
Trust, Former Partner, Torys LLP; Board
Chair, the National Ballet of Canada;
Trustee of University Health Network;
and Executive in Residence at the
University of Toronto’s Rotman School
of Management.
Notes
1 Audit Committee
2 Governance, Employee Development,
Nominating and Compensation Committee
3 Pension Committee
4 Risk and Compliance Committee
* Chair of the Committee
Board
of Directors
GALEN G. WESTON, B.A., M.B.A.
Chairman and Former President,
Loblaw Companies Limited; Chairman
and Chief Executive Officer, George
Weston Limited; Chairman of
President’s Choice Bank; Chairman,
Wittington Investments Limited;
and President of the Weston
Family Foundation.
SCOTT B. BONHAM, B.Sc., M.B.A.1, 4
Corporate Director; Co-founder
of Intentional Capital Corp.;
Former Co-Founder of GGV Capital;
Former Vice-President, Capital
Group Companies; Director, The
Bank of Nova Scotia; Board Member
of Canadian Institute of Advanced
Research and the DenmarkBridge.
SHELLEY G. BROADER, B.A.1, 4
Corporate Director; Former President
and Chief Executive Officer of Chicos
FAS, Inc.; Former President and
Chief Executive Officer of Walmart
EMEA Ltd. and Walmart Canada;
Former President and Chief Operating
Officer of The Michaels Companies,
Inc.; Director, IFCO Systems US LLC;
Member of the U.S. Advisory Board
of Amoobi SA; and Former Director
of Walmart Canada Corporation and
Walmart Mexico.
CHRISTIE J.B. CLARK, B. COMM.,
M.B.A., F.C.A., F.C.P.A.1*,3, 4
Corporate Director; Former Chief
Executive Officer and Senior
Partner, PricewaterhouseCoopers
LLP; Director, Air Canada; Director,
AtkinsRéalis Canada Inc. (formerly
SNC-Lavalin Group Inc.); Former
Trustee, Choice Properties Real Estate
Investment Trust; Former Director,
Hydro One Inc., Hydro One Limited;
Board Member, Canadian Olympic
Committee, Canadian Olympic
Foundation, Own the Podium, the
Sunnybrook Foundation.
DANIEL DEBOW, B.A., J.D./M.B.A., L.L.M.2, 4
Vice President, Product, Shopify Inc.;
Former Founder and Chief Executive
Officer, Helpful.com; Co-Founder and
Former Co-Chief Executive Officer of
Rypple; Founding team member of
Workbrain.
WILLIAM A. DOWNE, C.M., M.B.A.2*
Corporate Director; Former Chief
Executive Officer, Chief Operating
Officer, Head of BMO Capital Markets,
BMO Financial Group; Former Director,
Bank of Montreal and its subsidiaries,
BMO Nesbitt Burns Holding
Corporation and BMO Financial Corp.;
Lead Director, ManpowerGroup
Inc.; Chairman, Trans Mountain
Corporation; Director, Rush University
System for Health; Board Member,
Social and Economic Policy Advisory
Board, Rand Corporation.
Leadership
GALEN G. WESTON
Chairman
FRANK GAMBIOLI
President, Market/Superstore
IAN FREEDMAN
President, Joe Fresh
PER BANK
President and Chief Executive Officer
MELANIE SINGH
President, Hard Discount Division
RICHARD DUFRESNE
Chief Financial Officer
ROBERT WIEBE
Chief Administrative Officer
JEFF LEGER
President, Shoppers Drug Mart
TINA LEE
Chief Executive Officer,
T&T Supermarkets
MARK WILSON
Executive Vice President and
Chief Human Resources Officer
NICK HENN
Executive Vice President,
Chief Legal Officer and Secretary
DAVID MARKWELL
Executive Vice President,
Chief Technology and Analytics Officer
MARY MACISAAC
Senior Vice President, Loblaw
Marketing and Control Brands
LAUREN STEINBERG
Senior Vice President,
Loyalty, Media and Digital
MIKE RINALDI
Senior Vice President, Business
Enablement and Enterprise
Procurement
16
2023 ANNUAL REPORT LOBLAW COMPANIES LIMITED 2023 Annual Report –
Financial Review
2023 Annual Report - Financial Review
Financial Highlights
Management’s Discussion and Analysis
Financial Results
Notes to the Consolidated Financial Statements
Three Year Summary
Glossary of Terms
1
3
67
78
137
139
Financial Highlights(1)
As at or for the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Consolidated Results of Operations
Revenue
Revenue growth
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(2)
Income taxes
Adjusted income taxes(2)
Adjusted effective tax rate(2)
Net earnings
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders of the Company(i)
Adjusted net earnings available to common shareholders of the Company(2)
Consolidated per Common Share ($)
Diluted net earnings
Adjusted diluted net earnings(2)
Dividends
Dividends declared per common share ($)
Consolidated Financial Position and Cash Flows
2023
(52 weeks)
2022
(52 weeks)
$ 59,529
$ 56,504
5.4 %
6.3 %
$ 3,704
$
3,342
$
6,647
11.2 %
803
803
714
858
$
6,181
10.9 %
683
694
665
841
25.0 %
26.4 %
$ 2,187
$
1,994
2,100
2,088
2,480
1,921
1,909
2,263
$
$
6.52
7.75
$
$
5.75
6.82
$
1.743
$
1.580
Cash and cash equivalents and short term investments
$
1,952
$
1,934
Cash flows from operating activities
Capital investments(ii)
Free cash flow(2)
Financial Measures
Retail debt to retail adjusted EBITDA(2)
Adjusted return on equity(2)
Adjusted return on capital(2)
5,654
2,109
1,700
2.3 x
22.2 %
11.5 %
4,755
1,571
1,528
2.4 x
20.2 %
10.8 %
(i) Net earnings available to common shareholders of the Company are net earnings attributable to shareholders of the Company net of
dividends declared on the Company’s Second Preferred Shares, Series B.
(ii) Capital investments are the sum of fixed asset purchases and intangible asset additions as presented in the Company’s consolidated
statements of cash flows, and prepayments transferred to fixed assets in the current year. Capital investments for the year ended December
30, 2023 include $37 million of prepayments transferred to fixed assets.
2023 Annual Report - Financial Review Loblaw Companies Limited 1
Financial Highlights(1)
As at or for the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Retail Results of Operations
Sales
Operating income
Gross profit(2)
Gross profit %(2)
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
Retail Operating Statistics
Food retail same-store sales growth
Drug retail same-store sales growth
Drug retail same-store pharmacy sales growth
Drug retail same-store front store sales growth
Total retail square footage (in millions)
Number of corporate stores
Number of franchise stores
Number of Associate-owned drug stores
Financial Services Results of Operations
Revenue
Earnings (Losses) before income taxes
Financial Services Operating Measures and Statistics
Average quarterly net credit card receivables
Credit card receivables
Allowance for credit card receivables
Annualized yield on average quarterly gross credit card receivables
Annualized credit loss rate on average quarterly gross credit card receivables
2023
(52 weeks)
2022
(52 weeks)
$ 58,345
$ 55,492
3,500
18,083
3,260
17,165
31.0 %
30.9 %
$ 6,361
$ 5,939
10.9 %
10.7 %
$ 2,848
$ 2,746
3.9 %
5.4 %
6.8 %
4.2 %
71.2
569
535
1,351
4.7 %
6.9 %
5.7 %
8.2 %
71.2
547
551
1,346
$
1,540
$
1,338
61
(2)
$ 3,950
$ 3,607
4,132
256
13.9 %
3.8 %
3,954
206
13.0 %
2.7 %
Financial Highlights Endnotes
(1) For financial definitions and ratios refer to the Glossary of Terms section included within the Company’s 2023 Annual Report.
(2) See Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion and Analysis for the reconciliation of
such non-GAAP and other financial measures to the most directly comparable GAAP measures.
2 2023 Annual Report - Financial Review Loblaw Companies Limited
Management's Discussion and Analysis
1.
Forward-Looking Statements
2. Overview
3. Strategic Framework
4. Key Financial Performance Indicators
5. Overall Financial Performance
5.1
5.2
Consolidated Results of Operations
Selected Financial Information
6. Reportable Operating Segments Results of Operations
7.
6.1
6.2
Retail Segment
Financial Services Segment
Liquidity and Capital Resources
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
Cash Flows
Liquidity and Capital Structure
Components of Total Debt
Financial Condition
Credit Ratings
Share Capital
Off-Balance Sheet Arrangements
Contractual Obligations
8. Financial Derivative Instruments
9. Quarterly Results of Operations
9.1
9.2
Results by Quarter
Fourth Quarter Results
10. Disclosure Controls and Procedures
11.
Internal Control over Financial Reporting
12. Enterprise Risks and Risk Management
12.1 Operating Risks and Risk Management
12.2
Financial Risks and Risk Management
13. Related Party Transactions
14. Critical Accounting Estimates and Judgments
14.1
14.2
14.3
14.4
14.5
14.6
14.7
14.8
14.9
Consolidation
Business Combinations - Valuation of Intangible Assets
Inventories
Impairment of Non-Financial Assets
Impairment of Credit Card Receivables
Income and Other Taxes
Segment Information
Provisions
Leases
15. Accounting Standards
15.1
Amendments to Accounting Standards
16 Strategic Update and Outlook
1617 Non-GAAP and Other Financial Measures
18 Additional Information
4
6
6
7
8
8
11
13
13
15
17
17
19
20
22
22
22
24
25
26
27
27
29
37
37
38
39
48
49
52
52
52
52
53
53
53
53
54
54
54
54
55
56
66
2023 Annual Report - Financial Review Loblaw Companies Limited 3
Management’s Discussion and Analysis
The following Management’s Discussion and Analysis (“MD&A”) for Loblaw Companies Limited and its subsidiaries
(collectively, the “Company” or “Loblaw”) should be read in conjunction with the audited annual consolidated
financial statements and the accompanying notes for the year ended December 30, 2023 (“consolidated financial
statements”) included within the 2023 Annual Report.
The Company’s consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards” or
“GAAP”) and include the accounts of the Company and other entities that the Company controls and are reported
in Canadian dollars, except when otherwise noted.
Management uses non-GAAP and other financial measures to exclude the impact of certain expenses and income
that must be recognized under GAAP when analyzing consolidated and segment underlying operating
performance, as the excluded items are not necessarily reflective of the Company’s underlying operating
performance and make comparisons of underlying financial performance between periods difficult. The Company
adjusts for these items if it believes doing so would result in a more effective analysis of underlying operating
performance. The exclusion of certain items does not imply that they are non-recurring. See Section 17 “Non-GAAP
and Other Financial Measures”, of this MD&A for more information on the Company’s non-GAAP and other financial
measures.
The information in this MD&A is current to February 21, 2024, unless otherwise noted. A glossary of terms can be
found at the end of the 2023 Annual Report.
Unless otherwise indicated, all comparisons of results for the fourth quarter of 2023 (12 weeks ended December
30, 2023) are against results for the fourth quarter of 2022 (12 weeks ended December 31, 2022) and all
comparisons of results for the full-year of 2023 (52 weeks ended December 30, 2023) are against the results for
the full-year of 2022 (52 weeks ended December 31, 2022).
1. Forward-Looking Statements
The 2023 Annual Report, including the MD&A, contains forward-looking statements about the Company’s
objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance,
prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in the 2023 Annual
Report include, but are not limited to, statements with respect to the Company’s anticipated future results, events
and plans, strategic initiatives and restructuring, regulatory changes including further healthcare reform, future
liquidity, planned capital investments, and the status and impact of information technology (“IT”) systems
implementations. These specific forward-looking statements are contained throughout the 2023 Annual Report
including, without limitation, Section 3 “Strategic Framework”, Section 5.1 “Consolidated Results of Operations”,
Section 6.1 “Retail Segment”, Section 6.2 “Financial Services Segment”, Section 7 “Liquidity and Capital
Resources”, Section 9 “Quarterly Results of Operations”, Section 12 “Enterprise Risks and Risk Management”,
Section 14 “Critical Accounting Estimates and Judgments”, Section 15 “Accounting Standards”, “Section 16
“Strategic Update and Outlook” and Section 17 “Non-GAAP and Other Financial Measures”. Forward-looking
statements are typically identified by words such as “expect”, “anticipate”, “believe”, “foresee”, “could”, “estimate”,
“goal”, “intend”, “plan”, “seek”, “strive”, “will”, “may”, “should” and similar expressions, as they relate to the
Company and its management.
Forward-looking statements reflect the Company’s estimates, beliefs and assumptions, which are based on
management’s perception of historical trends, current conditions and expected future developments, as well as
other factors it believes are appropriate in the circumstances. The Company’s estimates, beliefs and assumptions
are inherently subject to significant business, economic, competitive and other uncertainties and contingencies
regarding future events and, as such, are subject to change. The Company can give no assurance that such
estimates, beliefs and assumptions will prove to be correct.
4 2023 Annual Report - Financial Review Loblaw Companies Limited
Numerous risks and uncertainties could cause the Company’s actual results to differ materially from those
expressed, implied or projected in the forward-looking statements, including those described in the Company’s
MD&A in the 2023 Annual Report, and the Company’s 2023 Annual Information Form (“AIF”) for the year ended
December 30, 2023. Such risks and uncertainties include:
•
changes in economic conditions, including inflation, price increases from suppliers, levels of employment, costs
of borrowing, household debt, political uncertainty and government regulation, the impact of natural disasters,
war or acts of terrorism, pandemics, changes in interest rates, tax rates, or exchange rates, and access to
consumer credit;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
inability of the Company’s IT infrastructure to support the requirements of the Company’s business, or the
occurrence of any internal or external security breaches, denial of service attacks, viruses, worms and other
known or unknown cybersecurity or data breaches;
changes to any of the laws, rules, regulations or policies applicable to the Company’s business;
inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory or control
shrink;
failure to realize benefits from investments in the Company’s new IT systems and related processes;
failure to execute the Company’s e-commerce initiatives or to adapt its business model to shifts in the retail
landscape caused by digital advances;
failure to attract and retain colleagues may impact the Company’s ability to effectively operate and achieve
financial performance goals;
changes to the regulation of generic prescription drug prices, the reduction of reimbursements under public
drug benefit plans and the elimination or reduction of professional allowances paid by drug manufacturers;
failure to maintain an effective supply chain and consequently an appropriate assortment of available product
at the store and digital retail level;
failure to achieve desired results in labour negotiations, including the terms of future collective bargaining
agreements;
public health events including those related to food and drug safety;
errors made through medication dispensing or errors related to patient services or consultation;
failure to realize the anticipated benefits associated with the Company’s strategic priorities and major
initiatives, including revenue growth, anticipated cost savings and operating efficiencies, or organizational
changes that may impact the relationships with franchisees and Shoppers Drug Mart Licensees (“Associates”);
failure to adapt to environmental and social risks, including failure to execute against the Company’s climate
change and social equity initiatives;
reliance on the performance and retention of third party service providers, including those associated with the
Company’s supply chain and apparel business and located in both advanced and developing markets;
adverse outcomes of legal and regulatory proceedings and related matters; and
failure to effectively respond to consumer trends or heightened competition, whether from current competitors
or new entrants to the marketplace.
This is not an exhaustive list of the factors that may affect the Company’s forward-looking statements. Other risks
and uncertainties not presently known to the Company or that the Company presently believes are not material
could also cause actual results or events to differ materially from those expressed in its forward-looking statements.
Additional risks and uncertainties are discussed in the Company’s materials filed with the Canadian securities
regulatory authorities (“securities regulators”) from time to time, including, without limitation, the section entitled
"Risks" in the Company's 2023 AIF (for the year ended December 30, 2023). Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date
of this MD&A. Except as required by law, the Company does not undertake to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
2023 Annual Report - Financial Review Loblaw Companies Limited 5
Management’s Discussion and Analysis
2. Overview
Loblaw Companies Limited is a Canadian public company incorporated in 1956 and is Canada's food and pharmacy
leader, and the nation's largest retailer. The Company has two operating segments: Retail and Financial Services.
The Retail segment consists primarily of corporate and franchise-owned retail food and Associate-owned drug
stores, and includes in-store pharmacies, health care services, other health and beauty products, apparel and other
general merchandise. The Company’s Financial Services segment provides credit card and everyday banking
services, the PC Optimum™ loyalty program, insurance brokerage services, and telecommunication services. The
businesses are underpinned by the PC Optimum loyalty program, a customer loyalty program that provides more
than a billion dollars in annual rewards and is unique to each consumer across their network-wide purchases.
3. Strategic Framework
Loblaw is driven by its purpose to help Canadians Live Life Well® which guides the Company's strategic framework.
This framework centres around Loblaw’s three strategic pillars of Delivering Retail Excellence, Driving Growth, and
Investing for the Future, while embedding Environmental, Social and Governance (“ESG”) initiatives in everything
Loblaw does. Underpinning these strategic pillars is a sharp focus on leveraging data driven insights and process
efficiency excellence to deliver strong financial performance. The framework is supported by colleagues with a
shared set of CORE values and culture principles that encourages colleagues to be authentic, build trust and make
connections.
The Company strives to be the "best in food, health and beauty" and with its focus on retail excellence, it is
constantly improving its retail operations to differentiate its customer offerings, to lower cost to serve and to deliver
scale through its national logistics infrastructure. Retail operations benefit from more than one billion customer
touchpoints annually and deliver a unique customer experience driven by industry leading control brands, healthy
alternatives, and a choice of in-store shopping, pick-up and delivery. The approach to being “best in food” is driven
by fresh food selection, competitive value, and customized assortments across banners. The approach to being
“best in health and beauty” is supported by high quality health and wellness products, an expanding offer of
healthcare services, and a diverse and differentiated beauty offering.
Building for the future, its purpose guides its investments in strategic growth initiatives to further differentiate its
portfolio of assets, generate competitive advantages in products, services and price, improve its operational
efficiencies, and create new areas of growth to service the changing needs of Canadians and to personalize their
experiences.
Loblaw's purpose-led approach to addressing environmental, social and governance issues focuses on two
priorities: fighting climate change and advancing social equity. ESG considerations are central to decisions made
across the Company. By integrating consideration of environmental and social risks and good governance
practices in its day-to-day business activities, implementing robust compliance and ethics programs and supporting
its colleagues and the communities in which it operates, the Company aims to be a leading contributor to Canadian
society both today and for generations to come.
Together, each of these components forms a part of the strategic framework that guides our direction now and into
the future.
6 2023 Annual Report - Financial Review Loblaw Companies Limited
4. Key Financial Performance Indicators(1)
The Company has identified key financial performance indicators to measure the progress of short and long term
objectives. Certain key financial performance indicators are set out below:
As at or for the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Consolidated
Revenue growth
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Net earnings
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders of the Company(i)
Adjusted net earnings available to common shareholders of the Company(2)
Diluted net earnings per common share ($)
Adjusted diluted net earnings per common share(2) ($)
Cash and cash equivalents and short term investments
Cash flows from operating activities
Free cash flow(2)
Financial Measures
Retail debt to retail adjusted EBITDA(2)
Adjusted return on equity(2)
Adjusted return on capital(2)
Retail Segment
Food retail same-store sales growth
Drug retail same-store sales growth
Operating income
Gross profit(2)
Gross profit %(2)
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Financial Services Segment
Earnings (Losses) before income taxes
Annualized yield on average quarterly gross credit card receivables
Annualized credit loss rate on average quarterly gross credit card receivables
2023
(52 weeks)
2022
(52 weeks)
5.4 %
6.3 %
$ 3,704
$
3,342
6,647
11.2 %
6,181
10.9 %
$ 2,187
$
1,994
2,100
2,088
2,480
6.52
7.75
1,952
5,654
1,700
$
$
$
1,921
1,909
2,263
5.75
6.82
1,934
4,755
1,528
$
$
$
2.3 x
22.2 %
11.5 %
3.9 %
5.4 %
2.4 x
20.2 %
10.8 %
4.7 %
6.9 %
$ 3,500
$ 3,260
18,083
31.0 %
17,165
30.9 %
$ 6,361
$ 5,939
10.9 %
10.7 %
$
61
$
13.9 %
3.8 %
(2)
13.0 %
2.7 %
(i) Net earnings available to common shareholders of the Company are net earnings attributable to shareholders of the Company net of
dividends declared on the Company’s Second Preferred Shares, Series B.
2023 Annual Report - Financial Review Loblaw Companies Limited 7
Management’s Discussion and Analysis
5. Overall Financial Performance
5.1 Consolidated Results of Operations
The following is a summary of selected consolidated financial information for 2023:
As at or for the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(2)
Income taxes
Adjusted income taxes(2)
Effective tax rate
Adjusted effective tax rate(2)
Net earnings attributable to non-controlling interests
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders of the Company(i)
Adjusted net earnings available to common shareholders of
the Company(2)
Diluted net earnings per common share ($)
Adjusted diluted net earnings per common share(2) ($)
Diluted weighted average common shares outstanding (in millions)
2023
(52 weeks)
2022
(52 weeks)
$ Change % Change
$ 59,529
$ 56,504
$ 3,025
5.4 %
3,704
6,647
3,342
6,181
362
466
10.8 %
7.5 %
11.2 %
10.9 %
$ 2,906
$ 2,795
$
803
803
714
858
24.6 %
25.0 %
683
694
665
841
25.0 %
26.4 %
111
120
109
49
17
4.0 %
17.6 %
15.7 %
7.4 %
2.0 %
$
87
$ 2,100
2,088
2,480
$ 6.52
$
7.75
320.0
$
$
$
$
73
1,921
1,909
2,263
5.75
6.82
331.7
$
$
14
19.2 %
179
179
9.3 %
9.4 %
217
9.6 %
$ 0.77
13.4 %
$ 0.93
13.6 %
(i) Net earnings available to common shareholders of the Company are net earnings attributable to shareholders of the Company net of
dividends declared on the Company’s Second Preferred Shares, Series B.
Loblaw continued to deliver strong and consistent financial and operating results across its various businesses in
2023. Loblaw’s ability to deliver everyday value and savings to Canadians was reflected in strong sales growth
across its Retail business as global inflationary pressures continued to impact customer behaviours. Loblaw’s
portfolio of best in class assets was well positioned to meet customer’s everyday needs across food, health and
wellness. The Company’s relentless focus on retail excellence leveraged these assets to deliver strong sales
growth, gross margin improvements, and leverage its operating costs.
8 2023 Annual Report - Financial Review Loblaw Companies Limited
Net Earnings Available to Common Shareholders of the Company and Diluted Net Earnings Per Common Share
Net earnings available to common shareholders of the Company were $2,088 million ($6.52 per common share),
an increase of $179 million ($0.77 per common share) or 9.4% when compared to 2022. The increase included an
improvement in the underlying operating performance of $217 million which was partially offset by the unfavourable
change in adjusting items totaling $38 million, as described below:
•
the improvement in the underlying operating performance of $217 million ($0.66 per common share) was
primarily due to the following:
◦
an improvement in the underlying operating performance in the Retail segment driven by an increase in
gross profit(2), partially offset by an increase in selling, general and administrative expenses (“SG&A”) and
depreciation and amortization; and
•
an increase in net interest expense and other financing charges.
the favourable impact from adjustments to certain tax provisions;
◦
partially offset by,
◦
the unfavourable change in adjusting items totaling $38 million (unfavourable change of $0.16 per common
share) was primarily due to the following:
◦
the unfavourable impact of the prior year recovery related to Glenhuron Bank Limited (“Glenhuron”) of
$42 million ($0.13 per common share);
◦
◦
◦
the year-over-year unfavourable change in gain on sale of non-operating properties of $35 million
($0.11 per common share);
the year-over-year unfavourable change in fair value adjustment on fuel and foreign currency contracts of
$16 million ($0.05 per common share); and
the unfavourable impact of prior year restructuring and other related recoveries of $14 million ($0.04 per
common share);
partially offset by,
◦
the year-over-year favourable impact of charges related to President’s Choice Bank (“PC Bank”)
commodity tax matters of $69 million ($0.20 per common share); and
•
the favourable impact of prior year Lifemark transaction costs of $12 million ($0.04 per common share).
◦
diluted net earnings per common share also included the favourable impact from the repurchase of common
shares over the last 12 months ($0.27 per common share).
Adjusted net earnings available to common shareholders of the Company(2) were $2,480 million, an increase of
$217 million or 9.6% when compared to 2022. Adjusted net earnings per common share(2) were $7.75 per common
share, an increase of $0.93 or 13.6%. The increase includes the favourable impact from the repurchase of common
shares.
Revenue
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(52 weeks)
2022
(52 weeks)
$ Change % Change
Retail
Financial Services
Eliminations
Revenue
$ 58,345
$
55,492 $
2,853
1,540
(356)
1,338
(326)
202
(30)
$ 59,529
$ 56,504 $
3,025
5.1 %
15.1 %
(9.2) %
5.4 %
Revenue was $59,529 million, an increase of $3,025 million, or 5.4% when compared to 2022. The increase was
primarily driven by an increase in Retail segment sales of $2,853 million, due to positive same-store sales growth.
There was also an increase in Financial Services segment sales of $202 million.
2023 Annual Report - Financial Review Loblaw Companies Limited 9
◦
partially offset by,
◦
◦
Management’s Discussion and Analysis
Operating Income Operating income was $3,704 million, an increase of $362 million, or 10.8% when compared to
2022. The increase in operating income was driven by an improvement in the underlying operating performance of
$357 million, and a favourable change in adjusting items totaling $5 million as described below:
•
the improvement in the underlying operating performance of $357 million was primarily due to the following:
◦
an improvement in the underlying operating performance of the Retail segment due to an increase in
gross profit(2), partially offset by an increase in SG&A and depreciation and amortization.
•
the favourable change in adjusting items totaling $5 million was primarily due to the following:
◦
the year-over-year favourable impact of charges related to PC Bank commodity tax matters of $87 million;
and
the favourable impact of prior year Lifemark Health Group (“Lifemark”) transaction costs of $16 million;
the year-over-year unfavourable change from the gains on sale of non-operating properties of $45 million;
the year-over-year unfavourable impact of fair value adjustments on fuel and foreign currency contracts of
$21 million;
◦
◦
the unfavourable impact of prior year restructuring and other related recoveries of $15 million; and
the year-over-year unfavourable impact of fair value adjustments on non-operating properties of
$15 million.
Adjusted EBITDA(2)
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Retail
Financial Services
Adjusted EBITDA(2)
2023
(52 weeks)
6,361
286
6,647
$
$
$
$
2022
(52 weeks)
$ Change % Change
7.1 %
18.2 %
7.5 %
422
44
466
5,939 $
242
6,181 $
Adjusted EBITDA(2) was $6,647 million, an increase of $466 million, or 7.5% when compared to 2022, driven by an
increase in the Retail segment of $422 million, and an increase in the Financial Services segment of $44 million.
Depreciation and Amortization Depreciation and amortization was $2,906 million, an increase of $111 million or
4.0% when compared to 2022. The increase was primarily driven by an increase in depreciation of leased assets
and IT assets, accelerated depreciation of $24 million as a result of network optimization, and an increase in
depreciation of fixed assets related to conversions of retail locations, partially offset by the impact of prior year
accelerated depreciation due to the reassessment of the estimated useful life of certain IT assets. Included in
depreciation and amortization was the amortization of intangible assets related to the acquisitions of Shoppers
Drug Mart Corporation (“Shoppers Drug Mart”) and Lifemark of $499 million (2022 – $497 million).
Net Interest Expense and Other Financing Charges Net interest expense and other financing charges were
$803 million, an increase of $120 million or 17.6% when compared to 2022. The increase was primarily driven by an
increase in interest expense from lease liabilities, borrowing related to credit card receivables, long term debt,
independent funding trusts, post-employment and other long term employee benefits, and prior year interest
income related to Glenhuron as discussed in Section 17. Non-GAAP and Other Financial Measures below. This was
partially offset by higher interest income on certain short term investments.
Income Taxes Income tax expense in 2023 was $714 million (2022 – $665 million) and the effective tax rate was
24.6% (2022 – 25.0%). The decrease to the effective tax rate was primarily attributable to adjustments to certain tax
provisions and the non-taxable portion of the gain from real estate dispositions during the year, partially offset by
the recovery of income taxes related to Glenhuron in 2022.
Adjusted income tax expense(2) in 2023 was $858 million (2022 – $841 million) and the adjusted effective tax rate(2)
was 25.0% (2022 – 26.4%). The decrease to the adjusted effective tax rate(2) was primarily attributable to
adjustments to certain tax provisions and the non-taxable portion of the gain from real estate dispositions during
the year.
10 2023 Annual Report - Financial Review Loblaw Companies Limited
Net Earnings Attributable To Non-Controlling Interests Net earnings attributable to non-controlling interests were
$87 million, an increase of $14 million or 19.2% when compared to 2022, primarily driven by an increase in
franchisee earnings after profit sharing. Non-controlling interests represent the share of earnings that relates to the
Company’s Food Retail franchisees and is impacted by the timing of when profit sharing with franchisees is agreed
and finalized under the terms of the agreements.
5.2 Selected Financial Information
The selected information presented below has been derived from and should be read in conjunction with the
annual consolidated financial statements of the Company dated December 30, 2023, December 31, 2022, and
January 1, 2022, included within the 2023 and 2022 Annual Reports. The analysis of the data contained in the
table focuses on the trends and significant events or items affecting the financial condition and results of the
Company’s operations over the most recent three years.
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(millions of Canadian dollars except where otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(2)
Adjusted effective tax rate(2)
Net earnings
Net earnings attributable to the shareholders of the Company
Net earnings available to common shareholders of the Company(i)
Adjusted net earnings available to common shareholders
of the Company(2)
Basic net earnings per common share ($)
Diluted net earnings per common share ($)
Adjusted diluted net earnings per common share(2) ($)
Diluted weighted average common shares (in millions)
Dividends declared per common share ($)
Dividends declared per Second Preferred Share, Series B ($)
Total assets
Total long term debt
Lease liabilities
Long term financial liabilities
2023
(52 weeks)
2022
(52 weeks)
2021
(52 weeks)
$ 59,529
$ 56,504
$ 53,170
3,704
6,647
11.2 %
3,342
6,181
10.9 %
2,937
5,587
10.5 %
$ 2,906
$ 2,795
$ 2,664
803
803
683
694
495
684
25.0 %
26.4 %
26.3 %
$ 2,187
$
1,994
$
1,976
2,100
2,088
2,480
6.59
6.52
7.75
320.0
1.743
1.325
$
$
$
$
$
1,921
1,909
2,263
5.82
5.75
6.82
331.7
1.580
1.325
$
$
$
$
$
1,875
1,863
1,911
5.49
5.45
5.59
341.8
1.400
1.325
$
$
$
$
$
$ 38,979
$ 7,852
9,458
$ 38,147
$ 36,614
$
7,783
$
7,213
9,115
8,839
$ 17,310
$ 16,898
$ 16,052
(i) Net earnings available to common shareholders of the Company are net earnings attributable to shareholders of the Company net of
dividends declared on the Company’s Second Preferred Shares, Series B.
2023 Annual Report - Financial Review Loblaw Companies Limited 11
Management’s Discussion and Analysis
Revenue Revenue was $59,529 million in 2023, an increase of $3,025 million when compared to 2022. Food retail
same-store sales growth was 3.9% (2022 – 4.7%). Drug retail same-store sales growth was 5.4% (2022 – 6.9%).
Revenue was $56,504 million in 2022, an increase of $3,334 million when compared to 2021. Food retail same-
store sales growth was 4.7% (2021 – 0.3%). Drug retail same-store sales growth was 6.9% (2021 – 5.0%).
The Company’s Retail segment sales have continued to grow despite the pressure of a highly competitive retail
market, impacts of global economic uncertainties, and regulatory environment over the last three years. In 2021,
COVID-19 continued to have a significant impact on the Company, continuing to accelerate some long-term trends,
enabling the Company to advance its strategic growth areas of Everyday Digital Retail, Connected Healthcare and
Payments and Rewards. In Food Retail, sales remained strong as eat-at-home trends remained elevated even in
periods where social restrictions loosened. In Drug Retail, sales benefited from growth in pharmacy services as
COVID-19 testing and vaccinations ramped up throughout the year. Higher margin front-store categories within
Drug Retail, that had previously negatively impacted earnings, increased sales momentum as the economy opened
up. In 2022, COVID-19 continued to impact Retail segment sales through the first half of the year. Food Retail
benefited from elevated eat-at-home trends, and Drug Retail from strong cosmetics and over-the-counter (“OTC”)
product sales, as customers returned to pre-pandemic activities, while COVID-19 related testing and vaccines
continued at elevated levels. Retail segment sales growth in the second half of 2022 benefited from global
inflationary pressures and reflected continued strength in cosmetics and OTC sales in Drug Retail. In 2023, amidst
global inflationary pressures, consumers increased their focus on value, which benefited the Company’s sales due
to its strength in private label products, discount banners, and personalized promotions, including its PC Optimum
loyalty program. In Drug Retail, strong cosmetics and OTC product sales continued, while pharmacy services
demonstrated strong growth, partially off-setting a decline in COVID-19 related services.
The Financial Services segment sales have continued to grow. In 2021, the Financial Services segment benefited
from an increase in customer spending and higher sales attributable to The Mobile Shop™ kiosks. In 2022, the
Financial Services segment continued to benefit from an increase in customer spending. Further, the segment
benefited from growing credit card receivables in 2022 driven by growth in the active customer base. In 2023, the
segment benefited from an increase in customer spending and higher sales attributable to The Mobile Shop kiosk.
Further, the segment continued to benefit from growing credit card receivables driven by growth in the active
customer base and an increase in customer spending.
Net Earnings Available to Common Shareholders of the Company and Diluted Net Earnings Per Common Share
Net earnings available to common shareholders of the Company and diluted net earnings per common share
fluctuated over the past three years and were impacted by certain adjusting items set out in Section 17 “Non-GAAP
and Other Financial Measures,” and the changes in the underlying operating performance of the Company. The
fluctuations in net earnings available to common shareholders of the Company and diluted net earnings per
common share were primarily due to:
•
changes in underlying operating performance of the Retail segment due to COVID-19. The Company’s financial
results for the year ended December 30, 2023 and December 31, 2022 had higher revenue and cost of sales
when compared to 2021;
•
•
•
•
cost savings and operating efficiencies and investments in and benefits from strategic initiatives;
fluctuations in the performance of the Financial Services segment driven by the impact of the increase in
customer spending and growth in active customer base, the year-over-year movements of certain commodity
taxes accrued, the expected credit loss provision, and operating costs;
the favourable impact of the repurchase of common shares for cancellation; and
the impact of certain adjusting items, including:
◦
◦
◦
◦
◦
◦
◦
charges related to PC Bank commodity tax matters;
fair value adjustments on fuel and foreign currency;
the gains and losses on sale of non-operating properties;
Lifemark transaction costs;
fair value adjustments on non-operating properties;
restructuring and other related recoveries and costs; and
the recovery relating to Glenhuron.
12 2023 Annual Report - Financial Review Loblaw Companies Limited
Total Assets and Long Term Financial Liabilities In 2023, total assets of $38,979 million increased by 2.2%
compared to 2022. The increase was primarily driven by an increase in fixed assets, right-of-use assets, credit card
receivables, and other assets. This was partially offset by a decrease in intangible assets. Long term financial
liabilities of $17,310 million, increased by 2.4% compared to 2022. This was primarily driven by an increase in lease
liability and long term debt driven by an increase in guaranteed investment certificates (“GICs”).
In 2022, total assets of $38,147 million increased by 4.2% compared to 2021. The increase was primarily driven by
an increase in inventory, credit card receivables, and goodwill. This was partially offset by a decrease in cash and
cash equivalents and a decrease in income tax recoverable due to collection of income tax refunds from
Glenhuron. Long term financial liabilities of $16,898 million increased by 5.3% compared to 2021. This was primarily
driven by an increase in lease liability and long term debt driven by an increase in GICs.
6. Reportable Operating Segments Results of Operations
The Company has two reportable operating segments, with all material operations carried out in Canada:
•
the Retail segment consists primarily of corporate and franchise-owned retail food and Associate-owned drug
stores, and includes in-store pharmacies, health care services, other health and beauty products, apparel and
other general merchandise. This segment is comprised of several operating segments that are aggregated
primarily due to similarities in the nature of products and services offered for sale in the retail operations and
the customer base; and
•
the Financial Services segment provides credit card and everyday banking services, the PC Optimum loyalty
program, insurance brokerage services, and telecommunication services.
6.1 Retail Segment
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(52 weeks)
2022
(52 weeks)
$ Change % Change
Sales
Operating income
Gross profit(2)
Gross profit %(2)
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
$ 58,345
$ 55,492
$ 2,853
3,500
18,083
3,260
17,165
31.0 %
30.9 %
240
918
5.1 %
7.4 %
5.3 %
$ 6,361
$ 5,939
$
422
7.1 %
10.9 %
10.7 %
$ 2,848
$ 2,746
$
102
3.7 %
The following table provides a breakdown of the Company’s total and same-store sales for the Retail segment.
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Food retail
Drug retail
Pharmacy and healthcare services
Front store
2023
(52 weeks)
2022
(52 weeks)
Same-store
sales
Sales
Same-store
sales
Sales
$ 41,188
17,157
8,642
8,515
3.9 % $ 39,398
5.4 % 16,094
6.8 % 7,944
4.2 % 8,150
4.7 %
6.9 %
5.7 %
8.2 %
2023 Annual Report - Financial Review Loblaw Companies Limited 13
Management’s Discussion and Analysis
Sales Retail segment sales were $58,345 million in 2023, an increase of $2,853 million, or 5.1% compared to 2022,
primarily driven by the following factors:
•
Food retail same-store sales growth was 3.9% (2022 – 4.7%).
◦
◦
◦
Same-store sales growth in food was strong;
Same-store sales growth in pharmacy was flat;
The Consumer Price Index (“CPI”) as measured by The Consumer Price Index for Food Purchased From
Stores was 7.8% (2022 – 9.7%) which was generally in line with the Company’s internal food inflation; and
◦
Food Retail traffic increased and basket size decreased.
• Drug retail same-store sales growth was 5.4% (2022 – 6.9%).
◦
◦
Pharmacy and healthcare services same-store sales growth was 6.8% (2022 – 5.7%). Pharmacy and
healthcare services same-store sales growth benefited from the change in sales mix. The number of
prescriptions dispensed increased by 0.6% (2022 – increased by 2.5%). On a same-store basis, the
number of prescriptions dispensed increased by 0.9% (2022 – 2.6%) and the average prescription value
increased by 4.8% (2022 – 2.4%); and
Front store same-store sales growth was 4.2% (2022 – 8.2%). Front store same-store sales growth
benefited from higher consumer spending and economic re-opening.
In 2023, 23 food and drug stores were opened, and 12 food and drug stores were closed, and net retail square
footage has remained constant at 71.2 million square feet.
Operating Income Operating income was $3,500 million in 2023, an increase of $240 million, or 7.4% compared to
2022. The increase was driven by an improvement in underlying operating performance of $322 million, partially
offset by the unfavourable change in adjusting items totaling $82 million, as described below:
•
the improvement in underlying operating performance of $322 million was due to an increase in gross profit(2),
partially offset by an increase in SG&A and depreciation and amortization; and
•
the unfavourable change in adjusting items totaling $82 million was primarily due to the following:
◦
◦
◦
◦
the year-over-year unfavourable change from the gains on sale of non-operating properties of
$45 million;
the year-over-year unfavourable change in fair value adjustments on fuel and foreign currency contracts
of $21 million;
the unfavourable impact of prior year restructuring and other related recoveries of $15 million; and
the year-over-year unfavourable change in fair value adjustments on non-operating properties of
$15 million;
partially offset by,
◦
the favourable impact of prior year Lifemark transaction costs of $16 million.
14 2023 Annual Report - Financial Review Loblaw Companies Limited
Gross Profit(2) Gross profit(2) was $18,083 million in 2023, an increase of $918 million, or 5.3% compared to 2022.
Gross profit percentage(2) of 31.0% increased by 10 basis points when compared to 2022, primarily driven by
growth in higher margin Drug Retail front store categories and the scaling of the external freight business, partially
offset by higher shrink.
Adjusted EBITDA(2) Adjusted EBITDA(2) was $6,361 million in 2023, an increase of $422 million, or 7.1% compared
to 2022. The increase was driven by an increase in gross profit(2) of $918 million, partially offset by an increase in
SG&A of $496 million. SG&A as a percentage of sales was 20.1%, a favourable decrease of 10 basis points when
compared to 2022. The favourable decrease of 10 basis points was primarily due to operating leverage from higher
sales.
Depreciation and Amortization Depreciation and amortization was $2,848 million, an increase of $102 million or
3.7% when compared to 2022. The increase was primarily driven by an increase in depreciation of leased assets
and IT assets, accelerated depreciation of $24 million as a result of network optimization, and an increase in
depreciation of fixed assets related to conversions of retail locations, partially offset by the impact of prior year
accelerated depreciation due to the reassessment of the estimated useful life of certain IT assets. Included in
depreciation and amortization was the amortization of intangible assets related to the acquisitions of
Shoppers Drug Mart and Lifemark of $499 million (2022 – $497 million).
Network Optimization In 2023, the Company recorded charges of $70 million associated with network
optimization. Included in the charges was accelerated depreciation of $24 million as described above, and other
charges. The Company finalized plans for 2024 that are expected to result in the conversion of 30 Provigo stores
to Maxi discount stores in Quebec. Charges associated with store conversions will be recorded as incurred and are
expected to include equipment, severance, lease related and other costs and will not be considered an adjusting
item.
6.2 Financial Services Segment
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Revenue
Earnings (Losses) before income taxes
2023
(52 weeks)
2022
(52 weeks)
$ Change % Change
$
1,540
$
1,338 $
202
15.1 %
61
(2)
63 3,150.0 %
(millions of Canadian dollars except where otherwise indicated)
As at
December 30, 2023
As at
December 31, 2022
$ Change % Change
Average quarterly net credit card receivables
$
Credit card receivables
Allowance for credit card receivables
Annualized yield on average quarterly gross
credit card receivables
Annualized credit loss rate on average quarterly
gross credit card receivables
$
3,950
4,132
256
3,607
3,954
206
$
343
178
50
9.5 %
4.5 %
24.3 %
13.9 %
3.8 %
13.0 %
2.7 %
2023 Annual Report - Financial Review Loblaw Companies Limited 15
Management’s Discussion and Analysis
Revenue Revenue was $1,540 million in 2023, an increase of $202 million compared to 2022. The increase in
revenue was primarily driven by:
•
•
•
higher interchange income and other credit card related revenue from an increase in customer spending; and
higher interest income from growth in credit card receivables;
higher sales attributable to The Mobile Shop.
Earnings (Losses) before income taxes Earnings before income taxes were $61 million in 2023, as compared to
losses of $2 million in 2022. The improvement was primarily driven by:
•
•
the year-over-year impact from the prior year charge of $111 million versus the current year charge of
$24 million related to PC Bank commodity tax matters; and
higher revenue as described above;
•
lower operating costs, including benefits associated with the renewal of a long-term agreement with
Mastercard and lower customer acquisition expenses.
partially offset by,
•
higher contractual charge-offs, and loyalty program costs from an increase in customer spending and growth in
the credit card portfolio;
•
•
higher funding costs from an increase in interest rates and growth in credit card portfolio; and
the year-over-year impact of the expected credit loss provision from the prior year increase of $1 million versus
the current year increase of $50 million.
In the second quarter of 2023, the Federal government enacted certain commodity tax legislation that applies to
PC Bank on a retroactive basis. A charge of $37 million, inclusive of interest, was recorded for this matter. In the
fourth quarter of 2023, the Company reversed $13 million of previously recorded charges. The reversal was a result
of new guidance issued by the Canada Revenue Agency (“CRA”).
In July 2022, the Tax Court of Canada (“Tax Court”) released a decision relating to PC Bank. Although the
Company believes in the merits of its position, the Company recorded a charge of $111 million, inclusive of interest,
in the second quarter of 2022. In September 2022, PC Bank filed a Notice of Appeal with the Federal Court of
Appeal. Subsequent to December 30, 2023, the Federal Court of Appeal scheduled the hearing of the appeal for
March 6, 2024. The Company believes that this provision is sufficient to cover its liability, if the appeal is ultimately
unsuccessful.
Credit Card Receivables As at December 30, 2023, credit card receivables were $4,132 million, an increase of
$178 million compared to December 31, 2022. This increase was primarily driven by growth in the active customer
base and an increase in customer spending. The expected credit loss allowance for credit card receivables was
$256 million, an increase of $50 million compared to December 31, 2022. The increase is reflective of the current
and forecast macro-economic environment and its impact on consumer credit trends.
16 2023 Annual Report - Financial Review Loblaw Companies Limited
7. Liquidity and Capital Resources
7.1 Cash Flows
Major Cash Flow Components
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(52 weeks)
2022
(52 weeks) $ Change % Change
Cash and cash equivalents, beginning of year
$
1,608
$
1,976 $
(368)
(18.6) %
Cash flows from (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rate changes on
cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, end of year
$
5,654
$
4,755 $
(1,845)
(3,932)
(2,368)
899
523
18.9 %
22.1 %
(2,751)
(1,181)
(42.9) %
3
(4)
7
175.0 %
$
$
(120) $
(368) $
248
67.4 %
1,488
$
1,608 $
(120)
(7.5) %
Cash Flows from Operating Activities Cash flows from operating activities were $5,654 million, an increase of
$899 million when compared to 2022. The increase in cash flows from operating activities was primarily driven by
a favourable year-over-year change in non-cash working capital, and higher cash earnings, partially offset by the
unfavourable year-over-year change of income taxes paid due to the prior year recovery of cash taxes related to
Glenhuron. Cash flows from operating activities also increased as credit card receivables increased year-over-year
at a rate lower than prior year.
Cash Flows used in Investing Activities Cash flows used in investing activities were $1,845 million, a decrease of
$523 million when compared to 2022. The decrease in cash flows used in investing activities was primarily driven
by the acquisition of Lifemark in 2022, an increase in proceeds from disposal of assets, partially offset by an
increase in investments in fixed assets.
Capital Investments and Store Activity
As at December 30, 2023 and December 31, 2022
Corporate square footage (in millions)
Franchise square footage (in millions)
Associate-owned drug store square footage (in millions)
Total retail square footage (in millions)
Number of corporate stores
Number of franchise stores
Number of Associate-owned drug stores
Total number of stores
Average store size (square feet)
Corporate
Franchise
Associate-owned drug store
2023
(52 weeks)
2022
(52 weeks)
% Change
35.1
17.0
19.1
71.2
569
535
1,351
2,455
61,700
31,800
14,100
34.9
17.3
19.0
71.2
547
551
1,346
2,444
63,800
31,400
14,100
0.6 %
(1.7) %
0.5 %
— %
4.0 %
(2.9) %
0.4 %
0.5 %
(3.3) %
1.3 %
— %
2023 Annual Report - Financial Review Loblaw Companies Limited 17
Management’s Discussion and Analysis
Capital Investments Capital investments were $2,109 million, an increase of $538 million or 34.2%, compared to
2022.
Cash Flows used in Financing Activities Cash flows used in financing activities were $3,932 million, an increase of
$1,181 million when compared to 2022. The increase in cash flows used in financing activities was primarily driven
by higher issuance of long term debt net of repayments in the prior year, higher repurchases of common shares in
the current year, higher issuance of short-term debt in the prior year.
Free Cash Flow(2)
For the years ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Cash flows from (used in)
operating activities
Less:
Capital investments(ii)
Interest paid
Lease payments, net
Free cash flow(2)
2023
(52 weeks)
2022
(52 weeks)
Retail
Financial
Services
Elimi-
nations(i)
Total
Retail
Financial
Services
Elimi-
nations(i)
Total
$ 5,480 $
46 $
128 $ 5,654 $ 5,133 $
(444) $
66 $ 4,755
2,069
293
1,424
40
—
—
—
2,109
128
—
421
1,424
1,538
278
1,312
33
—
—
—
66
—
1,571
344
1,312
$ 1,694 $
6 $ — $ 1,700 $ 2,005 $
(477) $
— $ 1,528
Interest paid is included in cash flows from operating activities under the Financial Services segment.
(i)
(ii) Capital investments are the sum of fixed asset purchases and intangible asset additions as presented in the Company’s consolidated
statements of cash flows, and prepayments transferred to fixed assets in the current year. Capital investments for the year ended December
30, 2023 include $37 million of prepayments transferred to fixed assets.
Free cash flow(2) from the Retail segment was $1,694 million, a decrease of $311 million when compared to 2022.
The decrease was primarily driven by higher capital investments and the unfavourable year-over-year change of
income taxes paid due to the prior year recovery of cash taxes related to Glenhuron, partially offset by a favourable
change in non-cash working capital and higher cash earnings.
Free cash flow(2) from the Financial Services segment was $6 million, an increase of $483 million when compared
to 2022, as credit card receivables increased year-over-year at a rate lower than prior year.
18 2023 Annual Report - Financial Review Loblaw Companies Limited
7.2 Liquidity and Capital Structure
The Company expects that cash and cash equivalents, short term investments, future operating cash flows and the
amounts available to be drawn against committed credit facilities will enable the Company to finance its capital
investment program and fund its ongoing business requirements over the next 12 months, including working
capital, pension plan funding requirements and financial obligations.
PC Bank expects to obtain long term financing for its credit card portfolio through the issuance of Eagle Credit
Card Trust® (“Eagle”) notes and Guaranteed Investment Certificates.
The following table presents total debt by reportable operating segment:
(millions of Canadian dollars)
Bank indebtedness
Demand deposits from customers
Short term debt(i)
Long term debt due within one year
Long term debt
Certain other liabilities(ii)
Total debt excluding lease liabilities
Lease liabilities due within one year
Lease liabilities
As at
December 30, 2023
Financial
Services
Total
Retail
As at
December 31, 2022
Retail
Financial
Services
Total
$
13 $ — $
13
$
8 $ — $
8
—
166
—
400
850
791
166
850
1,191
—
—
—
125
700
727
125
700
727
4,460
2,201
6,661
4,866
2,190
7,056
280
—
280
153
—
153
$ 5,153 $ 4,008 $ 9,161
$ 5,027 $ 3,742 $ 8,769
1,455
8,003
—
—
1,455
1,401
8,003
7,714
—
—
1,401
7,714
Total debt including total lease liabilities
$ 14,611 $ 4,008 $ 18,619
$ 14,142 $ 3,742 $ 17,884
(i) During 2023, PC Bank recorded a $150 million net increase of co-ownership interest in the securitized receivables held with the Other
Independent Securitization Trusts.
(ii) As at December 30, 2023, certain other liabilities include financial liabilities of $190 million related to the sale and leaseback of retail
properties (December 31, 2022 – $73 million) (see note 27: Leases of the Company’s consolidated financial statements).
Retail The Company manages its capital structure with the objective of maintaining Retail segment credit metrics
consistent with those of investment grade retailers. The Company calculates the Retail segment’s debt to rolling
year retail adjusted EBITDA(2) ratio to measure the leverage being employed.
Retail debt to retail adjusted EBITDA(2)
As at
December 30, 2023
As at
December 31, 2022
2.3 x
2.4 x
The Retail debt to retail adjusted EBITDA(2) ratio as at December 30, 2023 decreased compared to
December 31, 2022, primarily due to an improvement in adjusted EBITDA(2).
President’s Choice Bank PC Bank’s capital management objectives are to maintain a consistently strong capital
position while considering the economic risks generated by its credit card receivables portfolio and to meet all
regulatory requirements as defined by the Office of the Superintendent of Financial Institutions (“OSFI”).
Covenants and Regulatory Requirements The Company is required to comply with certain financial covenants for
various debt instruments. As at December 30, 2023 and throughout the year, the Company was in compliance with
such covenants. As at December 30, 2023 and throughout the year, PC Bank has met all applicable regulatory
requirements.
2023 Annual Report - Financial Review Loblaw Companies Limited 19
Management’s Discussion and Analysis
7.3 Components of Total Debt
Debentures There were no debentures issued in 2023. The following table summarizes the debentures issued
in 2022.
(millions of Canadian dollars except where otherwise indicated)
Loblaw Companies Limited Notes(i)
Loblaw Companies Limited Notes(i)
Total debentures issued
Interest
Rate
5.01%
5.34%
Maturity Date
September 13, 2032
September 13, 2052
Principal
Amount
2022
$
$
400
400
800
(i) During 2022, the Company completed a dual-tranche issuance of $800 million aggregate principal amount of senior unsecured notes. In
connection with this issuance, the Company used the net proceeds of the issuance to redeem $800 million outstanding principal amount of
its Series 2023 unsecured notes.
There were no debentures repaid in 2023. The following table summarizes the debentures repaid in 2022.
(millions of Canadian dollars except where otherwise indicated)
Loblaw Companies Limited Notes(i)
Total debentures repaid
Interest
Rate
4.86%
Maturity Date
September 12, 2023
Principal
Amount
2022
$
$
800
800
(i) The Company recorded an early repayment premium charge of $7 million in net interest expense and other financing charges when the
Company redeemed the $800 million outstanding principal amount of its Series 2023 senior unsecured notes with original maturity date of
September 12, 2023 on September 21, 2022.
Committed Credit Facility The Company has a committed credit facility with a maturity date of July 15, 2027,
provided by a syndicate of lenders. On December 14, 2023, the Company increased the committed credit facility
from $1.0 billion to $1.5 billion with all other terms and conditions remaining substantially the same. This committed
credit facility contains certain financial covenants (see note 23 of the Company’s consolidated financial statements).
As at December 30, 2023 and December 31, 2022, there were no amounts drawn under this facility.
Independent Securitization Trusts The Company, through PC Bank, participates in various securitization programs
that provide a source of funds for the operation of its credit card business. PC Bank maintains and monitors a co-
ownership interest in credit card receivables with independent securitization trusts, including Eagle and Other
Independent Securitization Trusts, in accordance with its financing requirements.
The following table summarizes the amounts securitized to independent securitization trusts:
(millions of Canadian dollars)
Securitized to independent securitization trusts:
Securitized to Eagle Credit Card Trust®
Securitized to Other Independent Securitization Trusts
Total securitized to independent securitization trusts
As at
December 30, 2023
As at
December 31, 2022
$
$
1,350 $
850
2,200 $
1,350
700
2,050
Under its securitization programs, PC Bank is required to maintain, at all times, a credit card receivable pool
balance equal to a minimum of 107% of the outstanding securitized liability. PC Bank was in compliance with this
requirement as at December 30, 2023 and throughout 2023.
20 2023 Annual Report - Financial Review Loblaw Companies Limited
During 2023, Eagle issued $250 million (2022 – $250 million) of senior and subordinated term notes with a
maturity date of June 17, 2028 (2022 – July 17, 2027). These notes have a weighted average interest rate of 5.25%
(2022 – 4.89%). In connection with this issuance, $125 million (2022 – $140 million) of bond forward agreements
were settled, resulting in a realized fair value gain of $4 million (2022 – gain of $8 million) before income taxes,
which was cumulatively recorded in other comprehensive income as unrealized prior to the settlement of the
agreement. The gain will be reclassified to net earnings over the life of the Eagle notes. This settlement resulted in
a net effective interest rate of 4.95% (2022 – 4.24%) on the Eagle notes issued (see note 28 of the Company’s
consolidated financial statements).
During 2023, $250 million (2022 – $250 million) of senior and subordinated term notes at weighted average
interest rate of 3.10% (2022 – 2.71%), previously issued by Eagle, matured and were repaid on July 17, 2023 (2022
– October 17, 2022). As a result, during 2023, there was no net change in the balances related to Eagle notes.
Independent Funding Trusts As at December 30, 2023, the independent funding trusts had drawn $558 million
(December 31, 2022 – $574 million) from the revolving committed credit facility that is the source of funding to the
independent funding trusts. The Company provides credit enhancement in the form of a standby letter of credit for
the benefit of the independent funding trusts. As at December 30, 2023, the Company provided a credit
enhancement of $64 million (December 31, 2022 – $64 million) for the benefit of the independent funding trusts
representing not less than 10% (December 31, 2022 – not less than 10%) of the principal amount of loans
outstanding.
The Company has a $700 million revolving committed credit facility that is the source of funding to the
independent funding trusts that has a maturity date of April 14, 2025.
Guaranteed Investment Certificates The following table summarizes PC Bank’s GICs activity, before commissions
in 2023 and 2022:
(millions of Canadian dollars)
Balance, beginning of year
GICs issued
GICs matured
Balance, end of year
December 30, 2023
(52 weeks)
December 31, 2022
(52 weeks)
$
$
1,567 $
583
(496)
1,654 $
996
764
(193)
1,567
As at December 30, 2023, $541 million in GICs were recorded as long term debt due within one year
(December 31, 2022 – $477 million).
Associate Guarantees The Company has arranged for its Associates to obtain financing to facilitate their inventory
purchases and fund their working capital requirements by providing guarantees to various Canadian chartered
banks that support Associate loans. As at December 30, 2023, the Company’s maximum obligation in respect of
such guarantees was $580 million (December 31, 2022 – $580 million) with an aggregate amount of $476 million
(December 31, 2022 – $473 million) in available lines of credit allocated to the Associates by the various banks. As
at December 30, 2023, Associates had drawn an aggregate amount of $13 million (December 31, 2022 –
$8 million) against these available lines of credit. Any amounts drawn by the Associates are included in bank
indebtedness on the Company’s consolidated balance sheets. As recourse, in the event that any payments are
made under the guarantees, the Company holds a first-ranking security interest on all assets of Associates, subject
to certain prior-ranking statutory claims.
2023 Annual Report - Financial Review Loblaw Companies Limited 21
Management’s Discussion and Analysis
7.4 Financial Condition
Adjusted return on equity(2) and Adjusted return on capital(2)
Adjusted return on equity(2)
Adjusted return on capital(2)
As at
December 30, 2023
As at
December 31, 2022
22.2 %
11.5 %
20.2 %
10.8 %
Adjusted return on equity(2) as at December 30, 2023 increased compared to December 31, 2022, primarily due to
an improvement in the underlying operating performance of the Retail segment and Financial Services segment.
Adjusted return on capital(2) as at December 30, 2023 increased compared to December 31, 2022, primarily due to
an improvement in adjusted operating income(2).
7.5 Credit Ratings
The following table sets out the current credit ratings of the Company:
Credit Ratings (Canadian Standards)
Issuer rating
Medium term notes
Second Preferred Shares, Series B
Dominion Bond Rating Service
Credit Rating
BBB (high)
BBB (high)
Pfd-3 (high)
Trend
Stable
Stable
Stable
Standard & Poor’s
Credit Rating
BBB
BBB
P-3 (high)
Outlook
Stable
n/a
n/a
During 2023, Dominion Bond Rating Service Morningstar confirmed the credit ratings and trend of the Company,
and Standard and Poor’s Global Ratings confirmed the credit ratings and outlook of the Company.
7.6 Share Capital
First Preferred Shares (authorized - 1.0 million shares) There were no First Preferred Shares outstanding as at
December 30, 2023 and December 31, 2022.
Second Preferred Shares (authorized - unlimited) The Company has outstanding 9.0 million 5.30% non-voting
Second Preferred Shares, Series B, with a face value of $225 million, which were issued for net proceeds of
$221 million. These preferred shares are presented as a component of equity on the consolidated balance sheets.
Common Shares (authorized – unlimited) Common shares issued are fully paid and have no par value. The
activities in the common shares issued and outstanding were as follows:
(millions of Canadian dollars except where otherwise indicated)
December 30, 2023
(52 weeks)
Common
Share
Capital
Number of
Common
Shares
December 31, 2022
(52 weeks)
Common
Share
Capital
Number of
Common
Shares
Issued and outstanding, beginning of period
324,062,608 $ 6,489
333,527,369 $ 6,643
Issued for settlement of stock options
984,923
69
1,487,377
100
Purchased and cancelled
Issued and outstanding, end of period
Shares held in trust, beginning of period
Purchased for future settlement of RSUs and PSUs
Released for settlement of RSUs and PSUs
Shares held in trust, end of period
Issued and outstanding, net of shares held in trust,
(14,521,152)
(277)
(10,952,138)
(254)
310,526,379 $ 6,281
324,062,608 $ 6,489
(1,222,278) $
(625,000)
578,039
(24)
(13)
12
(595,495) $
(1,172,000)
545,217
(12)
(23)
11
(1,269,239) $
(25)
(1,222,278) $
(24)
end of period
309,257,140 $ 6,256
322,840,330 $ 6,465
Weighted average outstanding, net of shares held in trust
316,732,641
328,068,749
22 2023 Annual Report - Financial Review Loblaw Companies Limited
Dividends The declaration and payment of dividends on the Company’s common shares and the amount thereof
are at the discretion of the Board of Directors (“Board”), which takes into account the Company’s financial results,
capital requirements, available cash flow, future prospects of the Company’s business and other factors considered
relevant from time to time. Over the long term, it is the Company’s intention to increase the amount of the dividend
while retaining appropriate free cash flow to finance future growth. In the second quarter of 2023 and in the
second quarter of 2022, the Board raised the quarterly dividend by $0.041 to $0.446 and $0.04 to $0.405 per
common share, respectively.
The following table summarizes the Company’s cash dividends declared for the periods as indicated:
Dividends declared per share ($)
Common Share
Second Preferred Share, Series B
2023(i)
(52 weeks)
2022
(52 weeks)
$
$
1.743
1.325
$
$
1.580
1.325
(i) The Common Share dividends declared in the fourth quarter of 2023 of $0.446 per share had a payment date of December 30, 2023.
The Second Preferred Shares, Series B dividends declared in the fourth quarter of 2023 of $0.33125 per share had a payment date of
December 31, 2023.
(millions of Canadian dollars)
Dividends declared
Common Share
Second Preferred Share, Series B
Total dividends declared
December 30, 2023
(52 weeks)
December 31, 2022
(52 weeks)
$
$
550 $
12
562 $
517
12
529
Subsequent to December 30, 2023, the Board declared a quarterly dividend of $0.446 per common share, payable
on April 1, 2024 to shareholders of record on March 15, 2024 and a quarterly dividend of $0.33125 per share on the
Second Preferred Shares, Series B payable on March 31, 2024 to shareholders of record on March 15, 2024.
Normal Course Issuer Bid Activities under the Company’s Normal Course Issuer Bid (“NCIB”) during the periods
were as follows:
(millions of Canadian dollars except where otherwise indicated)
Common shares repurchased under the NCIB for cancellation
(number of shares)(i)
Cash consideration paid
Premium charged to retained earnings(ii)
Reduction in common share capital(iii)
Common shares repurchased under the NCIB and held in trust
(number of shares)
Cash consideration paid
Premium charged to retained earnings
Reduction in common share capital
December 30, 2023
(52 weeks)
December 31, 2022
(52 weeks)
14,521,152
10,952,138
$
1,729 $
1,352
277
1,258
1,204
254
625,000
1,172,000
$
72 $
59
13
138
115
23
(i) Common shares repurchased and cancelled as at December 30, 2023 do not include the shares that may be repurchased subsequent to
the end of the quarter under the automatic share repurchase plan, as described below.
(ii) Includes $84 million related to the automatic share purchase plan, as described below.
(iii) Includes $16 million related to the automatic share purchase plan, as described below.
2023 Annual Report - Financial Review Loblaw Companies Limited 23
Management’s Discussion and Analysis
In the second quarter of 2023, the Company renewed its NCIB to purchase on the Toronto Stock Exchange or
through alternative trading systems up to 16,055,686 of the Company’s common shares, representing
approximately 5% of issued and outstanding common shares. As at December 30, 2023, the Company had
purchased 10,992,986 common shares for cancellation under its current NCIB. The Company is still permitted to
purchase its common shares from George Weston Limited (“Weston”) under its NCIB, pursuant to an automatic
disposition plan agreement among the Company’s broker, the Company and Weston, in order for Weston to
maintain its proportionate ownership interest in the Company. The maximum number of common shares that may
be purchased pursuant to the NCIB will be reduced by the number of common shares purchased from Weston.
During 2023, 14,521,152 common shares (2022 – 10,952,138) were purchased under the NCIB for cancellation, for
aggregate consideration of $1,729 million (2022 – $1,258 million), including 7,132,579 common shares (2022 –
4,868,949) purchased from Weston, for aggregate consideration of $847 million (2022 – $558 million).
From time to time, the Company participates in an automatic share purchase plan (“ASPP”) with a broker in order to
facilitate the repurchase of the Company’s common shares under its NCIB. During the effective period of the ASPP,
the Company’s broker may purchase common shares at times when the Company would not be active in the
market. As at December 30, 2023, an obligation to repurchase shares of $100 million was recognized under the
ASPP in trade payables and other liabilities.
7.7 Off-Balance Sheet Arrangements
The following is a summary of the Company’s off-balance sheet arrangements. Certain significant arrangements
have also been discussed in Section 7.3 “Components of Total Debt”.
Letters of Credit Standby and documentary letters of credit are used in connection with certain obligations mainly
related to real estate transactions, benefit programs, purchase orders and other performance guarantees, surety
bond, securitization of PC Bank’s credit card receivables, letter of credit and third party financing made available to
the Company’s franchisees. The gross potential liability related to the Company’s letters of credit is approximately
$457 million as at December 30, 2023 (December 31, 2022 – $450 million).
Guarantees In addition to the letters of credit mentioned above, the Company has entered into various guarantee
arrangements including obligations to indemnify third parties in connection with leases and other transactions in
the normal course of business.
Lease Obligations In connection with historical dispositions of certain of its assets, the Company has assigned
leases to third parties. The Company remains contingently liable for these lease obligations in the event any of the
assignees are in default of their lease obligations. The Company has guaranteed lease obligations of a third party
distributor in the amount of $3 million (December 31, 2022 – $4 million).
Financial Services The Company has provided a guarantee on behalf of PC Bank to Mastercard International
Incorporated (“Mastercard”) for accepting PC Bank as a card member and licensee of Mastercard. As at December
30, 2023, the guarantee on behalf of PC Bank to Mastercard was USD $190 million (December 31, 2022 – USD
$190 million).
Cash Collateralization As at December 30, 2023, the Company had agreements to cash collateralize certain of its
uncommitted credit facilities up to an amount of $93 million (December 31, 2022 – $93 million), of which a nominal
amount (December 31, 2022 – nominal) was deposited with major financial institutions and classified as security
deposits, which is included in other assets.
24 2023 Annual Report - Financial Review Loblaw Companies Limited
7.8 Contractual Obligations
The following illustrates certain of the Company’s significant contractual obligations and discusses other
obligations as at December 30, 2023:
Summary of Contractual Obligations
Payments due by year
2026
2024
(millions of Canadian dollars)
Total
Total debt (including interest payments(i)) $ 2,558 $ 1,496 $ 854 $ 907 $ 1,360 $ 4,859 $ 12,034
Foreign exchange forward contracts
498
Financial Liabilities(ii)
Lease obligations
Contracts for purchases of investment
2028 Thereafter
9,219
3,040
1,509
1,092
1,242
1,484
852
498
215
154
2025
2027
12
12
12
12
13
—
—
—
—
—
projects(iii)
Purchase obligations(iv)
Total contractual obligations
392
886
67
626
41
577
157
39
40
1
7
1
704
2,130
$ 5,830 $ 3,711 $ 2,726 $ 2,207 $ 2,265 $ 8,061 $ 24,800
(i) Fixed interest payments are based on the maturing face values and annual interest for each instrument, including GICs, long term
independent securitization trusts and an independent funding trust, as well as annual payment obligations for structured entities. Variable
interest payments are based on the forward rates as of December 30, 2023.
(ii) These are the contractual payments that the Company is committed to related to the sale of retail properties to Choice Properties Real
Estate Investment Trust and third parties.
(iii) These obligations include agreements for the purchase of equipment, real property and capital commitments for construction, expansion
and renovation of buildings. These agreements may contain conditions that may or may not be satisfied. If the conditions are not satisfied, it
is possible the Company will no longer have the obligation to proceed with the underlying transactions.
(iv) These obligations include contractual obligations to purchase goods or services of a material amount where the contract prescribes fixed or
minimum volumes to be purchased or payments to be made within a fixed period of time for a set or variable price. These are only estimates
of anticipated financial commitments under these arrangements and the amount of actual payments will vary. These purchase obligations do
not include purchase orders issued or agreements made in the ordinary course of business which are solely for goods which are meant for
resale, nor do they include any contracts which may be terminated on relatively short notice or with relatively insignificant cost or liability to
the Company.
At year end, the Company had additional long term liabilities which included post-employment and other long term
employee benefit plan liabilities, deferred vendor allowances, deferred income tax liabilities and provisions,
including insurance liabilities. These long term liabilities have not been included above as the timing and amount of
future payments are uncertain.
2023 Annual Report - Financial Review Loblaw Companies Limited 25
Management’s Discussion and Analysis
8. Financial Derivative Instruments
The Company uses derivative instruments to offset certain of its financial risks. The Company uses bond forwards
and interest rate swaps, to manage its anticipated exposure to fluctuations in interest rates on future debt
issuances. The Company also uses futures, options and forward contracts to manage its anticipated exposure to
fluctuations in commodity prices and exchange rates in its underlying operations.
The following is a summary of the fair values recognized on the consolidated balance sheets and the net realized
and unrealized gains (losses) before income taxes related to the Company’s financial derivative instruments
designated as cash flow hedges:
(millions of Canadian dollars)
December 30, 2023
(52 weeks)
Gain/(loss)
recorded in
operating
income
Gain/(loss)
recorded
in OCI
December 31, 2022
(52 weeks)
Gain/(loss)
recorded in
operating
income
Gain/(loss)
recorded
in OCI
Net asset/
(liability)
Fair value
Net asset/
(liability)
Fair value
Derivatives designated as cash flow hedges
Foreign Exchange Forwards(i)
Bond Forwards(ii)
Interest Rate Swaps and Other(iii)
Total derivatives designated as cash flow hedges $
$
7 $
(2) $
2 $
4 $
4 $
—
(3)
4 $
11
(4)
5 $
(4)
2
— $
1
1
6 $
18
(1)
21 $
2
(5)
4
1
(i) PC Bank uses foreign exchange forwards, with a notional value of $9 million USD, to manage its foreign exchange risk related to certain U.S.
payables. The fair value of the derivatives is included in prepaid expenses and other assets.
(ii) PC Bank uses bond forwards to manage its interest risk related to future debt issuances. During 2023, PC Bank settled all of its outstanding
bond forwards..
(iii) PC Bank uses interest rate swaps, with a notional value of $180 million, to mitigate the impact of increases in interest rate. In the second
quarter of 2023, the Company entered into a 20 year arrangement to hedge energy pricing on its purchases in Alberta beginning on
January 1, 2025. The hedge has a notional value of $223 million and resulted in a fair value loss of $4 million in 2023, which has been
recorded in other comprehensive income. The fair values of the derivatives are included in both prepaid expenses and other assets and
trade payables and other liabilities.
The Company also uses futures, options and forward contracts to manage its anticipated exposure to fluctuations
in commodity prices and exchange rates on its underlying operations. These derivative instruments are not
designated in a formal hedging relationship. For further details on the impact of these instruments during 2023 see
Section 17 “Non-GAAP and other Financial Measures” of the MD&A.
The following is a summary of the fair values recognized on the consolidated balance sheets and the net realized
and unrealized gains (losses) before income taxes related to the Company’s financial derivative instruments not
designated in a formal hedging relationship:
(millions of Canadian dollars)
Derivatives not designated in a formal hedging relationship
December 30, 2023
(52 weeks)
Gain/(loss)
recorded in
operating
income
Net asset/
(liability)
Fair value
December 31, 2022
(52 weeks)
Gain/(loss)
recorded in
operating
income
Net asset/
(liability)
Fair value
Foreign Exchange and Other Forwards
Other Non-Financial Derivatives
$
(3) $
(4) $
13 $
(4)
(7)
1
Total derivatives not designated in a formal hedging relationship $
(7) $
(11) $
14 $
32
24
56
26 2023 Annual Report - Financial Review Loblaw Companies Limited
9. Quarterly Results of Operations
9.1 Results by Quarter
The Company follows a 52-week reporting cycle which periodically necessitates a fiscal year of 53 weeks due to
an accounting convention common in the retail industry. Fiscal years 2023 and 2022 were both 52 weeks.
The 52-week reporting cycle is divided into four quarters of 12 weeks each except for the third quarter, which is
16 weeks in duration.
The following is a summary of selected unaudited consolidated financial information for each of the eight most
recently completed quarters:
Summary of Consolidated Quarterly Results
(millions of Canadian
dollars except where
otherwise indicated)
First
Quarter
(12 weeks)
Second
Quarter
(12 weeks)
Third
Quarter
(16 weeks)
Fourth
Quarter
(12 weeks)
Total
(52 weeks)
First
Quarter
(12 weeks)
Second
Quarter
(12 weeks)
Third
Quarter
(16 weeks)
Fourth
Quarter
(12 weeks)
Total
(52 weeks)
2023
2022
Revenue
Adjusted EBITDA(2)
Net earnings
available to
common
shareholders of
the Company
Adjusted net
earnings available
to common
shareholders of
the Company(2)
Net earnings per
common share:
$ 12,995
$ 13,738
$ 18,265
$ 14,531
$ 59,529
$ 12,262
$ 12,847
$ 17,388
$ 14,007
$ 56,504
1,448
1,640
1,926
1,633
6,647
1,343
1,499
1,846
1,493
6,181
418
508
621
541
2,088
437
387
556
529
1,909
505
626
719
630
2,480
459
566
663
575
2,263
Basic ($)
Diluted ($)
$ 1.30
$ 1.59
$ 1.97
$ 1.73
$ 6.59
$ 1.29
$ 1.58
$ 1.95
$ 1.72
$ 6.52
$
$
1.31
1.30
$
$
1.17
1.16
$
1.71
$ 1.63
$ 5.82
$ 1.69
$ 1.62
$ 5.75
Adjusted diluted net
earnings per
common share(2) ($) $ 1.55
Food Retail same-
store sales growth
3.1 %
$ 1.94
$ 2.26
$ 2.00
$ 7.75
$
1.36
$
1.69
$ 2.01
$ 1.76
$ 6.82
6.1 %
4.5 %
2.0 %
3.9 %
2.1 %
0.9 %
6.9 %
8.4 %
4.7 %
Drug Retail same-
store sales growth
7.4 %
5.7 %
4.6 %
4.6 %
5.4 %
5.2 %
5.6 %
7.7 %
8.7 %
6.9 %
2023 Annual Report - Financial Review Loblaw Companies Limited 27
Management’s Discussion and Analysis
the timing of holidays;
seasonality, which was greatest in the fourth quarter and least in the first quarter;
Revenue Revenue for the last eight quarters was impacted by various factors including the following:
•
•
• macro-economic conditions impacting food and drug retail prices;
• COVID-19 pandemic related impacts; and
•
changes in net retail square footage. Over the past eight quarters, net retail square footage has remained
constant at 71.2 million square feet.
the timing of holidays;
seasonality, which was greatest in the fourth quarter and least in the first quarter;
Net Earnings Available to Common Shareholders of the Company and Diluted Net Earnings Per Common Share
Net earnings available to common shareholders of the Company and diluted net earnings per common share for
the last eight quarters were impacted by the following items:
•
•
•
•
• COVID-19 pandemic related impacts; and
•
the impact of certain adjusting items, as set out in Section 17 “Non-GAAP and Other Financial Measures”,
including:
cost savings and operating efficiencies and benefits from strategic initiatives;
the favourable impact of the repurchase of common shares for cancellation;
◦
◦
◦
◦
◦
◦
◦
charges and recoveries related to PC Bank commodity tax matters;
Lifemark transaction costs;
restructuring and other related recoveries and costs;
the recovery relating to Glenhuron;
fair value adjustments on non-operating properties;
fair value adjustments on fuel and foreign currency contracts; and
the gains and losses on sale of non-operating properties.
28 2023 Annual Report - Financial Review Loblaw Companies Limited
9.2 Fourth Quarter Results
The following is a summary of selected consolidated unaudited financial information for the fourth quarter of 2023:
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
Revenue
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(2)
Income taxes
Adjusted income taxes(2)
Adjusted effective tax rate(2)
Net earnings (losses) attributable to non-controlling interests
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders
of the Company(i)
Adjusted net earnings available to common shareholders
of the Company(2)
Diluted net earnings per common share ($)
Adjusted diluted net earnings per common share(2) ($)
Diluted weighted average common shares outstanding
(in millions)
Cash flows from (used in)(i):
Operating activities
Investing activities
Financing activities
$ 14,531
$ 14,007
$ 524
943
1,633
11.2 %
680
195
195
188
224
25.7 %
16
544
541
630
1.72
2.00
$
$
$
$
$
871
1,493
10.7 %
$
667
$
172
172
181
205
26.7 %
(14)
532
529
575
1.62
1.76
$
$
$
$
3.7 %
8.3 %
9.4 %
1.9 %
13.4 %
13.4 %
3.9 %
9.3 %
72
140
13
23
23
7
19
$
$
30
12
214.3 %
2.3 %
12
2.3 %
55
$ 0.10
9.6 %
6.2 %
$ 0.24
13.6 %
314.9
327.4
$
1,405
$
1,148
$ 257
22.4 %
(330)
(819)
(416)
(539)
86
20.7 %
(280)
(51.9) %
Dividends declared per common share ($)
$ 0.446
$ 0.405
$ 0.041
10.1 %
Dividends declared per Second Preferred Share, Series B ($)
$ 0.33125
$ 0.33125
—
—
(i) Net earnings available to common shareholders of the Company are net earnings attributable to shareholders of the Company net of
dividends declared on the Company’s Second Preferred Shares, Series B.
Loblaw delivered another quarter of strong operational and financial results as it maintained its focus on retail
excellence. The Company’s value proposition, private label brands, and personalized PC Optimum offers continued
to resonate with customers seeking quality and value. This resulted in traffic growth and continued market share
momentum in Food Retail. The Company recorded an internal food inflation lower than Canada’s food CPI again
this quarter, demonstrating the impact of its continuing investments in value. Additionally, the Company opened 8
more Maxi and NoFrills discount stores in the fourth quarter. Drug Retail sales reflected continued strength in front
store beauty products, and strong sales of cough and cold medications. Canadians reacted very positively to the
convenience and level of care offered across the Company’s 74 new pharmacy-based clinics, resulting in strong
growth of new pharmacist led healthcare services. Operational excellence across the Company’s businesses
supported sales growth, provided sequential shrink improvements, and continued the Company’s focused cost
discipline, to drive earnings growth. Loblaw’s strategy, unique assets, and dedicated colleagues position it well to
best serve the needs of Canadians today and in the future.
2023 Annual Report - Financial Review Loblaw Companies Limited 29
Management’s Discussion and Analysis
Net Earnings Available to Common Shareholders of the Company and Diluted Net Earnings Per Common Share
Net earnings available to common shareholders of the Company in the fourth quarter of 2023 were $541 million
($1.72 per common share). When compared to the fourth quarter of 2022, this was an increase of $12 million ($0.10
per common share). The increase included an improvement in the underlying operating performance of $55 million,
partially offset by the unfavourable change in adjusting items totaling $43 million as described below:
•
the improvement in underlying operating performance of $55 million ($0.16 per common share) was primarily
due to the following:
◦
an improvement in the underlying operating performance in the Retail segment driven by an increase in
gross profit(2), partially offset by an increase in SG&A and depreciation and amortization;
the unfavourable impact from non-controlling interests.
partially offset by,
◦
the unfavourable change in adjusting items totaling $43 million ($0.14 per common share) was primarily due to
the following:
◦
the unfavourable impact of prior year gain on sale of non-operating properties of $41 million ($0.13 per
common share); and
◦
the year-over-year unfavourable change in fair value adjustments of non-operating properties of
$10 million ($0.03 per common share);
partially offset by,
◦
the favourable impact of recoveries related to PC Bank commodity tax matters of $12 million ($0.04 per
common share).
diluted net earnings per common share also included the favourable impact from the repurchase of common
shares over the last 12 months ($0.08 per common share).
•
•
Adjusted net earnings available to common shareholders of the Company(2) were $630 million, an increase of
$55 million or 9.6% compared to the fourth quarter of 2022. Adjusted net earnings per common share(2) were
$2.00, an increase of $0.24 or 13.6%. The increase includes the favourable impact from the repurchase of common
shares.
Revenue
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
Retail
Financial Services
Eliminations
Revenue
$
14,157
$
13,694 $
463
487
(113)
417
(104)
70
(9)
$
14,531
$
14,007 $
524
3.4 %
16.8 %
(8.7) %
3.7 %
Revenue was $14,531 million in the fourth quarter of 2023. When compared to the fourth quarter of 2022, this was
an increase of $524 million, or 3.7%. The increase was primarily driven by an increase in Retail segment sales of
$463 million due to positive same-store sales growth. There was also an increase in Financial Services segment
sales of $70 million.
30 2023 Annual Report - Financial Review Loblaw Companies Limited
Operating Income Operating income was $943 million in the fourth quarter of 2023. When compared to the fourth
quarter of 2022, this was an increase of $72 million, or 8.3%. The increase was driven by an improvement in
underlying operating performance of $127 million, partially offset by the unfavourable change in adjusting items
totaling $55 million as described below:
•
the improvement in underlying operating performance of $127 million was primarily due to the following:
◦
an improvement in the underlying operating performance of the Retail Segment due to an increase in
gross profit(2), partially offset by an increase in SG&A and depreciation and amortization.
•
the unfavourable impact of prior year gain on sale of non-operating properties of $50 million; and
the unfavourable change in adjusting items totaling $55 million was primarily due to the following:
◦
◦
the year-over-year unfavourable change in fair value adjustments on non-operating properties of
$15 million;
partially offset by,
◦
the favourable impact of recoveries related to PC Bank commodity tax matters of $13 million.
Adjusted EBITDA(2)
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
Retail
Financial Services
Adjusted EBITDA(2)
$
$
1,532
$
1,418 $
101
75
1,633
$
1,493 $
114
26
140
8.0 %
34.7 %
9.4 %
Adjusted EBITDA(2) was $1,633 million in the fourth quarter of 2023. When compared to the fourth quarter of 2022,
this was an increase of $140 million or 9.4%, driven by an increase in the Retail segment of $114 million, and an
increase in the Financial Services segment of $26 million.
Depreciation and Amortization Depreciation and amortization was $680 million in the fourth quarter of 2023, an
increase of $13 million when compared to the fourth quarter of 2022. The increase in depreciation and amortization
in the fourth quarter of 2023 was primarily driven by an increase in depreciation of leased assets and IT assets,
accelerated depreciation of $7 million as a result of network optimization, and an increase in depreciation of fixed
assets related to conversions of retail locations, partially offset by the impact of prior year accelerated depreciation
due to the reassessment of the estimated useful life of certain IT assets. Included in depreciation and amortization
was the amortization of intangible assets related to the acquisitions of Shoppers Drug Mart and Lifemark of
$115 million (2022 – $115 million).
Net Interest Expense and Other Financing Charges Net interest expense and other financing charges were
$195 million, an increase of $23 million or 13.4% compared to the fourth quarter of 2022. The increase was
primarily driven by an increase in interest expense from lease liabilities and borrowing related to credit card
receivables, and prior year interest income from post-employment and other long term employee benefits.
Income Taxes Income tax expense in the fourth quarter of 2023 was $188 million (2022 – $181 million) and the
effective tax rate was 25.1% (2022 – 25.9%). The decrease in the effective tax rate was primarily attributable to the
impact of certain non-deductible items.
Adjusted income tax expense(2) in the fourth quarter of 2023 was $224 million (2022 – $205 million) and the
adjusted effective tax rate(2) was 25.7% (2022 – 26.7%). The decrease in the adjusted effective tax rate(2) was
primarily attributable to the non-taxable portion of the gain from real estate dispositions during the quarter and the
impact of certain non-deductible items.
Net Earnings (Losses) Attributable To Non-Controlling Interests Net earnings attributable to non-controlling
interests were $16 million, as compared to losses of $14 million in the prior period. The increase is primarily driven
by an increase in franchisee earnings after profit sharing. On a full year basis, net earnings attributable to non-
controlling interests were $87 million, an increase of $14 million or 19.2% compared to 2022, primarily driven by an
increase in franchisee earnings after profit sharing. Non-controlling interests represent the share of earnings that
relates to the Company’s Food Retail franchisees and is impacted by the timing of when profit sharing with
franchisees is agreed and finalized under the terms of the agreements.
2023 Annual Report - Financial Review Loblaw Companies Limited 31
Management’s Discussion and Analysis
Cash Flow
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
Cash and cash equivalents, beginning of period
Cash flows from (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rate changes on
cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, end of period
$
$
$
$
(330)
(819)
4
260
1,488
1,228
$
1,414 $
(186)
(13.2) %
1,405
$
1,148 $
(416)
(539)
257
86
22.4 %
20.7 %
(280)
(51.9) %
1
3
300.0 %
$
$
194 $
66
1,608 $
(120)
34.0 %
(7.5) %
Cash Flows from Operating Activities Cash flows from operating activities were $1,405 million in the fourth quarter
of 2023, an increase of $257 million compared to the fourth quarter of 2022. The increase in cash flows from
operating activities was primarily driven by higher cash earnings, and a cash payment made in the fourth quarter of
2022 in relation to PC Bank commodity tax matters. Cash flows from operating activities also increased as credit
card receivables increased year-over-year at a rate lower than prior year.
Cash Flows used in Investing Activities Cash flows used in investing activities were $330 million in the fourth
quarter of 2023, a decrease of $86 million compared to the fourth quarter of 2022. The decrease in cash flows
used in investing activities was primarily driven by a favourable change in long-term and short term investment
portfolio and an increase in proceeds from disposal of assets, partially offset by the release of $250 million in
security deposits to repay Eagle notes maturing in the fourth quarter of 2022.
Cash Flows used in Financing Activities Cash flows used in financing activities were $819 million in the fourth
quarter of 2023, an increase of $280 million compared to the fourth quarter of 2022. The increase in cash flows
used in financing activities was primarily driven by higher repurchases of common shares in the current year and
higher issuance of short-term debt in the current year.
Capital Investments Capital investments in the fourth quarter of 2023 were $676 million, an increase of $25 million
or 3.8%, compared to the fourth quarter of 2022.
Free Cash Flow(2)
For the periods ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Cash flows from (used in)
2023
(12 weeks)
2022
(12 weeks)
Retail
Financial
Services
Eliminations(i)
Total
Retail
Financial
Services
Eliminations(i)
Total
operating activities
$ 1,495 $ (131) $
41 $ 1,405 $ 1,347 $ (218) $
19 $
1,148
Less:
Capital investments(ii)
Interest paid
Lease payments, net
Free cash flow(2)
666
60
257
10
—
—
—
41
—
676
101
257
640
66
233
11
—
—
—
19
—
$ 512 $ (141) $
— $
371 $ 408 $ (229) $
— $
651
85
233
179
Interest paid is included in cash flows from operating activities under the Financial Services segment.
(i)
(ii) Capital investments are the sum of fixed asset purchases and intangible asset additions as presented in the Company’s consolidated
statements of cash flows, and prepayments transferred to fixed assets in the current year. Capital investments in the fourth quarter of 2023
include $37 million of prepayments transferred to fixed assets.
Free cash flow(2) from the Retail segment in the fourth quarter of 2023 was $512 million, an increase of $104 million
from the fourth quarter of 2022. The increase was primarily driven by higher cash earnings partially offset by higher
capital investments.
32 2023 Annual Report - Financial Review Loblaw Companies Limited
Free cash flow(2) from the Financial Services segment in the fourth quarter of 2023 was $141 million, an increase of
$88 million compared to the fourth quarter of 2022. The increase was primarily driven by, a cash payment made in
the fourth quarter of 2022 in relation to PC Bank commodity tax matters and higher cash earnings. Free cash flow
also increased as credit card receivables increased year-over-year at a rate lower than prior year.
Segment Information
(unaudited)
(millions of Canadian dollars)
Revenue(ii)
Operating income
Net interest expense and other
December 30, 2023
(12 weeks)
December 31, 2022
(12 weeks)
Retail
Financial
Services Eliminations(i)
Total
Retail
Financial
Services Eliminations(i)
Total
$ 14,157 $ 487 $
(113) $ 14,531 $ 13,694 $ 417 $
(104) $ 14,007
$ 843 $ 100 $
— $ 943 $ 810 $ 61 $
— $ 871
financing charges
156
39
—
195
144
28
—
172
Earnings before income taxes
$ 687 $ 61 $
— $ 748 $ 666 $ 33 $
— $ 699
Operating income
$ 843 $ 100 $
— $ 943 $ 810 $ 61 $
— $ 871
Depreciation and amortization
Adjusting items(iii)
Less: amortization of intangible
assets acquired with
Shoppers Drug Mart and
Lifemark
Adjusted EBITDA(iii)
Depreciation and amortization(iv)
Adjusted operating income
666
138
14
(13)
—
—
680
125
653
70
14
—
—
—
667
70
(115)
—
—
(115)
(115)
—
—
(115)
$ 1,532 $ 101 $
— $ 1,633 $ 1,418 $ 75 $
— $ 1,493
551
14
—
565
538
14
—
552
$ 981 $ 87 $
— $ 1,068 $ 880 $ 61 $
— $ 941
Eliminations includes the reclassification of revenue related to PC® Mastercard®
Included in Financial Services revenue is $167 million (December 31, 2022 – $141 million) of interest income.
(i)
(ii)
(iii) Certain items are excluded from operating income to derive adjusted EBITDA(2). Adjusted EBITDA(2) is used internally by management when
loyalty awards in the Financial Services segment.
analyzing segment underlying performance.
(iv) Depreciation and amortization for the calculation of adjusted EBITDA(2) excludes $115 million (December 31, 2022 – $115 million) of
amortization of intangible assets acquired with Shoppers Drug Mart and Lifemark.
2023 Annual Report - Financial Review Loblaw Companies Limited 33
Management’s Discussion and Analysis
Retail Segment Fourth Quarter Results of Operations
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Sales
Operating income
Gross profit(2)
Gross profit %(2)
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
$ 14,157
$ 13,694
$
463
843
4,409
810
4,188
33
221
3.4 %
4.1 %
5.3 %
31.1 %
30.6 %
$
1,532
$
1,418
$
114
8.0 %
10.8 %
10.4 %
$
666
$
653
$
13
2.0 %
The following table provides a breakdown of the Company’s total and same-store sales for the Retail segment.
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Food retail
Drug retail
Pharmacy and healthcare services
Front store
2023
(12 weeks)
2022
(12 weeks)
Same-store
sales
Sales
Same-store
sales
Sales
$ 9,774
4,383
2,099
2,284
2.0 % $ 9,514
4.6 %
8.0 %
1.7 %
4,180
1,941
2,239
8.4 %
8.7 %
5.4 %
11.5 %
Sales Retail segment sales were $14,157 million in the fourth quarter of 2023, an increase of $463 million, or 3.4%
compared to the fourth quarter of 2022, primarily driven by the following factors:
•
Same-store sales growth in food was moderate;
Food retail same-store sales growth was 2.0% (2022 – 8.4%) for the quarter.
◦
◦
◦
Same-store sales growth in pharmacy was moderate;
The CPI as measured by The Consumer Price Index for Food Purchased From Stores was 4.9% (2022 –
11.2%) which was higher than the Company’s internal food inflation; and
◦
Food Retail traffic increased and basket size decreased.
• Drug retail same-store sales growth was 4.6% (2022 – 8.7%) for the quarter.
◦
◦
Pharmacy and healthcare services same-store sales growth was 8.0% (2022 – 5.4%). Pharmacy and
healthcare services same-store sales growth benefited from the change in sales mix. The number of
prescriptions dispensed increased by 3.5% (2022 – 2.0%). On a same-store basis, the number of
prescriptions dispensed increased by 3.4% (2022 – 2.2%) and the average prescription value increased by
3.4% (2022 – 2.3%);
Front store same-store sales growth was 1.7% (2022 – 11.5%). Front store same-store sales growth
benefited from higher consumer spending.
In the last 12 month, 23 food and drug stores were opened, and 12 food and drug stores were closed, and net retail
square footage has remained constant at 71.2 million square feet.
34 2023 Annual Report - Financial Review Loblaw Companies Limited
Operating Income Operating income was $843 million in the fourth quarter of 2023, an increase of $33 million, or
4.1% compared to the fourth quarter of 2022. The increase was driven by an improvement in underlying operating
performance of $101 million, and an unfavourable change in adjusting items totaling $68 million, as described
below:
•
the improvement in underlying operating performance of $101 million was due to an increase in gross profit(2),
partially offset by an increase in SG&A and depreciation and amortization; and
•
the unfavourable impact of prior year gain on sale of non-operating properties of $50 million; and
the unfavourable change in adjusting items totaling $68 million was primarily due to the following:
◦
◦
the year-over-year unfavourable change in fair value adjustments on non-operating properties of
$15 million.
Gross Profit(2) Gross profit(2) was $4,409 million in the fourth quarter of 2023, an increase of $221 million, or 5.3%
compared to 2022. The gross profit percentage(2) for the fourth quarter of 2023 was 31.1%, which was in line with
the full-year gross profit percentage(2) of 31.0%, and was higher by 50 basis points compared to the fourth quarter
of 2022 (2022 – decreased by 30 basis points). The increase was driven by lapping of high-intensity prior year
promotional activities and the scaling of the external freight business, partially offset by higher shrink.
Adjusted EBITDA(2) Adjusted EBITDA(2) was $1,532 million in the fourth quarter of 2023, an increase of $114 million,
or 8.0% compared to the fourth quarter of 2022. The increase was driven by an increase in gross profit(2) of $221
million, partially offset by an increase in SG&A of $107 million. SG&A as a percentage of sales was 20.3%, an
increase of 10 basis points, driven by the year-over-year impact of labour costs including expenses related to the
ratification of union labour agreements, partially offset by operating leverage from higher sales.
Depreciation and Amortization Depreciation and amortization was $666 million in the fourth quarter of 2023, an
increase of $13 million when compared to the fourth quarter of 2022. The increase in depreciation and amortization
in the fourth quarter of 2023 was primarily driven by an increase in depreciation of leased assets and IT assets,
accelerated depreciation of $7 million as a result of network optimization, and an increase in depreciation of fixed
assets related to conversions of retail locations, partially offset by the impact of prior year accelerated depreciation
due to the reassessment of the estimated useful life of certain IT assets. Included in depreciation and amortization
was the amortization of intangible assets related to the acquisitions of Shoppers Drug Mart and Lifemark of
$115 million (2022 – $115 million).
Network Optimization During the fourth quarter of 2023, the Company recorded charges of $25 million associated
with network optimization. Included in the charges was accelerated depreciation of $7 million as described above,
and other charges. The Company finalized plans for 2024 that are expected to result in the conversion of 30
Provigo stores to Maxi discount stores in Quebec. Charges associated with store conversions will be recorded as
incurred and are expected to include equipment, severance, lease related and other costs and will not be
considered an adjusting item.
2023 Annual Report - Financial Review Loblaw Companies Limited 35
Management’s Discussion and Analysis
Financial Services Segment Fourth Quarter Results of Operations
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Revenue
Earnings before income taxes
2023
(12 weeks)
2022
(12 weeks)
$ Change % Change
$
487
$
417 $
61
33
70
28
16.8 %
84.8 %
(millions of Canadian dollars except where otherwise indicated)
As at
December 30, 2023
As at
December 31, 2022
$ Change % Change
Average quarterly net credit card receivables
$
Credit card receivables
Allowance for credit card receivables
Annualized yield on average quarterly gross
credit card receivables
Annualized credit loss rate on average quarterly
gross credit card receivables
3,950
4,132
256
13.9 %
3.8 %
$
3,607
$
343
178
50
3,954
206
13.0 %
2.7 %
9.5 %
4.5 %
24.3 %
Revenue Revenue was $487 million in the fourth quarter of 2023, an increase of $70 million compared to the
fourth quarter of 2022. The increase in the fourth quarter was primarily driven by:
•
•
•
higher interchange income and other credit card related revenue from an increase in customer spending.
higher interest income from growth in credit card receivables; and
higher sales attributable to The Mobile Shop;
Earnings Before Income Tax Earnings before income taxes were $61 million in the fourth quarter of 2023, an
increase of $28 million compared to the fourth quarter of 2022. The increase in the fourth quarter was primarily
driven by:
•
•
lower operating costs, including benefits associated with the renewal of a long-term agreement with
Mastercard; and
higher revenue as described above;
a partial reversal of certain PC Bank commodity tax matters accrued in the second quarter of 2023;
•
partially offset by,
•
•
•
higher contractual charge-offs and loyalty program costs from growth in credit card portfolio;
the year-over-year unfavourable impact of the expected credit loss provision; and
higher funding costs from an increase in interest rates.
Credit Card Receivables As at December 30, 2023, credit card receivables were $4,132 million, an increase of
$178 million compared to December 31, 2022. The increase was primarily driven by growth in the active customer
base and an increase in customer spending. The allowance for credit card receivables was $256 million, an
increase of $50 million compared to December 31, 2022. The increase is reflective of the current and forecast
macro-economic environment and its impact on consumer credit trends.
36 2023 Annual Report - Financial Review Loblaw Companies Limited
10. Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of disclosure controls and procedures to
provide reasonable assurance that all material information relating to the Company and its subsidiaries is gathered
and reported to senior management on a timely basis so that appropriate decisions can be made regarding public
disclosure.
As required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings
(“NI 52-109”), the President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) have caused
the effectiveness of the disclosure controls and procedures to be evaluated. Based on that evaluation,
management, under the supervision of the President and CEO and the CFO, have concluded that the design and
operation of the system of disclosure controls and procedures were effective as at December 30, 2023.
11. Internal Control over Financial Reporting
Management is also responsible for establishing and maintaining adequate internal controls over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with IFRS Accounting Standards.
As required by NI 52-109, the President and CEO, and the CFO have caused the effectiveness of the internal
controls over financial reporting to be evaluated using the framework established in ‘Internal Control - Integrated
Framework (COSO Framework)’ published by The Committee of Sponsoring Organizations of the Treadway
Commission (COSO), 2013. Based on that evaluation, management, under the supervision of the President and
CEO and the CFO, have concluded that the design and operation of the Company’s internal controls over financial
reporting were effective as at December 30, 2023.
In designing such controls, it should be recognized that due to inherent limitations, any control, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives and
may not prevent or detect misstatements. Additionally, management is required to use judgment in evaluating
controls and procedures.
Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control
over financial reporting in 2023 that materially affected, or are reasonably likely to materially affect the Company’s
internal control over financial reporting.
2023 Annual Report - Financial Review Loblaw Companies Limited 37
Management’s Discussion and Analysis
12. Enterprise Risks and Risk Management
The Company is committed to maintaining a framework that ensures risk management is an integral part of its
activities. The Company’s Enterprise Risk Management (“ERM”) program assists all areas of the business in
managing risks within appropriate levels of tolerance by bringing a systematic approach and methodology for
evaluating, measuring and monitoring key risks. The results of the ERM program and other business planning
processes are used to identify emerging risks to the Company, prioritize risk mitigation activities and develop a
risk-based internal audit plan.
Risks are not eliminated through the ERM program, but rather, are identified and managed in line with the
Company’s Risk Appetite Statement and within approved risk tolerances. The Risk Appetite Statement articulates
key aspects of the Company’s businesses, values, and brands and provides directional guidance on risk taking.
(i) Risks are assessed and evaluated based on the Company’s vulnerability to the risk and the potential impact that the underlying risks would
have on the Company’s ability to execute on its strategies and achieve its objectives.
(ii) Any of the key risks have the potential to negatively affect the Company and its financial performance. The Company has risk management
strategies in place for key risks. However, there can be no assurance that the risks will be mitigated or will not materialize or that events or
circumstances will not occur that could adversely affect the reputation, operations or financial condition or performance of the Company.
38 2023 Annual Report - Financial Review Loblaw Companies Limited
12.1 Operating Risks and Risk Management
The following discussion of risks identifies significant factors that could have a material adverse effect on the
Company’s business, operations, financial condition or future financial performance.
The following risks are a subset of the key risks identified through the ERM program. They should be read in
conjunction with the full set of risks inherent in the Company’s business, as included in the Company’s AIF for the
year ended December 30, 2023, which is hereby incorporated by reference:
Economic Conditions
Business Continuity
Cybersecurity, Privacy and Data Breaches
Food, Drug, Product and Services Safety
Regulatory Compliance
Change Management, Process and Efficiency
Inventory Management and Shrink
Environmental and Social
IT Systems Implementations and Data Management
Service Providers
Electronic Commerce and Disruptive Technology
Legal Proceedings
Colleague Attraction, Development and
Succession Planning
Healthcare Reform
Distribution and Supply Chain
Labour Relations
Franchisee Relationships
Associate-owned Drug Store Network and
Relationships with Associates
Competitive Environment and Strategy
Economic Conditions The Company’s revenue, profitability, brand and reputation may be impacted by general
economic conditions. These economic conditions include inflation, price increases from suppliers, levels of
employment, costs of borrowing, household debt, political uncertainty and government regulation, the impact of
natural disasters, war or acts of terrorism, pandemics, changes in interest rates, tax rates, or exchange rates, and
access to consumer credit. A number of these conditions could negatively impact consumer spending. As a result,
these economic conditions may adversely impact demand for the Company’s products and services which could
adversely affect the Company’s operations, financial performance, brand or reputation.
Cybersecurity, Privacy and Data Breaches The Company depends on the uninterrupted operation of its IT
systems, networks and services including internal and public internet sites, data hosting and processing facilities
and cloud-based services and hardware, such as point-of-sale processing at stores, to operate its business.
In the ordinary course of business, the Company collects, processes, transmits and retains confidential, sensitive
and personal information (“Confidential Information”), including payment card industry data and personal health
and financial information regarding the Company and its employees, franchisees, Associates, vendors, customers,
patients, credit card and PC Money™ Account holders and loyalty program members (“members”). Some of this
Confidential Information is held and managed by third party service providers. As with other large companies, the
Company is regularly subject to cyberattacks and such attempts are occurring more frequently, are constantly
evolving in nature and are becoming more sophisticated.
The Company has implemented security measures, including employee training, monitoring and testing,
maintenance of protective systems and contingency plans, to protect and to prevent unauthorized access of
Confidential Information and to reduce the likelihood of disruptions to its IT systems. The Company continues to
make strategic investments in this area in order to mitigate cyber threats. The Company also has security
processes, protocols and standards that are applicable to its third party service providers.
Despite these measures, all of the Company’s information systems, including its back-up systems and any third
party service provider systems that it employs, are vulnerable to damage, interruption, disability or failures due to a
variety of reasons, including physical theft, electronic theft, fire, power loss, computer and telecommunication
failures or other catastrophic events, as well as from internal and external security breaches, denial of service
attacks, viruses, worms and other known or unknown disruptive events.
2023 Annual Report - Financial Review Loblaw Companies Limited 39
Management’s Discussion and Analysis
The Company or its third party service providers may be unable to anticipate, timely identify or appropriately
respond to one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers,
cyber terrorists and others may attempt to breach the Company’s security measures or its third party service
providers’ information systems.
As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber
threats might defeat the Company’s security measures or those of its third party service providers. Moreover,
employee error or malfeasance, faulty password management or other irregularities may result in a breach of the
Company’s or its third party service providers’ security measures, which could result in a breach of employee,
franchisee, Associate, customer, patient, credit card or PC Money Account holder or loyalty program member
privacy or Confidential Information.
If the Company does not allocate and effectively manage the resources necessary to build and sustain reliable IT
infrastructure, fails to timely identify or appropriately respond to cybersecurity incidents, or the Company’s or its
third party service providers’ information systems are damaged, destroyed, shut down, interrupted or cease to
function properly, the Company’s business could be disrupted and the Company could, among other things, be
subject to: transaction errors; processing inefficiencies; the loss of or failure to attract new customers; the loss of
revenue; the loss or unauthorized access to Confidential Information or other assets; the loss of or damage to
intellectual property or trade secrets; damage to its reputation; litigation; regulatory enforcement actions; violation
of privacy, security or other laws and regulations; and remediation costs. Any such occurrences could adversely
affect the reputation, operations or financial performance of the Company.
Regulatory Compliance The Company is subject to a wide variety of laws, regulations and orders across all
countries in which it does business, including those laws involving product liability, labour and employment, anti-
trust and competition, pharmacy, food safety, intellectual property, privacy, environmental and other matters. The
Company is subject to taxation by various taxation authorities in Canada and a number of foreign jurisdictions.
Changes to any of the laws, rules, regulations or policies applicable to the Company’s business, including tax laws,
minimum wage laws, and laws affecting the production, processing, preparation, distribution, packaging and
labelling of food, pharmaceuticals and general merchandise products, could adversely affect the operations,
financial condition or performance of the Company.
Failure by the Company to comply with applicable laws, regulations and orders could subject the Company to civil
or regulatory actions, investigations or proceedings, including fines, assessments, injunctions, recalls or seizures,
which in turn could adversely affect the reputation, operations or financial condition or performance of the
Company. In the course of complying with changes to laws, the Company could incur significant costs. Changing
laws or interpretations of such laws or enhanced enforcement of existing laws could restrict the Company’s
operations or profitability and thereby threaten the Company’s competitive position and ability to efficiently
conduct business. The Company is subject to tax audits from various tax authorities on an ongoing basis. As a
result, from time to time, tax authorities may disagree with the positions and conclusions taken by the Company in
its tax filings or legislation could be amended or interpretations of current legislation could change, any of which
events could lead to reassessments.
The Company is subject to capital requirements from the OSFI, the primary regulator of PC Bank. PC Bank’s capital
management objectives are to maintain a consistently strong capital position while considering the economic risks
generated by its credit card receivables portfolio and to meet all regulatory capital requirements as defined by
OSFI. PC Bank uses Basel III as its regulatory capital management framework which includes a target common
equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5% and a total capital ratio of 10.5%. In addition to the
regulatory capital ratios requirement, PC Bank is subject to the Basel III Leverage ratio and OSFI’s Guideline on
Liquidity Adequacy Requirements (“LARs”). The LARs guideline establishes standards based on the Basel III
framework. PC Bank would be assessed fines and other penalties for non-compliance with these and other
regulations. In addition, failure by PC Bank to comply, understand, acknowledge and effectively respond to
applicable regulations could result in regulatory intervention and reputational damage.
40 2023 Annual Report - Financial Review Loblaw Companies Limited
Inventory Management and Shrink The Company is subject to risks associated with managing its inventory and
controlling shrink. Failure to successfully manage such risks could result in shortages of inventory, excess or
obsolete inventory which cannot be sold profitably or increases in levels of inventory shrink. Any of these outcomes
could adversely affect the financial performance of the Company. Although the Company has implemented new IT
systems, which are intended to provide increased visibility to integrated inventory and sales information at store
level, the Company’s failure to effectively implement such new IT systems and applicable processes may increase
the risks associated with managing inventory, including the risk that inaccurate inventory could result in inaccurate
financial statements.
The Company’s Retail segment is also examining its fundamental processes related to article lifecycle
management, with the goal of making existing processes more efficient. This will impact existing workflow and
system processes across procurement, supply chain and merchandising. Such simplification and efficiency
processes are critical to the organization’s ability to implement longer term system solutions and achieve
efficiencies across the Retail divisions. Any failure to effectively deliver this enterprise core solution could
negatively impact the Company’s operations or financial performance.
IT Systems Implementations and Data Management The operations of the Company are reliant on the continuous
and uninterrupted operations of critical technology systems. Any technology failure/outage pertaining to the
availability, capacity or sustainability of the Company’s IT systems may result in disruptions impacting the
Company’s customers or financial performance, or may negatively impact the Company’s reputation. The Company
continues to make investments in new IT systems to improve the operating effectiveness of the organization.
Failure to successfully migrate from legacy systems to new IT systems or a significant disruption in the Company’s
current IT systems during the implementation of new systems could result in a lack of accurate data to effectively
manage day-to-day operations of the business or achieve its operational objectives, causing significant disruptions
to the business and potential financial losses.
Failure to successfully adopt or implement appropriate processes to support the new IT systems, or failure to
effectively leverage or convert data from one system to another, may preclude the Company from optimizing its
overall performance and could result in inefficiencies and duplication in processes, which in turn could adversely
affect the reputation, operations or financial performance of the Company. Failure to realize the anticipated
strategic benefits including revenue growth, anticipated cost savings or operating efficiencies associated with new
IT systems could adversely affect the reputation, operations or financial performance of the Company.
The Company also depends on relevant and reliable information to operate its business. As the volume of data
being generated and reported continues to increase across the Company, data accuracy, quality and governance
are required for effective decision making. Failure by the Company to leverage data, including customer data, in a
timely manner may adversely affect the Company’s ability to execute its strategy and therefore its financial
performance. Moreover, lack of sensitive data classification, protection and use case approval may result in
operational or reputational risk.
Electronic Commerce and Disruptive Technologies The Company’s e-commerce strategy is a growing business
initiative. Customers expect innovative concepts and a positive customer experience, including a user-friendly
website, customer offerings that are integrated with the Company’s loyalty program, reliable data, safe and reliable
processing of payments and a well-executed merchandise pick up or delivery process. If systems are damaged or
cease to function properly, capital investment may be required. The Company is also vulnerable to various
additional uncertainties associated with e-commerce including website downtime and other technical failures,
changes in applicable federal and provincial regulations, security breaches, and consumer privacy concerns. If
these technology-based systems and related processes do not function effectively, or if the Company is unable to
identify and adapt to technological efficiencies, such as artificial/cognitive intelligence or automation in a timely
manner, the Company’s ability to grow its e-commerce business could be adversely affected. The Company has
increased its investment in improving the digital customer experience, but there can be no assurances that the
Company will be able to recover the costs incurred to date.
Colleague Attraction, Development and Succession Planning The Company’s operations and continued growth
are dependent on its ability to hire, retain and develop colleagues, including leaders. Any failure to effectively
attract and retain colleagues and leaders, including those with scarce and/or specialized skills, and to establish
adequate leadership succession planning, could result in a lack of requisite knowledge, skill and experience. This
could erode the Company’s competitive position or result in increased costs due to the competition for, or high
turn-over of, colleagues. Any of the foregoing could negatively affect the Company’s ability to operate its business,
which in turn could adversely affect the Company’s reputation, operations or financial performance.
2023 Annual Report - Financial Review Loblaw Companies Limited 41
Management’s Discussion and Analysis
Healthcare Reform The Company is reliant on prescription drug sales for a significant portion of its sales and
profits. Prescription drugs and their sales are subject to numerous federal, provincial, territorial and local laws and
regulations. Changes to these laws and regulations, including the potential implementation of a national
pharmacare system, changes in the models used to fund prescription drugs such as the introduction of a
pharmacare system, or non-compliance with these laws and regulations, could adversely affect the reputation,
operations or financial performance of the Company.
Federal and provincial laws and regulations that establish public drug plans typically regulate prescription drug
coverage, patient eligibility, pharmacy reimbursement, drug product eligibility and drug pricing. With respect to
pharmacy reimbursement, such laws and regulations typically regulate the allowable drug cost of a prescription
drug product, the permitted mark-up on a prescription drug product and the professional or dispensing fees that
may be charged on prescription drug sales to patients eligible under the public drug plan. With respect to drug
product eligibility, such laws and regulations typically regulate the requirements for listing the manufacturer’s
products as a benefit or partial benefit under the applicable governmental drug plan, drug pricing and, in the case
of generic prescription drug products, the requirements for designating the product as interchangeable with a
branded prescription drug product. In addition, other federal, provincial, territorial and local laws and regulations
govern the approval, packaging, labeling, sale, marketing, advertising, handling, storage, distribution, dispensing
and disposal of prescription drugs.
Sales of prescription drugs, pharmacy reimbursement and drug prices may be affected by changes to the
healthcare industry, including legislative or other changes that impact patient eligibility, drug product eligibility, the
allowable cost of a prescription drug product, the mark-up permitted on a prescription drug product, the amount of
professional or dispensing fees paid by payers or the provision or receipt of manufacturer allowances by
pharmacies and pharmacy suppliers.
The majority of prescription drug sales are reimbursed or paid by three types of payers: (i) government or public,
(ii) private insurers or employers, and (iii) out-of-pocket by the patient. These payers have pursued and continue to
pursue measures to manage the costs of their drug plans. Canada and each of the provinces has implemented
legislative and/or other measures directed towards managing pharmacy service costs and controlling increasing
drug costs incurred by public drug plans and private payers, which impact pharmacy reimbursement levels and the
availability of manufacturer allowances. Legislative measures to control drug costs include lowering of generic drug
pricing. Additionally, the pan-Canadian Pharmaceutical Alliance continues its work regarding cost reduction
initiatives for pharmaceutical products and services.
Legislation in certain provincial jurisdictions establishes listing requirements that ensure that the selling price for a
prescription drug product will not be higher than any selling price established by the manufacturer for the same
prescription drug product under other provincial drug insurance programs. In some provinces, elements of the laws
and regulations that impact pharmacy reimbursement and manufacturer allowances for sales to the public drug
plans are extended by legislation to sales to private payers. Also, private payers (such as corporate employers and
their insurers) are looking or may look to benefit from any measures implemented by government payers to reduce
prescription drug costs for public plans by attempting to extend these measures to prescription drug plans they
own or manage. Accordingly, changes to pharmacy reimbursement and manufacturer allowances for a public drug
plan could also impact pharmacy reimbursement and manufacturer allowances for private payers. In addition,
private payers could reduce pharmacy reimbursement for prescription drugs provided to their members or could
elect to reimburse members only for products included on closed formularies or available from preferred providers.
Changes impacting pharmacy reimbursement programs and prescription drug pricing, legislative or otherwise, are
expected to continue to put downward pressure on the value of prescription drug sales. These changes may have
a material adverse effect on the Company’s business, sales and profitability. In addition, the Company could incur
significant costs in the course of complying with any changes in the regulatory regime affecting prescription drugs
and pharmacy services. Non-compliance with any such existing or proposed laws or regulations, particularly those
that provide for the licensing and conduct of wholesalers, the licensing and conduct of pharmacists, the regulation
and ownership of pharmacies, the advertising of pharmacies and prescription services, the provision of information
concerning prescription drug products, the pricing of prescription drugs, privacy and confidentiality and interactions
with provincial drug and eHealth systems, could result in audits, civil or regulatory proceedings, fines, penalties,
injunctions, recalls or seizures, any of which could adversely affect the reputation, operations or financial
performance of the Company.
42 2023 Annual Report - Financial Review Loblaw Companies Limited
Distribution and Supply Chain The Company’s ability to satisfy its customers’ demands and achieve its cost
objectives depends on its ability to maintain key logistic and transport arrangements. The Company’s distribution
and supply chain could be negatively affected by unforeseen disruptions due to fire, severe weather conditions,
natural disasters or other catastrophic events, public health events, labour disagreements, or other transportation
problems. The loss of or disruption to these types of arrangements could interrupt product supply, which in turn
could adversely affect the assortment and product availability at the store and digital retail level. If not effectively
managed or remedied, these events could negatively impact customer experience and the Company’s ability to
attract and retain customers, and could adversely affect the Company’s operations or financial performance.
Labour Relations The Company’s workforce is comprised of both unionized and non-unionized colleagues. With
respect to those colleagues that are covered by collective agreements, there can be no assurance as to the
outcome of any labour negotiations or the timing of their completion. Renegotiating collective agreements or the
failure to successfully renegotiate collective agreements and changes to business operations could result in strikes,
work stoppages or business interruptions, and if any of these events were to occur, they could adversely affect the
reputation, operations and financial performance of the Company. If non-unionized colleagues become unionized,
the terms of the resulting collective agreements would have implications for the affected operations, such as higher
labour costs.
Business Continuity The Company’s ability to continue critical operations and processes could be negatively
impacted by adverse events resulting from various incidents, including severe weather, work stoppages, prolonged
IT systems failure, terrorist activity, power failures, border closures or a pandemic or other national or international
catastrophe. The Company has business continuity plans in place to manage any such events. Despite this,
ineffective contingency planning, business interruptions, crises or potential disasters could adversely affect the
reputation, operations or financial performance of the Company.
Food, Drug, Product and Services Safety The Company’s products may expose it to risks associated with product
safety and defects and product handling in relation to the manufacturing, design, packaging and labeling, storage,
distribution, and display of products. The Company cannot be certain that active management of these risks,
including maintaining strict and rigorous controls and processes in its manufacturing facilities and distribution
systems, will eliminate all the risks related to food and product safety. The Company could be adversely affected in
the event of a significant outbreak of food-borne illness or food safety issues including food tampering or
contamination. In addition, failure to trace or locate any contaminated or defective products could affect the
Company’s ability to be effective in a recall situation. The Company is also subject to risk associated with the
distribution of drug products, errors related to medication dispensing or compounding, injections, patient services
or consultation. The occurrence of such events or incidents, as well as any failure to maintain the cleanliness and
health standards at store level, could result in harm to customers and negative publicity, could adversely affect the
Company’s brands, reputation, operations or financial performance and could lead to unforeseen liabilities from
legal claims or otherwise.
Change Management, Process and Efficiency Many initiatives are underway to reduce the complexity and cost of
the Company’s business operations, ensuring a low cost operating structure that allows for continued investments
in the Company’s strategic growth areas. These efforts include initiatives focused on improving processes and
generating efficiencies across the Company’s administrative, store and distribution network infrastructures. The
success of these initiatives is dependent on effective leadership and realizing intended benefits. Ineffective change
management could result in a lack of integrated processes and procedures, unclear accountabilities and decision-
making rights, decreased colleague engagement, ineffective communication and training or a lack of requisite
knowledge. Any of the foregoing could disrupt operations, increase the risk of customer dissatisfaction, adversely
affect the Company’s reputation or financial performance or adversely affect the ability of the Company to
implement and achieve its long-term strategic objectives.
2023 Annual Report - Financial Review Loblaw Companies Limited 43
Management’s Discussion and Analysis
Environmental and Social As a leading Canadian food and pharmacy retailer, Loblaw is committed to creating
positive environmental and social change by focusing on issues that matter most to the Company’s customers,
employees, communities and other stakeholders, with a particular focus on combatting climate change and
advancing social equity. Any failure or perceived failure to advance the environmental or social priorities of the
Company or its stakeholders may negatively affect the Company’s reputation, operations or financial performance.
Environmental The Company faces environmental risks that could, directly or indirectly, negatively impact the
Company’s reputation, operations or performance over the short or long term.
In particular, the Company is confronted with issues relating to climate change. As a large company, Loblaw has the
opportunity to make a significant positive impact on the environment. To address this opportunity, Loblaw is
focused on several strategic initiatives, including reducing emissions, food and plastic waste. Federal and provincial
governments are also striving to combat climate change, including through the consideration and/or
implementation of carbon reduction targets and financial mechanisms to reduce carbon emissions, such as carbon
taxes, carbon pricing and caps and trade. In addition to its own initiatives, the Company may be required to make
operational changes and/or incur significant financial costs to comply with the various governmental reforms, which
may differ across jurisdictions. Additionally, certain global climate change patterns (e.g. rising sea levels, changing
rainfall) may impact sourcing of food and food ingredients. Any failure to meet its strategic objectives, adhere to
climate change reforms or to adapt to the impacts of climate change, such as failure to reduce emissions, eliminate
food and plastic waste or mitigate sourcing and supply chain disruptions, could result in fines or could adversely
affect the Company’s reputation, operations or financial performance.
The Company maintains a portfolio of real estate and other facilities and is subject to environmental risks
associated with the contamination of such properties and facilities, whether by previous owners or occupants,
neighbouring properties or by the Company itself. In particular, the Company has a number of underground fuel
storage tanks, the majority of which are used for its supply chain transport fleets. Contamination resulting from
leaks from these tanks is possible. Additional environmental issues relating to matters or sites may require the
Company to incur significant additional costs. The Company also operates refrigeration equipment in its stores and
distribution centres to preserve perishable products as they pass through the supply chain and ultimately to
consumers. These systems contain refrigerant gases which could be released if equipment fails or leaks. A release
of these gases could have adverse effects on the environment. Failure to properly manage any of these
environmental risks could adversely affect the reputation, operations or financial performance of the Company.
The Company is subject to legislation that imposes liabilities on retailers, brand owners and importers for costs
associated with recycling and disposal of consumer goods packaging and printed materials distributed to
consumers. There is a risk that the Company will be subject to increased costs associated with these laws. In
addition, the Company could be subject to increased or unexpected costs associated with environmental incidents
and the related remediation activities, including litigation and regulatory related costs, all of which could adversely
affect the reputation or financial performance of the Company.
Social The Company faces risks associated with social issues and has established certain priorities in response,
including achieving adequate representation of traditionally under-represented groups in management positions
and the colleague population as a whole, building a culture of inclusion and investing in communities, particularly
by supporting women’s and children’s health. In the event that the Company is not perceived to have robust
diversity and inclusion programs, its ability to attract, develop and retain colleagues could be compromised. The
Company recognizes its responsibility to respect and protect the human rights of all people who support and
intersect with the business, and is committed to not tolerating abuse, discrimination or harassment in any form.
Ineffective action or inaction in response to social matters, including a failure or perceived failure to adequately
address its priorities, could adversely affect the Company’s reputation or financial performance.
44 2023 Annual Report - Financial Review Loblaw Companies Limited
Service Providers The Company has a wide range of key business relationships with third parties including
vendors, suppliers, distributors and contractors. The Company relies on vendors, including offshore vendors in both
mature and developing markets, to provide the Company with goods and services. Offshore sourcing increases
certain risks to the Company, including risks associated with food safety and general merchandise product defects,
non-compliance with ethical and safe business practices and inadequate supply of products. The Company has no
direct influence over how vendors are managed. Negative events affecting vendors or inefficient, ineffective or
incomplete vendor management strategies, policies and/or procedures, including those related to ethical sourcing,
could adversely impact the Company’s reputation and impair the Company’s ability to meet customer needs or
control costs and quality, which could adversely affect the reputation, operations or financial performance of the
Company.
The Company relies on service providers including transport carriers or other delivery service providers, logistic
service providers and operators of warehouses and distribution facilities. Ineffective selection, contractual terms or
relationship management could impact the Company’s ability to source products (both national brand and control
brand products), to have products available for customers, to market to customers or to operate efficiently and
effectively. Disruption in services from suppliers could interrupt the delivery of merchandise to stores or customers,
which in turn could adversely affect the operations or financial performance of the Company.
PC Bank uses third party service providers to process credit card transactions, operate call centres and
operationalize certain risk management strategies for the PC® Mastercard® and PC Money Account. A significant
disruption in the services provided by third party service providers could adversely affect the financial performance
of PC Bank and the Company.
The Company has outsourced certain administrative functions of its business to service providers including account
payments, payroll services, IT support, investment management and custodial relationships, and benefit plan
administration. Any disruption in the services provided by these suppliers could adversely affect the return on
these assets or liquidity of the Company.
Legal Proceedings In the ordinary course of business, the Company is involved in and potentially subject to legal
proceedings. The proceedings may involve suppliers, customers, patients, Associates, franchisees, regulators, tax
authorities or other persons. The potential outcome of legal proceedings and claims is uncertain.
Shoppers Drug Mart was previously served with an Amended Statement of Claim in a class action proceeding that
has been filed in the Ontario Superior Court of Justice (“Superior Court”) by licensed Associates (“Associates”),
claiming various declarations and damages resulting from Shoppers Drug Mart’s alleged breaches of the Associate
Agreement. The class action comprises all of Shoppers Drug Mart’s current and former licensed Associates
residing in Canada, other than in Québec, who were parties to Shoppers Drug Mart’s 2002 and 2010 forms of the
Associate Agreement. On July 9, 2013, the Superior Court certified as a class proceeding portions of the action. A
summary judgment trial of the matter was held in December 2022 and on February 17, 2023, the Superior Court
released its decision in relation to those summary judgment motions (the “Decision”). The Superior Court dismissed
the plaintiffs’ claims on the majority of the issues including a request for damages at this stage of proceedings. The
Court also held that Shoppers Drug Mart breached the 2002 form of Associate Agreement when it did not remit
certain amounts that it received from generic drug manufacturers to Associates. On March 20, 2023, the plaintiffs
filed a Notice of Appeal and on April 4, 2023, the Company filed a Notice of Cross-Appeal. A hearing for the
appeals was held on February 14, 2024 and on February 15, 2024, and a decision is pending. Accordingly, the
Company has not recorded any amounts related to the potential liability associated with this lawsuit. The Company
does not believe that the ultimate resolution of this matter will have a material adverse impact on its financial
condition or prospects.
2023 Annual Report - Financial Review Loblaw Companies Limited 45
Management’s Discussion and Analysis
In 2017, the Company and Weston announced actions taken to address their role in an industry-wide price-fixing
arrangement involving certain packaged bread products. The arrangement involved the coordination of retail and
wholesale prices of certain packaged bread products over a period extending from late 2001 to March 2015. Under
the arrangement, the participants regularly increased prices on a coordinated basis. Class action lawsuits have
been commenced against the Company and Weston as well as a number of other major grocery retailers and
another bread wholesaler. It is too early to predict the outcome of such legal proceedings. Neither the Company
nor Weston believes that the ultimate resolution of such legal proceedings will have a material adverse impact on
its financial condition or prospects. The Company’s cash balances far exceed any realistic damages scenario and
therefore it does not anticipate any impacts on its dividend, dividend policy or share buyback plan. The Company
has not recorded any amounts related to the potential civil liability associated with the class action lawsuits in 2023
or prior on the basis that a reliable estimate of the liability cannot be determined at this time. The Company will
continue to assess whether a provision for civil liability associated with the class action lawsuits can be reliably
estimated and will record an amount in the period at the earlier of when a reliable estimate of liability can be
determined or the matter is ultimately resolved. As a result of admission of participation in the arrangement and
cooperation in the Competition Bureau’s investigation, the Company and Weston will not face criminal charges or
penalties. In response to such class action lawsuits, certain major grocery retailers have cross claimed against the
Company and Weston, and the Company and Weston believe such crossclaims are without merit.
In August 2018, the Province of British Columbia filed a class action against numerous opioid manufacturers and
distributors, including the Company and its subsidiaries, Shoppers Drug Mart Inc. and Sanis Health Inc. The claim
contains allegations of breach of the Competition Act, fraudulent misrepresentation and deceit and negligence, and
seeks unquantified damages for the expenses incurred by the federal government, provinces, and territories of
Canada in paying for opioid prescriptions and other healthcare costs related to opioid addiction and abuse in
Canada. During the second quarter of 2021, the claim against Loblaw Companies Limited was discontinued. In May
2019, two further opioid-related class actions were commenced in each of Ontario and Quebec against a large
group of defendants, including Sanis Health Inc. In February 2022, the plaintiff and Sanis Health Inc. agreed to
settle the Quebec action for a nominal amount, with no admission of liability and for the express purpose of
avoiding the delays, disruption, and expenses associated with the litigation. The settlement has been approved by
the court and is now final. In December 2019, a further opioid-related class action was commenced in British
Columbia against a large group of defendants, including Sanis Health Inc., Shoppers Drug Mart Inc. and the
Company. The allegations in the Ontario, Quebec, and the civil British Columbia class actions are similar to the
allegations against manufacturer defendants in the Province of British Columbia class action, except that these May
2019 and December 2019 claims seek recovery of damages on behalf of opioid users directly. In April 2021, the
Company, Shoppers Drug Mart Inc. and Sanis Health Inc. were served with another opioid-related class action that
was started in Alberta against multiple defendants. The claim seeks damages on behalf of municipalities and local
governments in relation to public safety, social service, and criminal justice costs allegedly incurred due to the
opioid crisis. In September 2021, the Company, Shoppers Drug Mart Inc. and Sanis Health Inc. were served with a
class action started in Saskatchewan by Peter Ballantyne Cree Nation and Lac La Ronge Indian Band on behalf of
all Indigenous, Metis, First Nation and Inuit communities and governments in Canada to recover costs they have
incurred as a result of the opioid crisis, including healthcare costs, policing costs and societal costs. In January
2024, Shoppers Drug Mart Inc. was served with a second class action in Saskatchewan started by Lac La Ronge
Indian Band. The case is brought on behalf of Band members and is claiming damages relating to abatement costs,
the diversion of financial and other resources, the reduction in the value of the reserve lands and interests, and lost
tax revenues. Shoppers Drug Mart Inc. is being sued as a representative of an international defendant subclass of
opioid “dealers” and Sanis Health Inc. is a proposed supplier class member. The Company believes these
proceedings are without merit and is vigorously defending them. The Company does not currently have any
significant accruals or provisions for these matters recorded in the consolidated financial statements.
In July 2022, the Tax Court released a decision relating to PC Bank, a subsidiary of the Company. The Tax Court of
Canada ruled that PC Bank is not entitled to claim notional input tax credits for certain payments it made to Loblaws
Inc. in respect of redemptions of loyalty points. On September 29th, 2022, PC Bank filed a Notice of Appeal with
the Federal Court of Appeal and in the first half of 2023 both PC Bank and the Crown submitted their respective
facta for the appeal. Subsequent to December 30, 2023, the Federal Court of Appeal scheduled the hearing of the
appeal for March 6, 2024. The Company has not reversed any portion of the charge of $111 million, inclusive of
interest, recorded in the second quarter of 2022. The Company believes that this provision is sufficient to cover its
liability, if the appeal is ultimately unsuccessful.
46 2023 Annual Report - Financial Review Loblaw Companies Limited
Franchisee Relationships The Company has entered into agreements with third party franchisees that permit the
franchisees to own and operate retail stores in accordance with prescribed procedures and standards.
A substantial portion of the Company’s revenues and earnings comes from amounts paid by franchisees in
connection with their store operations and leased property. Franchisees are independent operators and their
operations may be negatively affected by factors beyond the Company’s control. If franchisees do not operate their
stores in accordance with the Company’s standards or otherwise in accordance with good business practices,
franchisee fees and rent paid to the Company could be negatively affected, which in turn could adversely affect the
Company’s reputation, operations or financial performance. In addition, the Company’s reputation could be harmed
if a significant number of franchisees were to experience operational failures, health and safety exposures or were
unable to pay the Company for products, fees or rent.
The Company’s franchise system is also subject to franchise legislation enacted by a number of provinces. Any
new legislation or failure to comply with existing legislation could adversely affect operations and could add
administrative costs and burdens, any of which could affect the Company’s relationship with its franchisees.
Supply chain or system changes by the Company could cause or be perceived to cause disruptions to franchised
store operations and could result in negative effects on the financial performance of franchisees. Relationships with
franchisees could pose significant risks if they are disrupted, which could adversely affect the reputation,
operations or financial performance of the Company.
Associate-owned Drug Store Network and Relationships with Associates The success of the Company and the
reputation of its brands are closely tied to the performance of the Shoppers Drug Mart Associate-owned drug
stores. Accordingly, the Company relies on Associates to successfully operate, manage and execute retail
programs and strategies at their respective drug store locations. Associates are independent business operators
that have entered into agreements with the Company to own and operate retail stores in accordance with
prescribed procedures and standards. The success of the operations and financial performance of their respective
drug stores may be beyond the Company’s control. In addition, Associates are subject to franchise legislation.
Disruptions to the Company’s relationships with Shoppers Drug Mart Associate-owned drug stores or changes in
legislation could negatively affect revenue from Associates, which in turn could adversely affect the reputation,
operations or financial performance of the Company.
Competitive Environment and Strategy The retail industry in Canada is highly competitive. The Company
competes against a wide variety of retailers including supermarket and retail drug store operators, as well as mass
merchandisers, warehouse clubs, online retailers, mail order prescription drug distributors, limited assortment
stores, discount stores, convenience stores and specialty stores. Many of these competitors offer a selection of
food, drug and general merchandise, while others remain focused on supermarket-type merchandise. In addition,
the Company is subject to competitive pressures from new entrants into the marketplace and from the expansion
or renovation of existing competitors, particularly those expanding into the grocery and retail drug markets and
those offering e-commerce retail platforms. The Company’s loyalty program is a valuable offering to customers and
provides a key differentiating marketing tool for the business. The marketing, promotional and other business
activities related to the Company’s loyalty program must be well managed and coordinated to preserve positive
customer perception. The Company has made significant investments in support of its strategic growth areas of
Everyday Digital Retail, Payments and Rewards and Connected Healthcare, which are all subject to competitive
pressures. Failure to achieve these or other strategic priorities could adversely affect the Company’s financial
position and its competitiveness.
The Company’s inability to effectively predict market activity, leverage customer preferences and spending
patterns and respond in a timely manner to trends, or compete effectively with its current or future competitors
could result in, among other things, reduced market share and reduced profitability. If the Company is ineffective in
responding to consumer trends or in executing its strategic plans, its financial performance could be adversely
affected. The failure to effectively respond to customer trends may adversely impact the Company’s relationship
with its customers. The Company closely monitors market developments and market share trends. Failure by the
Company to sustain its competitive position could adversely affect the Company’s financial performance.
2023 Annual Report - Financial Review Loblaw Companies Limited 47
Management’s Discussion and Analysis
12.2 Financial Risks and Risk Management
The Company is exposed to a number of financial risks, including those associated with financial instruments, which
have the potential to affect its operating and financial performance. The Company uses OTC derivative instruments
to offset certain of these risks. Policies and guidelines prohibit the use of any derivative instrument for trading or
speculative purposes. The fair value of derivative instruments is subject to changing market conditions which could
adversely affect the financial performance of the Company.
The following is a list of the Company’s financial risks which are discussed in detail below:
Liquidity
Commodity Prices
Currency Exchange Rates
Credit
Interest Rates
Credit Ratings
Liquidity Liquidity risk is the risk that the Company is unable to generate or obtain sufficient cash or its equivalents
in a cost effective manner to fund its obligations as they come due. The Company is exposed to liquidity risk
through, among other areas, PC Bank, which requires a reliable source of funding for its credit card business.
PC Bank relies on its securitization programs, demand deposits from customers and the acceptance of guaranteed
investment certificate deposits to fund the receivables of its credit cards. The Company would experience liquidity
risks if it fails to maintain appropriate levels of cash and short-term investments, is unable to access sources of
funding or fails to appropriately diversify sources of funding. If any of these events were to occur, they could
adversely affect the financial performance of the Company.
Liquidity risk is mitigated by maintaining appropriate levels of cash and cash equivalents and short term
investments, actively monitoring market conditions, and by diversifying sources of funding, including the
Company’s committed credit facilities, and maintaining a well diversified maturity profile of debt and capital
obligations.
Commodity Prices The Company is exposed to increases in the prices of commodities in operating its stores and
distribution networks, as well as to the indirect effect of changing commodity prices on the price of consumer
products. Rising commodity prices could adversely affect the financial performance of the Company. To manage a
portion of this exposure, the Company uses purchase commitments and derivative instruments in the form of
exchange traded futures contracts and forward contracts to minimize cost volatility related to commodities.
Currency Exchange Rates The Company is exposed to foreign currency exchange rate variability, primarily on its
USD denominated purchases in trade payables and other liabilities. A depreciating Canadian dollar relative to the
USD will have a negative impact on year-over-year changes in reported operating income and net earnings, while
an appreciating Canadian dollar relative to the USD will have the opposite impact. To manage a portion of this
exposure, the Company uses derivative instruments in the form of futures contracts and forward contracts to
minimize cost volatility related to foreign exchange.
Credit The Company is exposed to credit risk resulting from the possibility that counterparties could default on
their financial obligations to the Company, including derivative instruments, cash and cash equivalents, short term
investments, security deposits, PC Bank’s credit card receivables, finance lease receivable, pension assets held in
the Company’s defined benefit plans and accounts receivable, including amounts due from government and third-
party drug plans arising from prescription drug sales, independent accounts and amounts owed from vendors.
Failure to manage credit risk could adversely affect the financial performance of the Company.
The risk related to derivative instruments, cash and cash equivalents and short term investments is reduced by
policies and guidelines that require that the Company enters into transactions only with counterparties or issuers
that have a minimum long term “A-” credit rating from a recognized credit rating agency and place minimum and
maximum limits for exposures to specific counterparties and instruments.
PC Bank manages its credit card receivable risk by employing stringent credit scoring techniques, actively
monitoring the credit card portfolio and reviewing techniques and technology that can improve the effectiveness of
the collection process. In addition, these receivables are dispersed among a large, diversified group of credit card
customers.
Finance lease receivable and accounts receivable, including amounts due from governments and third-party drug
plans arising from prescription drug sales, independent accounts and amounts owed from vendors and tenants, are
actively monitored on an ongoing basis and settled on a frequent basis in accordance with the terms specified in
the applicable agreements.
48 2023 Annual Report - Financial Review Loblaw Companies Limited
Interest Rates The Company is exposed to interest rate risk from fluctuations in interest rates on its floating rate
debt, and from the refinancing of existing financial instruments. An increase in interest rates could adversely affect
the operations or financial performance of the Company. The Company manages interest rate risk by monitoring
the respective mix of fixed and floating rate debt and by taking action as necessary to maintain an appropriate
balance considering current market conditions, with the objective of maintaining the majority of its debt at fixed
interest rates.
Credit Ratings Credit ratings assigned to the Company and any of its securities may be changed at any time based
on the judgment of the credit rating agencies and may also be impacted by a change in the credit rating of Weston,
Choice Properties Real Estate Investment Trust (“Choice Properties”) and their respective affiliates. In addition, the
Company, Weston, Choice Properties and their respective affiliates may incur additional indebtedness in the future,
which could impact current and future credit ratings. A reduction in credit ratings could materially adversely affect
the market value of the Company’s outstanding securities and the Company’s access to and cost of financing.
13. Related Party Transactions
The Company’s controlling shareholder is Weston, which owns, directly and indirectly, 163,473,491 of the
Company’s common shares, representing approximately 52.6% of the Company’s outstanding common shares.
Galen G. Weston beneficially owns or controls, directly and indirectly, including through Wittington Investments,
Limited (“Wittington”), a total of 78,018,416 of Weston’s common shares, representing approximately 58.0% of
Weston’s outstanding common shares. Galen G. Weston also beneficially owns 473,636 of the Company’s common
shares, representing approximately 0.2% of the Company’s outstanding common shares.
Weston is the controlling shareholder of Choice Properties. Therefore, Choice Properties is a related party by virtue
of common control. As at December 30, 2023, Weston’s ownership interest in Choice Properties was
approximately 61.7% (December 31, 2022 – 61.7%). The Company is Choice Properties’ largest tenant, representing
approximately 57.1% (December 31, 2022 – 57.5%) of Choice Properties’ rental revenue as at December 30, 2023.
The Company also executes various agreements and transactions with Choice Properties.
In the ordinary course of business, the Company enters into various transactions with related parties. These
transactions are measured at the exchange amount, which is the amount of consideration established and agreed
upon by the related parties.
2023 Annual Report - Financial Review Loblaw Companies Limited 49
Management’s Discussion and Analysis
Transactions with Related Parties
(millions of Canadian dollars)
Included in cost of sales
Inventory purchases from a related party(i)
Operating income
Transactions with Weston and Wittington
Cost sharing agreements with Weston(ii)
Net administrative services provided by Weston(iii)
Dividends paid to Weston
Lease Payments to Wittington
Transactions with Choice Properties
Lease payments to Choice Properties(iv)
Lease surrender payments received from Choice Properties
Site intensification payments received from Choice Properties(v)
$
$
Transaction Value
2023
2022
41
$
39
$
58
19
290
1
71
16
272
1
$
763
$
753
(8)
(17)
—
(3)
(i) Associated British Foods plc is a related party by virtue of a common director of such entity’s parent company and Wittington. Total balance
outstanding owing to Associated British Foods plc as at December 30, 2023 was $4 million (December 31, 2022 – $6 million).
(ii) The Company and Weston have each entered into certain contracts with third parties for administrative and corporate services, including
telecommunication services and IT related matters on behalf of itself and the related party. Through cost sharing agreements that have been
established between the Company and Weston concerning these costs, the Company has agreed to be responsible to Weston for the
Company’s proportionate share of the total costs incurred.
(iii) The Company and Weston have entered into an agreement whereby certain administrative services are provided by one party to the other.
The services to be provided under this agreement include those related to commodity management, pension and benefits, information
systems, risk management, treasury, certain accounting functions and legal. Payments are made quarterly based on the actual costs of
providing these services. Where services are provided on a joint basis for the benefit of the Company and Weston together, each party pays
the appropriate proportion of the costs.
(iv) During 2023, lease payments paid to Choice Properties included base rent of $534 million (2022 – $528 million) and operating expenses of
$229 million (2022 – $225 million).
(v) During 2023, the Company received site intensification payments from Choice Properties. Included in certain investment properties sold to
Choice Properties is excess land with development potential. Choice Properties will compensate the Company, over time, with site
intensification payments, as Choice Properties pursues development, intensification or redevelopment of such excess lands. The payments
the Company receives are calculated in accordance with a payment grid, set out in the Strategic Alliance Agreement, that takes into account
the region, market ranking and type of use for the property.
The net balances due to (from) related parties are comprised as follows:
(millions of Canadian dollars)
Weston
Choice Properties
As at
December 30, 2023
As at
December 31, 2022
$
8
$
(31)
116
(18)
50 2023 Annual Report - Financial Review Loblaw Companies Limited
Other Transactions and Agreements with Choice Properties
Strategic Alliance Agreement The Strategic Alliance Agreement established on the initial public offering (“IPO”) of
Choice Properties creates a series of rights and obligations between Choice Properties and the Company, intended
to establish a preferential and mutually beneficial business and operating relationship. The Strategic Alliance
Agreement will expire on the earlier of July 5, 2033 or the date on which Weston and its affiliates own less than
50% effective interest in Choice Properties (on a fully diluted basis).
Commitments The following is a summary of the Company’s future undiscounted contractual lease payments to
Choice Properties:
(millions of Canadian dollars)
2024
Payments due by year
2025
2026
2027
As at
December 30, 2023
Total
As at
December 31, 2022
Total
2028 Thereafter
Lease payments
$ 546 $ 591 $ 509 $ 461 $ 370 $
1,403 $
3,880 $
4,151
Financial Liabilities with Choice Properties During 2023, the Company disposed of two retail properties (2022 –
two retail properties) to Choice Properties for total proceeds of $86 million (2022 – $15 million). The properties
were leased back by the Company. The transactions did not meet the criteria for sale of asset in accordance with
IFRS 15, “Revenue from and Contracts with Customers” (“IFRS 15”) as the Company did not relinquish control of the
properties under the terms of the leases. (see note 27).
Disposition of Properties to Choice Properties During 2023, the Company sold four properties (2022 – one
property) to Choice Properties for proceeds of $92 million (2022 – $26 million) and recognized a gain of $11 million
(2022 – $19 million). All (2022 – none) of these properties were leased back by the Company. In the fourth quarter
of 2023, the Company sold three properties (2022 – nil) to Choice Properties for proceeds of $80 million (2022 –
$26 million) and recognized a gain of $8 million (2022 – nil). All (2022 – none) of these properties were leased
back by the Company.
Other Transactions
Venture Fund During 2020, Loblaw, Weston and a wholly owned subsidiary of Wittington became limited partners
in a limited partnership formed by Wittington (“Venture Fund I”). A wholly owned subsidiary of Wittington is the
general partner of the Venture Fund, which hired an external fund manager to oversee it. The purpose of the
Venture Fund I is to pursue venture capital investing in innovative businesses that are in technology-oriented
companies at all stages of the start-up life cycle that operate in commerce, healthcare, and food sectors and are
based in North America. Each of the three limited partners have 33% interest in the Venture Fund I. The Company
has a total capital commitment of $33 million over a 10-year period (see note 18 of the consolidated financial
statements).
During 2022, Loblaw became a limited partner in another limited partnership formed by Wittington (“Venture Fund
II”). A wholly owned subsidiary of Wittington is also the general partner of Venture Fund II, and the purpose of
Venture Fund II is consistent with Venture Fund I. The Company has a 50% interest in Venture Fund II and has a
total capital commitment of $60 million over a 10-year period (see note 18 of the consolidated financial statements).
Post-Employment Benefit Plans The Company sponsors a number of post-employment plans, which are related
parties. Contributions made by the Company to these plans are disclosed in note 22 to the consolidated financial
statements. Effective November 21, 2022, Loblaw became the sponsor of a group plan which was previously
sponsored by the parent company, Weston. As a participant of the group plan, the Company will continue to make
contributions for its share of defined benefit costs, including interest, service and administrative costs. In 2023 and
2022, the Company did not make any contributions to the group plan.
Income Tax Matters From time to time, the Company, Weston and its affiliates may enter into agreements to make
elections that are permitted or required under applicable income tax legislation with respect to affiliated
corporations.
Key Management Personnel The Company’s key management personnel are comprised of the Board and certain
members of the executive team of the Company, as well as both the Board and certain members of the executive
team of Weston and Wittington to the extent that they have the authority and responsibility for planning, directing
and controlling the day-to-day activities of the Company.
2023 Annual Report - Financial Review Loblaw Companies Limited 51
Management’s Discussion and Analysis
Compensation of Key Management Personnel Annual compensation of key management personnel that is
directly attributable to the Company was as follows:
(millions of Canadian dollars)
Salaries, director fees and other short term employee benefits
Equity-based compensation
Total compensation
$
$
2023
10
1
11
$
$
2022
8
2
10
Other transactions with related parties, as defined by IFRS Accounting Standards, were not significant during the
year.
14. Critical Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to make estimates and judgments
in applying the Company’s accounting policies that affect the reported amounts and disclosures made in the
consolidated financial statements and accompanying notes.
Within the context of the 2023 Annual Report, a judgment is a decision made by management in respect of the
application of an accounting policy, a recognized or unrecognized financial statement amount and/or note
disclosure, following an analysis of relevant information that may include estimates and assumptions. Estimates and
assumptions are used mainly in determining the measurement of balances recognized or disclosed in the
consolidated financial statements and are based on a set of underlying data that may include management’s
historical experience, knowledge of current events and conditions and other factors that are believed to be
reasonable under the circumstances. Management continually evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key estimation uncertainty that the Company
believes could have the most significant impact on the amounts recognized in the consolidated financial
statements.
14.1 Consolidation
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining the
entities that it controls and therefore consolidates. The Company controls an entity when the Company has the
existing rights that give it the current ability to direct the activities that significantly affect the entity’s returns. The
Company consolidates all of its wholly owned subsidiaries. Judgment is applied in determining whether the
Company controls the entities in which it does not have ownership rights or does not have full ownership rights.
Most often, judgment involves reviewing contractual rights to determine if rights are participating (giving power
over the entity) or protective rights (protecting the Company’s interest without giving it power).
14.2 Business Combinations - Valuation of Intangible Assets
Key Estimations The Company applies significant judgment in estimating the fair value of intangible assets. In
determining the fair value of customer relationships and brands, various valuation techniques are used. Specifically,
the Company used the multi-period excess earnings method to fair value customer relationships and the royalty
relief method to fair value brands using a discounted cash flow model. Under these valuation approaches, the
Company developed assumptions related to revenue and gross margin forecasts, attrition rate, royalty rate and
discount rates.
14.3 Inventories
Key Estimations Inventories are carried at the lower of cost and net realizable value which requires the Company
to utilize estimates related to fluctuations in shrink, future retail prices, the impact of vendor rebates on cost,
seasonality and costs necessary to sell the inventory.
52 2023 Annual Report - Financial Review Loblaw Companies Limited
14.4 Impairment of Non-Financial Assets (Goodwill, Intangible Assets, Fixed Assets and Right-of-Use Assets)
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining cash
generating units (“CGUs”) for the purpose of testing fixed assets, right-of-use assets and intangible assets for
impairment. Judgment is also used to determine the goodwill CGUs for the purpose of testing goodwill for
impairment. The Company has determined that each retail location is a separate CGU. Intangible assets are
allocated to the CGUs (or groups of CGUs) to which they relate. Goodwill is allocated to CGUs (or groups of CGUs)
based on the level at which management monitors goodwill, which cannot be higher than an operating segment.
The allocation of goodwill is made to CGUs (or groups of CGUs) that are expected to benefit from the synergies
and future growth of the business combination from which they arose. In addition, judgment is used to determine
whether a triggering event has occurred requiring an impairment test to be completed. In applying this judgment
management considers profitability of the CGU and other qualitative factors.
Key Estimations In determining the recoverable amount of a CGU or a group of CGUs, various estimates are
employed. The Company determines fair value less costs to sell using such estimates as market rental rates for
comparable properties, discount rates and capitalization rates. The Company determines value in use by using
estimates including projected future sales and earnings, and discount rates consistent with external industry
information reflecting the risk associated with the specific cash flows.
14.5 Impairment of Credit Card Receivables
Judgments Made in Relation to Accounting Policies Applied and Key Sources of Estimation In each stage of the
expected credit loss (“ECL”) model, impairment is determined based on the probability of default, loss given
default, and expected exposures at default on drawn and undrawn exposures on credit card receivables. The
application of the ECL model requires management to apply the following significant judgments, assumptions and
estimations:
• Movement of impairment measurement between the three stages of the ECL model, based on the assessment
of the increase in credit risks on credit card receivables. The assessment of changes in credit risks includes
qualitative and quantitative factors of the accounts, such as historical credit loss experience and external credit
scores;
•
•
Thresholds for significant increase in credit risk based on changes in probability of default over the expected
life of the instrument relative to initial recognition; and
Forecasts of future economic conditions, namely the unemployment rate. Management uses an average of
unemployment rate forecasts published by major Canadian Chartered Banks and the Conference Board of
Canada to establish the base case scenario and other representative ranges of possible forecast scenarios.
14.6 Income and Other Taxes
Judgments Made in Relation to Accounting Policies Applied The calculation of current and deferred income taxes
requires management to make certain judgments including expectations about future operating results, the timing
and reversal of temporary differences, and the interpretation of tax rules in jurisdictions where the Company
performs activities. Where the amount of tax payable or recoverable is uncertain, the Company establishes
provisions based on the most likely amount of the liability or recovery.
14.7 Segment Information
Judgments Made in Relation to Determining the Aggregation of Operating Segments The Company uses
judgment in assessing the criteria used to determine the aggregation of operating segments. The Retail reportable
operating segment consists of several operating segments comprised primarily of food retail and Associate-owned
drug stores, and also includes in-store pharmacies and healthcare services and other health and beauty products,
apparel and other general merchandise. The Company has aggregated its retail operating segments on the basis
of their similar economic characteristics, customers and nature of products. This similarity in economic
characteristics reflects the fact that the Company’s retail operating segments operate primarily in Canada and are
therefore subject to the same economic market pressures and regulatory environment. The Company’s retail
operating segments are subject to similar competitive pressures such as price and product innovation and
assortment from existing competitors and new entrants into the marketplace. The similar economic characteristics
also include the provision of centralized, common functions such as marketing and IT across all retail operating
segments.
2023 Annual Report - Financial Review Loblaw Companies Limited 53
Management’s Discussion and Analysis
The retail operating segments’ customer profile is primarily individuals who are purchasing goods for their own or
their family’s personal needs and consumption. The nature of products and the product assortment sold by each of
the retail operating segments is also similar and includes grocery, pharmaceuticals, cosmetics, electronics and
housewares. The aggregation of the retail operating segments reflects the nature and financial effects of the
business activities in which the Company engages and the economic environment in which it operates.
14.8 Provisions
Judgments made in Relation to Accounting Policies Applied and Key Estimations The recording of provisions
requires management to make certain judgments regarding whether there is a present legal or constructive
obligation as a result of a past event, it is probable that the Company will be required to settle the obligation and if
a reliable estimate of the amount of the obligation can be made. The Company has recorded provisions primarily in
respect of self-insurance, legal claims and charges related to PC Bank commodity tax matters. The Company
reviews the merits, risks and uncertainties of each provision, based on current information, and the amount
expected to be required to settle the obligation. Provisions are reviewed on an ongoing basis and are adjusted
accordingly when new facts and events become known to the Company.
14.9 Leases
Judgments Made in Relation to Accounting Policies Applied Management exercises judgment in determining
the appropriate lease term on a lease by lease basis. Management considers all facts and circumstances that
create an economic incentive to exercise a renewal option or to not exercise a termination option including
investments in major leaseholds, store performances, past business practice and the length of time remaining
before the option is exercisable. The periods covered by renewal options are only included in the lease term if
management is reasonably certain to renew. Management considers reasonably certain to be a high threshold.
Changes in the economic environment or changes in the retail industry may impact management’s assessment of
lease term, and any changes in management’s estimate of lease terms may have a material impact on the
Company’s consolidated balance sheets and statements of earnings.
Key Estimations In determining the carrying amount of right-of-use assets and lease liabilities, the Company is
required to estimate the incremental borrowing rate specific to each leased asset or portfolio of leased assets if
the interest rate implicit in the lease is not readily determined. Management determines the incremental borrowing
rate using a base risk-free interest rate estimated by reference to the Government of Canada bond yield with an
adjustment that reflects the Company’s credit rating, the security, lease term and value of the underlying leased
asset, and the economic environment in which the leased asset operates. The incremental borrowing rates are
subject to change due to changes in the business and macroeconomic environment.
15. Accounting Standards
15.1 Amendments to Accounting Standards
Amendments to IAS 1 In February 2021, the International Accounting Standards Board issued amendments to
International Accounting Standard 1 Presentation of Financial Statements ("IAS 1") and IFRS Practice Statement 2
Making Materiality Judgments ("IFRS Practice Statement 2"). The amendments to IAS 1 require companies to
disclose their material accounting policy information rather than their significant accounting policies. The
amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to
accounting policy disclosures. The adoption of these amendments did not have a material impact on the
Company’s consolidated financial statements.
Amendments to IAS 12 The Company adopted the amendments to IAS 12, “Income Taxes” (“IAS 12”), issued in May
2023, introducing a mandatory temporary exception to the requirements of IAS 12 under which a company does
not recognize or disclose information about deferred tax assets and liabilities related to the proposed Organization
for Economic Co-operation and Development (“OECD”) Pillar Two model rules (“Pillar Two”). The Company applied
the temporary exception as of December 30, 2023 as disclosed in note 7 of the consolidated financial statements.
54 2023 Annual Report - Financial Review Loblaw Companies Limited
16. Strategic Update and Outlook(3)
Strategic Update Loblaw’s portfolio of businesses remains strong and well-positioned as economic pressures
continue to drive consumers to its banners, in search for more value. The Company’s best in class assets continue
to meet customers’ everyday needs for food, health and wellness – supporting Loblaw’s purpose: helping
Canadians Live Life Well. In an evolving landscape, the Company will continue to focus on three strategic pillars in
2024: delivering retail excellence; driving growth; and investing for the future.
Retail Excellence Loblaw creates value through disciplined execution of core retail operations and by leveraging
its scale and strategic assets. This retail excellence is underpinned by process and efficiency initiatives and helps
grow sales, optimize gross margins, and reduce operating costs. The Company remains focused on strategic
procurement opportunities to deliver reliability, improve product selection and drive economies of scale across its
grocery and pharmacy network. Leveraging its customer loyalty program and more than one billion customer
transactions across food, pharmacy, apparel, and financial services, Loblaw will increase its promotional
effectiveness while delivering personalized value and unmatched service to Canadians. The Company will continue
to invest in and refine its retail network to better meet customer needs and improve its overall profitability. This
includes an increased focus on its Discount business, where Loblaw has a unique opportunity to bring its NoFrills
and Maxi stores to more communities and neighbourhoods across the country. Management’s clear commitment to
food and drug retail excellence, together with a sense of urgency, is focused on delivering consistent strong
operational and financial performance.
Driving Growth Loblaw continues to invest in targeted growth areas to further differentiate its portfolio of assets
and generate competitive advantage. A clear differentiator and area of focus is Loblaw’s ability to digitally engage
customers with a suite of proprietary assets – Loblaw Digital (including PC Express), Advance, and PC Optimum,
Canada’s strongest loyalty program. The Company will focus on enhancing these platforms across each of its
businesses, improving the customer experience and functionality. In particular, the Company’s PC Optimum loyalty
program continues to evolve, with more meaningful personalized offers, and more effective promotions, all toward
strengthening the loyalty loop and increasing the share of customer wallet.
Investing For The Future Loblaw will continue to make capital investments towards the modernization and
automation of its supply chain and the expansion of its retail network. These investments will be partially funded by
proceeds from real estate dispositions. Loblaw will continue to invest in its Connected Healthcare strategy with the
goal of growing its healthcare ecosystem by connecting patients and providers through an unmatched network of
pharmacies, healthcare professionals and technology solutions. Pharmacies will play an increasing role in the
delivery of healthcare services to Canadians through expanded scope of practice changes and the expansion of
pharmacist led clinics.
Outlook(3) Loblaw will execute on retail excellence while advancing its growth initiatives with the goal of continuing
to deliver consistent operational and financial results in 2024. The Company’s businesses remain well positioned to
meet the everyday needs of Canadians.
For the full-year 2024, the Company expects:
•
•
•
its Retail business to grow earnings faster than sales;
adjusted net earnings per common share(2) growth in the high single-digits;
to continue investing in our store network and distribution centres by investing a net amount of $1.8 billion in
capital expenditures, which reflects gross capital investments of approximately $2.2 billion, net of
approximately $400 million of proceeds from property disposals; and
•
to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.
2023 Annual Report - Financial Review Loblaw Companies Limited 55
Management’s Discussion and Analysis
17. Non-GAAP and Other Financial Measures
The Company uses the following non-GAAP and other financial measures and ratios: Retail segment gross profit;
Retail segment adjusted gross profit; Retail segment adjusted gross profit percentage; adjusted earnings before
income taxes, net interest expense and other financing charges and depreciation and amortization (“adjusted
EBITDA”); adjusted EBITDA margin; adjusted operating income; adjusted net interest expense and other financing
charges; adjusted income taxes; adjusted effective tax rate; adjusted net earnings available to common
shareholders; adjusted diluted net earnings per common share, free cash flow; retail debt to retail adjusted EBITDA;
adjusted return on equity; adjusted return on capital; and same-store sales. The Company believes these non-
GAAP and other financial measures and ratios provide useful information to both management and investors in
measuring the financial performance and financial condition of the Company for the reasons outlined below.
Management uses these and other non-GAAP and other financial measures to exclude the impact of certain
expenses and income that must be recognized under GAAP when analyzing underlying consolidated and segment
operating performance, as the excluded items are not necessarily reflective of the Company’s underlying operating
performance and make comparisons of underlying financial performance between periods difficult. The Company
adjusts for these items if it believes doing so would result in a more effective analysis of underlying operating
performance. The exclusion of certain items does not imply that they are non-recurring.
These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be
comparable to similarly titled measures presented by other publicly traded companies and should not be construed
as an alternative to other financial measures determined in accordance with GAAP.
Retail Segment Gross Profit, Retail Segment Adjusted Gross Profit and Retail Segment Adjusted Gross Profit
Percentage The following tables reconcile adjusted gross profit by segment to gross profit by segment, which is
reconciled to revenue and cost of sales measures as reported in the consolidated statements of earnings for the
periods ended as indicated. The Company believes that Retail segment gross profit and Retail segment adjusted
gross profit are useful in assessing the Retail segment’s underlying operating performance and in making decisions
regarding the ongoing operations of the business.
Retail segment adjusted gross profit percentage is calculated as Retail segment adjusted gross profit divided by
Retail segment revenue.
2023
(12 weeks)
2022
(12 weeks)
For the periods ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Revenue
Cost of sales
Gross profit
Adjusted gross profit
Retail
Financial
Services Eliminations
Total
Retail
Financial
Services Eliminations
$ 14,157 $ 487 $
9,748
$ 4,409 $ 377 $
$ 4,409 $ 377 $
110
(113) $ 14,531 $ 13,694 $
— 9,858
9,506
417 $
81
(113) $ 4,673 $ 4,188 $ 336 $
(113) $ 4,673 $ 4,188 $ 336 $
Total
(104) $ 14,007
— 9,587
(104) $ 4,420
(104) $ 4,420
2023
(52 weeks)
2022
(52 weeks)
For the years ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Revenue
Cost of sales
Gross profit
Retail
Financial
Services Eliminations
Total
Retail
Financial
Services Eliminations
Total
$ 58,345 $ 1,540 $
(356) $ 59,529 $ 55,492 $ 1,338 $
(326) $ 56,504
40,262
230
— 40,492
38,327
201
— 38,528
$ 18,083 $ 1,310 $
(356) $ 19,037 $ 17,165 $
1,137 $
(326) $ 17,976
Adjusted gross profit
$ 18,083 $ 1,310 $
(356) $ 19,037 $ 17,165 $
1,137 $
(326) $ 17,976
56 2023 Annual Report - Financial Review Loblaw Companies Limited
Adjusted Operating Income, Adjusted EBITDA and Adjusted EBITDA Margin The following tables reconcile
adjusted operating income and adjusted EBITDA to operating income, which is reconciled to net earnings
attributable to shareholders of the Company as reported in the consolidated statements of earnings for the periods
ended as indicated. The Company believes that adjusted EBITDA is useful in assessing the performance of its
ongoing operations and its ability to generate cash flows to fund its cash requirements, including the Company’s
capital investment program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue.
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
Net earnings attributable to shareholders
of the Company
Add impact of the following:
Non-controlling interests
Net interest expense and other financing charges
Income taxes
2023
(12 weeks)
2022
(12 weeks)
Retail
Financial
Services
Total
Retail
Financial
Services
Total
$ 544
$ 532
16
195
188
(14)
172
181
Operating income
$ 843 $ 100 $ 943 $ 810 $
61 $ 871
Add (deduct) impact of the following:
Amortization of intangible assets acquired
with Shoppers Drug Mart and Lifemark
Fair value adjustment on fuel and foreign currency
contracts
Fair value adjustment on non-operating properties
Gain on sale of non-operating properties
Recoveries related to PC Bank commodity tax
matters
Adjusting items
$
115 $ — $
115 $
115 $
— $
115
14
9
—
—
—
—
—
14
9
—
11
(6)
(50)
(13)
(13)
—
—
—
—
—
$
138 $
(13) $
125 $
70 $
— $
11
(6)
(50)
—
70
Adjusted operating income
$ 981 $
87 $ 1,068 $ 880 $
61 $ 941
Depreciation and amortization
Less: Amortization of intangible assets acquired with
666
14
680
653
Shoppers Drug Mart and Lifemark
(115)
—
(115)
(115)
14
—
667
(115)
Adjusted EBITDA
$ 1,532 $
101 $ 1,633 $ 1,418 $
75 $ 1,493
2023 Annual Report - Financial Review Loblaw Companies Limited 57
Management’s Discussion and Analysis
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
Net earnings attributable to shareholders
of the Company
Add impact of the following:
Non-controlling interests
Net interest expense and other financing charges
Income taxes
Operating income
Add (deduct) impact of the following:
Amortization of intangible assets acquired
with Shoppers Drug Mart and Lifemark
Charges related to PC Bank commodity tax matters
Fair value adjustment on fuel and foreign currency
contracts
Fair value adjustment on non-operating properties
Lifemark transaction costs
Restructuring and other related recoveries
Gain on sale of non-operating properties
Adjusting items
Adjusted operating income
Depreciation and amortization
Less: Amortization of intangible assets acquired with
2023
(52 weeks)
2022
(52 weeks)
Retail
Financial
Services
Total
Retail
Financial
Services
Total
$ 2,100
$ 1,921
87
803
714
73
683
665
$ 3,500 $ 204 $ 3,704 $ 3,260 $
82 $ 3,342
—
16
9
—
—
(12)
$ 499 $ — $ 499 $ 497 $
24
24
—
— $ 497
111
111
—
—
—
—
—
16
9
—
—
(12)
(5)
(6)
16
(15)
(57)
—
—
—
—
—
(5)
(6)
16
(15)
(57)
$ 512 $
24 $ 536 $ 430 $
111 $ 541
$ 4,012 $ 228 $ 4,240 $ 3,690 $
193 $ 3,883
2,848
58
2,906
2,746
49
2,795
Shoppers Drug Mart and Lifemark
(499)
—
(499)
(497)
—
(497)
Adjusted EBITDA
$ 6,361 $ 286 $ 6,647 $ 5,939 $ 242 $ 6,181
58 2023 Annual Report - Financial Review Loblaw Companies Limited
In addition to the items described in the Retail segment adjusted gross profit section above, when applicable,
adjusted EBITDA was impacted by the following:
Amortization of intangible assets acquired with Shoppers Drug Mart and Lifemark The acquisition of Shoppers
Drug Mart in 2014 included approximately $6,050 million of definite life intangible assets, which are being
amortized over their estimated useful lives. Annual amortization associated with the acquired intangibles will be
approximately $500 million until 2024 and will decrease thereafter.
The acquisition of Lifemark in 2022 included approximately $299 million of definite life intangible assets, which are
being amortized over their estimated useful lives.
Charges (recoveries) related to PC Bank commodity tax matters In the second quarter of 2023, the Federal
government enacted certain commodity tax legislation that applies to PC Bank on a retroactive basis. A charge of
$37 million, inclusive of interest, was recorded for this matter. In the fourth quarter of 2023, the Company reversed
$13 million of previously recorded charges. The reversal was a result of new guidance issued by the CRA.
In the second quarter of 2022, the Company recorded a charge of $111 million, inclusive of interest. In July 2022,
the Tax Court released its decision and ruled that PC Bank is not entitled to claim notional input tax credits for
certain payments it made to Loblaws Inc. in respect of redemptions of loyalty points. In September 2022, PC Bank
filed a Notice of Appeal with the Federal Court of Appeal. Subsequent to December 30, 2023, the Federal Court of
Appeal scheduled the hearing of the appeal for March 6, 2024.
Fair value adjustment on fuel and foreign currency contracts The Company is exposed to commodity price and
U.S. dollar exchange rate fluctuations. In accordance with the Company’s commodity risk management policy, the
Company enters into exchange traded futures contracts and forward contracts to minimize cost volatility relating to
fuel prices and the U.S. dollar exchange rate. These derivatives are not acquired for trading or speculative
purposes. Pursuant to the Company’s derivative instruments accounting policy, changes in the fair value of these
instruments, which include realized and unrealized gains and losses, are recorded in operating income. Despite the
impact of accounting for these commodity and foreign currency derivatives on the Company’s reported results, the
derivatives have the economic impact of largely mitigating the associated risks arising from price and exchange
rate fluctuations in the underlying commodities and U.S. dollar commitments.
Fair value adjustment on non-operating properties The Company measures non-operating properties, which are
investment properties and assets held for sale that were transferred from investment properties, at fair value.
Under the fair value model, non-operating properties are initially measured at cost and subsequently measured at
fair value. Fair value using the income approach include assumptions as to market rental rates for properties of
similar size and condition located within the same geographical areas, recoverable operating costs for leases with
tenants, non-recoverable operating costs, vacancy periods, tenant inducements and terminal capitalization rates.
Gains and losses arising from changes in the fair value are recognized in operating income in the period in which
they arise.
Lifemark transaction costs In connection with the acquisition of Lifemark during 2022, the Company recorded
acquisition costs of $16 million in operating income.
Restructuring and other related recoveries The Company continuously evaluates strategic and cost reduction
initiatives related to its store infrastructure, distribution networks and administrative infrastructure with the objective
of ensuring a low cost operating structure. Only restructuring activities that are publicly announced related to these
initiatives are considered adjusting items.
In the fourth quarter of 2023 and on a full-year basis, the Company did not record any restructuring and other
related recoveries or charges. In 2022, the Company recorded restructuring and other related recoveries of $15
million. The recoveries recognized in 2022 were mainly in connection to the previously announced closure of two
distribution centres in Laval and Ottawa. The Company invested to build a modern and efficient expansion to its
Cornwall distribution centre to serve its food and drug retail businesses in Ontario and Quebec and volumes have
been transferred.
Gain on sale of non-operating properties In the fourth quarter of 2023, the Company did not record any gain or
loss related to the sale of non-operating properties (2022 – $50 million). In 2023, the Company recorded a gain
related to the sale of non-operating properties of $12 million (2022 – $57 million).
2023 Annual Report - Financial Review Loblaw Companies Limited 59
Management’s Discussion and Analysis
Adjusted Net Interest Expense and Other Financing Charges The following table reconciles adjusted net interest
expense and other financing charges to net interest expense and other financing charges as reported in the
consolidated statements of earnings for the periods ended as indicated. The Company believes that adjusted net
interest expense and other financing charges is useful in assessing the Company’s underlying financial
performance and in making decisions regarding the financial operations of the business.
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
2023
(12 weeks)
2022
(12 weeks)
2023
(52 weeks)
2022
(52 weeks)
Net interest expense and other financing charges
$
195
$
172
$
803
$
—
—
—
683
11
Add: Recovery related to Glenhuron
Adjusted net interest expense and other
financing charges
$
195
$
172
$
803
$
694
Recovery related to Glenhuron In 2021, the Supreme Court of Canada ruled in favour of the Company on the
Glenhuron matter. As a result of related reassessments received during the first quarter of 2022, the Company
reversed $35 million of previously recorded charges, of which $2 million was recorded as interest income and
$33 million was recorded as an income tax recovery, and an additional $9 million, before taxes, was recorded in
respect of interest income earned on expected cash tax refunds.
Adjusted Income Taxes and Adjusted Effective Tax Rate The following table reconciles adjusted income taxes to
income taxes as reported in the consolidated statements of earnings for the periods ended as indicated. The
Company believes that adjusted income taxes is useful in assessing the Company’s underlying operating
performance and in making decisions regarding the ongoing operations of its business.
Adjusted effective tax rate is calculated as adjusted income taxes divided by the sum of adjusted operating income
less adjusted net interest expense and other financing charges.
For the periods ended December 30, 2023 and December 31, 2022
2023
2022
2023
2022
(millions of Canadian dollars except where otherwise indicated)
Adjusted operating income(i)
Adjusted net interest expense and other
financing charges(i)
Adjusted earnings before taxes
Income taxes
Add impact of the following:
Tax impact of items included in adjusted
earnings before taxes(ii)
Recovery related to Glenhuron
Adjusted income taxes
Effective tax rate
Adjusted effective tax rate
(12 weeks)
(12 weeks)
(52 weeks)
(52 weeks)
$
1,068
$
941
$ 4,240
$ 3,883
803
$ 3,437
$
714
694
3,189
665
$
$
$
$
195
873
188
36
—
$
$
172
769
181
24
—
$
224
$
205
$
858
$
25.1 %
25.7 %
25.9 %
26.7 %
24.6 %
25.0 %
144
—
143
33
841
25.0 %
26.4 %
(i) See reconciliations of adjusted operating income and adjusted net interest expense and other financing charges in the tables above.
(ii) See the adjusted operating income, adjusted EBITDA and adjusted EBITDA margin table and the adjusted net interest expense and other
financing charges table above for a complete list of items included in adjusted earnings before taxes.
60 2023 Annual Report - Financial Review Loblaw Companies Limited
Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net Earnings Per Common
Share The following table reconciles adjusted net earnings available to common shareholders of the Company and
adjusted net earnings attributable to shareholders of the Company to net earnings attributable to shareholders of
the Company and then to net earnings available to common shareholders of the Company for the periods ended as
indicated. The Company believes that adjusted net earnings available to common shareholders and adjusted
diluted net earnings per common share are useful in assessing the Company’s underlying operating performance
and in making decisions regarding the ongoing operations of its business.
For the periods ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Net earnings attributable to shareholders of the Company
Prescribed dividends on preferred shares in share capital
Net earnings available to common shareholders
of the Company
Net earnings attributable to shareholders of the Company
Adjusting items (refer to the following table)
Adjusted net earnings attributable to shareholders
of the Company
Prescribed dividends on preferred shares in share capital
Adjusted net earnings available to common shareholders
of the Company
Diluted weighted average common shares outstanding
(millions)
2023
(12 weeks)
544
$
(3)
2022
(12 weeks)
532
(3)
$
2023
(52 weeks)
$ 2,100
(12)
2022
(52 weeks)
1,921
$
(12)
$
$
$
$
$
$
541
544
89
633
(3)
529
532
46
$ 2,088
$ 2,100
392
$
$
1,909
1,921
354
578
(3)
$ 2,492
(12)
$ 2,275
(12)
$
630
$
575
$ 2,480
$ 2,263
314.9
327.4
320.0
331.7
The following table reconciles adjusted net earnings available to common shareholders of the Company and
adjusted diluted net earnings per common share to net earnings available to common shareholders of the
Company and diluted net earnings per common share for the periods ended as indicated.
For the periods ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars/Canadian dollars)
2023
(12 weeks)
Diluted
Net
Earnings
Per
Common
Share
Net Earnings
Available to
Common
Shareholders
of the
Company
2022
(12 weeks)
Diluted
Net
Earnings
Per
Common
Share
Net Earnings
Available to
Common
Shareholders
of the
Company
2023
(52 weeks)
Diluted
Net
Earnings
Per
Common
Share
Net Earnings
Available to
Common
Shareholders
of the
Company
2022
(52 weeks)
Diluted
Net
Earnings
Per
Common
Share
Net Earnings
Available to
Common
Shareholders
of the
Company
As reported
$
541 $ 1.72 $ 529 $ 1.62 $ 2,088 $ 6.52 $ 1,909 $ 5.75
Add (deduct) impact of the following:
Amortization of intangible assets
acquired with Shoppers Drug Mart
and Lifemark
Fair value adjustment on fuel and
foreign currency contracts
Fair value adjustment on non-
operating properties
Gain on sale of non-operating
properties
Lifemark transaction costs
Restructuring and other related
recoveries
Recovery related to Glenhuron
Charges (recoveries) related to PC
Bank commodity tax matters
$
85 $ 0.27 $
83 $ 0.25 $
367 $ 1.15 $ 365 $
1.11
10 0.03
8 0.03
12 0.04
(4) (0.01)
6 0.02
(4) (0.01)
6 0.02
(4) (0.01)
—
—
—
—
—
—
—
—
(12) (0.04)
(41)
(0.13)
(10) (0.03)
(45)
(0.14)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12 0.04
(14) (0.04)
(42)
(0.13)
17 0.05
86 0.25
Adjusting items
Adjusted
$
89 $ 0.28 $
46 $ 0.14 $ 392 $ 1.23 $ 354 $ 1.07
$ 630 $ 2.00 $ 575 $ 1.76 $ 2,480 $ 7.75 $ 2,263 $ 6.82
2023 Annual Report - Financial Review Loblaw Companies Limited 61
Management’s Discussion and Analysis
Free Cash Flow The following table reconciles, by reportable operating segments, free cash flow to cash flows
from operating activities. The Company believes that free cash flow is the appropriate measure in assessing the
Company’s cash available for additional financing and investing activities.
For the periods ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Cash flows from (used in)
2023
(12 weeks)
2022
(12 weeks)
Retail
Financial
Services
Eliminations(i)
Total
Retail
Financial
Services
Eliminations(i)
Total
operating activities
$ 1,495 $ (131) $
41 $ 1,405 $ 1,347 $ (218) $
19 $
1,148
Less:
Capital investments(ii)
Interest paid(i)
Lease payments, net
666
60
257
10
—
—
—
41
—
676
101
257
640
66
233
11
—
—
—
19
—
Free cash flow
$ 512 $ (141) $
— $
371 $ 408 $ (229) $
— $
651
85
233
179
For the years ended December 30, 2023
and December 31, 2022
(millions of Canadian dollars)
Cash flows from (used in)
2023
(52 weeks)
2022
(52 weeks)
Retail
Financial
Services
Eliminations(i)
Total
Retail
Financial
Services
Eliminations(i)
Total
operating activities
$ 5,480 $ 46 $
128 $ 5,654 $ 5,133 $ (444) $
66 $ 4,755
Less:
Capital investments(ii)
Interest paid(i)
Lease payments, net
2,069
293
1,424
40
—
—
—
128
—
2,109
421
1,424
1,538
278
1,312
33
—
—
—
66
—
1,571
344
1,312
Free cash flow
$ 1,694 $
6 $
— $ 1,700 $ 2,005 $ (477) $
— $
1,528
Interest paid is included in cash flows from operating activities under the Financial Services segment.
(i)
(ii) Capital investments are the sum of fixed asset purchases and intangible asset additions as presented in the Company’s consolidated
statements of cash flows, and prepayments transferred to fixed assets in the current year. Capital investments in the fourth quarter of 2023
and for the year ended December 30, 2023 include $37 million of prepayments transferred to fixed assets.
Retail Debt to Retail Adjusted EBITDA, Adjusted Return on Equity and Adjusted Return on Capital The Company
uses the following metrics to measure its leverage and profitability. The definitions of these ratios are presented
below.
•
Retail Debt to Retail Adjusted EBITDA Retail segment total debt divided by Retail segment adjusted EBITDA
for the last four quarters. Please refer to section “7.2 Liquidity and Capital Structure” of this MD&A.
• Adjusted Return on Equity Adjusted net earnings available to common shareholders of the Company for the
last four quarters divided by average total equity attributable to common shareholders of the Company. Please
refer to section “7.4 Financial Condition” of this MD&A.
• Adjusted Return on Capital Tax-effected adjusted operating income for the last four quarters divided by
average capital where capital is defined as total debt, plus equity attributable to shareholders of the Company,
less cash and cash equivalents, and short term investments. Please refer to section “7.4 Financial Condition” of
this MD&A.
Same-Store Sales Same-store sales are retail segment sales for stores in operation in both comparable periods,
including relocated, converted, expanded, contracted or renovated stores. The Company believes this metric is
useful in assessing sales trends excluding the effect of the opening and closure of stores.
62 2023 Annual Report - Financial Review Loblaw Companies Limited
Non-GAAP and Other Financial Measures - Selected Quarterly and Three Year Summary Reconciliations to
GAAP Measures
Adjusted Operating Income, Adjusted EBITDA and Adjusted EBITDA Margin The following table provides a
reconciliation of adjusted EBITDA to operating income, which is reconciled to GAAP net earnings attributable to
shareholders of the Company reported for the quarters and years ended as indicated.
(unaudited)
(millions of Canadian dollars)
Net earnings attributable to
shareholders of the Company
Add (deduct) impact of the
following:
Non-controlling interests
Net interest expense and
other financing charges
Income taxes
Operating income
Add (deduct) impact of the
following:
Amortization of intangible
assets acquired with
Shoppers Drug Mart and
Lifemark
Charges (recoveries) related
to PC Bank commodity tax
matters
Fair value adjustment on fuel
and foreign currency
contracts
Fair value adjustment on non-
operating properties
Lifemark transaction costs
Restructuring and other
related (recoveries) costs
(Gain) Loss on sale of non-
operating properties
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(52 weeks)
2023
2022
2021
$ 421 $ 511 $ 624 $ 544 $ 2,100 $ 440 $ 390 $ 559 $ 532 $ 1,921 $ 1,875
16
30
25
16
87
33
38
16
(14)
73
101
181
193 234
195 803
142
152
217
172 683
495
151
193
182
188
714
123
162
199
181 665
466
$ 769 $ 927 $ 1,065 $ 943 $ 3,704 $ 738 $ 742 $ 991 $ 871 $ 3,342 $ 2,937
$ 114 $ 116 $ 154 $ 115 $ 499 $
117 $
114 $
151 $
115 $ 497 $ 506
—
37
—
(13)
24
—
111
—
—
111
—
3
5
(6)
14
16
(14)
4
(6)
11
(5)
(13)
—
—
—
—
—
—
9
—
—
—
—
—
9
—
—
—
3
—
13
—
—
(6)
—
(6)
16
(2)
—
(15)
—
—
—
(15)
13
1
—
(13)
—
(12)
—
(4)
(3)
(50)
(57)
(12)
Adjusting items
$ 118 $ 158 $ 135 $ 125 $ 536 $
91 $ 238 $
142 $
70 $ 541 $ 492
Adjusted operating income
$ 887 $ 1,085 $ 1,200 $ 1,068 $ 4,240 $ 829 $ 980 $ 1,133 $ 941 $ 3,883 $ 3,429
Depreciation and amortization
675
671 880 680 2,906
631 633 864 667 2,795 2,664
Less: Amortization of intangible
assets acquired with
Shoppers Drug Mart and
Lifemark
(114)
(116)
(154)
(115)
(499)
(117)
(114)
(151)
(115)
(497)
(506)
Adjusted EBITDA
$ 1,448 $ 1,640 $ 1,926 $ 1,633 $ 6,647 $ 1,343 $ 1,499 $ 1,846 $ 1,493 $ 6,181 $ 5,587
(i)
Depreciation and amortization for the calculation of adjusted EBITDA excludes the amortization of intangible assets, acquired with
Shoppers Drug Mart and Lifemark, recorded by Loblaw.
2023 Annual Report - Financial Review Loblaw Companies Limited 63
Management’s Discussion and Analysis
Adjusted Net Interest Expense and Other Financing Charges The following table reconciles adjusted net interest
expense and other financing charges to GAAP net interest expense and other financing charges reported for the
periods ended as indicated.
(unaudited)
(millions of Canadian dollars)
Net interest expense and other financing charges
Add: Recovery related to Glenhuron
Adjusted net interest expense and other financing charges
2023
(52 weeks)
2022
(52 weeks)
2021
(52 weeks)
$
$
803
$
683
$
—
11
803
$
694
$
495
189
684
Adjusted Income Taxes and Adjusted Effective Tax Rate The following table reconciles the effective tax rate
applicable to adjusted earnings before taxes to the GAAP effective tax rate applicable to earnings before taxes as
reported for the periods ended as indicated.
(unaudited)
(millions of Canadian dollars except where otherwise indicated)
Adjusted operating income(i)
Adjusted net interest expense and other financing charges(i)
Adjusted earnings before taxes
Income taxes
Add impact of the following:
2023
(52 weeks)
2022
(52 weeks)
2021
(52 weeks)
$ 4,240
803
$ 3,437
$
714
$ 3,883
694
$
$
3,189
665
$ 3,429
684
$ 2,745
$
466
Tax impact of items included in adjusted earnings before taxes(ii)
Recovery related to Glenhuron
144
—
Adjusted income taxes
Effective tax rate
Adjusted effective tax rate
$
858
$
24.6 %
25.0 %
143
33
841
25.0 %
26.4 %
$
127
128
721
19.1%
26.3%
(i) See reconciliations of adjusted operating income and adjusted net interest expense and other financing charges in the tables above.
(ii) See the adjusted operating income, adjusted EBITDA and adjusted EBITDA margin table and the adjusted net interest expense and other
financing charges table above for a complete list of items included in adjusted earnings before taxes.
64 2023 Annual Report - Financial Review Loblaw Companies Limited
Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net Earnings Per Common
Share The following tables reconcile adjusted net earnings available to common shareholders of the Company and
adjusted diluted net earnings per common share to GAAP net earnings available to common shareholders of the
Company and diluted net earnings per common share as reported for the quarters and years ended as indicated.
(unaudited)
(millions of Canadian dollars
As reported
Add (deduct) impact
of the following(i):
Amortization of
intangible assets
acquired
with Shoppers
Drug Mart and
Lifemark
Fair value
adjustment on fuel
and foreign
currency contracts
Fair value
adjustment on non-
operating
properties
(Gain) Loss on sale
of non-operating
properties
Lifemark transaction
costs
Restructuring and
other related
(recoveries) costs
Recovery related to
Glenhuron
Charges (recoveries)
related to PC Bank
commodity tax
matters
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2023
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total
2022
2021
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(52 weeks)
$ 418 $ 508 $ 621 $ 541 $ 2,088 $ 437 $ 387 $ 556 $ 529 $ 1,909 $ 1,863
$ 84 $ 85 $ 113 $ 85 $ 367 $ 87 $ 83 $
112 $ 83 $ 365 $ 372
2
4
(4)
10
12
(11)
3
(4)
8
(4)
(10)
—
—
—
6
6
—
—
—
(4)
(4)
(1)
1
—
(11)
—
(10)
—
(3)
(1)
(41)
(45)
(10)
—
—
—
—
—
2
10
—
—
12
—
—
—
—
—
—
—
—
—
—
—
(14)
—
—
—
(14)
10
(42)
—
—
—
(42)
(313)
—
29
—
(12)
17
—
86
—
—
86
—
Adjusting items
Adjusted(i)
$ 87 $ 118 $ 98 $ 89 $ 392 $ 22 $
179 $
107 $ 46 $ 354 $ 48
$ 505 $ 626 $ 719 $ 630 $ 2,480 $ — $ 459 $ 566 $ 663 $ 575 $ 2,263 $ 1,911
(i)
Net of income taxes and non-controlling interests, as applicable.
2023 Annual Report - Financial Review Loblaw Companies Limited 65
Management’s Discussion and Analysis
(unaudited)
($ except where otherwise
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2023
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2022
2021
Total
Total
indicated)
As reported
Add (deduct) impact
of the following(i):
Amortization of
intangible assets
acquired
with Shoppers
Drug Mart and
Lifemark
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(52 weeks)
$ 1.29 $ 1.58 $ 1.95 $ 1.72 $ 6.52 $ 1.30 $ 1.16 $ 1.69 $ 1.62 $ 5.75 $ 5.45
$ 0.26 $ 0.26 $ 0.35 $ 0.27 $ 1.15 $ 0.25 $ 0.25 $ 0.34 $ 0.25 $
1.11 $ 1.09
Fair value adjustment
on fuel and foreign
currency contracts
Fair value adjustment
on non-operating
properties
Gain on sale of non-
operating properties
Lifemark transaction
costs
Restructuring and
other related
(recoveries) costs
Recovery related to
Glenhuron
Charges (recoveries)
related to PC Bank
commodity tax
matters
— 0.01 (0.01) 0.03 0.04
(0.03) 0.01 (0.02) 0.03
(0.01) (0.03)
—
—
— 0.02 0.02
—
—
—
(0.01)
(0.01) —
—
— (0.03)
— (0.03)
—
(0.01)
—
(0.13)
(0.14) (0.03)
—
—
—
—
—
0.01 0.03
—
— 0.04 —
—
—
—
—
—
(0.04)
—
—
— (0.04) 0.03
—
—
—
—
—
(0.13)
—
—
—
(0.13) (0.92)
— 0.09
— (0.04) 0.05
— 0.25
—
— 0.25 —
Adjusting items
Adjusted(i)
Diluted weighted
average common
shares outstanding
(millions)
$ 0.26 $ 0.36 $ 0.31 $ 0.28 $ 1.23 $ 0.06 $ 0.53 $ 0.32 $ 0.14 $ 1.07 $ 0.14
$ 1.55 $ 1.94 $ 2.26 $ 2.00 $ 7.75 $ 1.36 $ 1.69 $ 2.01 $ 1.76 $ 6.82 $ 5.59
324.8 322.5 318.4 314.9 320.0
336.7
334.4 329.6 327.4
331.7 341.8
(i)
Net of income taxes and non-controlling interests, as applicable.
18. Additional Information
Additional information about the Company has been filed electronically with various securities regulators in Canada
through SEDAR+ and is available online at www.sedarplus.ca and with OSFI as the primary regulator for the
Company’s subsidiary, PC Bank.
February 21, 2024
Toronto, Canada
MD&A Endnotes
(1) For financial definitions and ratios refer to the Glossary of Terms section included within the Company’s 2023 Annual Report.
(2) See Section 17 “Non-GAAP and Other Financial Measures”, which includes the reconciliation of such non-GAAP and other measures to the
most directly comparable GAAP measures.
(3) To be read in conjunction with Section 1 “Forward-Looking Statements”.
66 2023 Annual Report - Financial Review Loblaw Companies Limited
Financial Results
Management’s Statement of Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.
Note 11.
Note 12.
Note 13.
Note 14.
Note 15.
Note 16.
Note 17.
Note 18.
Note 19.
Nature and Description of the Reporting Entity
Accounting Policies
Critical Accounting Estimates and Judgments
New Accounting Standards
Business Acquisitions
Net Interest Expense and Other Financing Charges
Income Taxes
Basic and Diluted Net Earnings per Common Share
Cash and Cash Equivalents, Short Term Investments and
Change in Non-cash Working Capital
Accounts Receivable
Credit Card Receivables
Inventories
Assets Held for Sale
Fixed Assets
Investment Properties
Intangible Assets
Goodwill
Other Assets
Provisions
Note 20.
Long Term Debt
Note 21.
Note 22.
Note 23.
Note 24.
Note 25.
Note 26.
Note 27.
Note 28.
Note 29.
Note 30.
Note 31.
Note 32.
Note 33.
Other Liabilities
Share Capital
Capital Management
Post-Employment and Other Long Term Employee Benefits
Equity-Based Compensation
Employee Costs
Leases
Financial Instruments
Financial Risk Management
Contingent Liabilities
Financial Guarantees
Related Party Transactions
Segment Information
68
69
73
74
75
76
77
78
78
78
90
92
93
94
94
97
97
98
98
100
100
101
102
103
104
105
106
107
110
110
112
114
120
122
123
125
127
129
131
132
135
2023 Annual Report - Financial Review Loblaw Companies Limited 67
Management’s Statement of Responsibility for Financial Reporting
Management of Loblaw Companies Limited is responsible for the preparation, presentation and integrity of the
accompanying consolidated financial statements, Management’s Discussion and Analysis and all other information
in the 2023 Annual Report. This responsibility includes the selection and consistent application of appropriate
accounting principles and methods in addition to making the judgments and estimates necessary to prepare the
consolidated financial statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board. It also includes ensuring that the financial information presented
elsewhere in the 2023 Annual Report is consistent with that in the consolidated financial statements.
Management is also responsible for providing reasonable assurance that assets are safeguarded and that relevant
and reliable financial information is produced. Management is required to design a system of internal controls and
certify as to the design and operating effectiveness of internal control over financial reporting. A dedicated control
compliance team reviews and evaluates internal controls, the results of which are shared with management on a
quarterly basis.
PricewaterhouseCoopers LLP, whose report follows, were appointed as independent auditors by a vote of the
Company’s shareholders to audit the consolidated financial statements.
The Board of Directors, acting through an Audit Committee comprised solely of directors who are independent, are
responsible for determining that management fulfills its responsibilities in the preparation of the consolidated
financial statements and the financial control of operations. The Audit Committee recommends the independent
auditors for appointment by the shareholders. The Audit Committee meets regularly with senior and financial
management, internal auditors and the independent auditors to discuss internal controls, auditing activities and
financial reporting matters. The independent auditors and internal auditors have unrestricted access to the Audit
Committee. These consolidated financial statements and Management’s Discussion and Analysis have been
approved by the Board of Directors for inclusion in the 2023 Annual Report based on the review and
recommendation of the Audit Committee.
Toronto, Canada
February 21, 2024
[signed]
Per Bank
President and Chief Executive Officer
[signed]
Richard Dufresne
Chief Financial Officer
68 2023 Annual Report - Financial Review Loblaw Companies Limited
Independent Auditor’s Report
To the Shareholders of Loblaw Companies Limited
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Loblaw Companies Limited and its subsidiaries (together, the Company) as at December 30,
2023 and December 31, 2022, and its financial performance and its cash flows for the 52-week years then ended
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
• the consolidated statements of earnings for the 52-week years ended December 30, 2023 and December 31,
2022;
• the consolidated statements of comprehensive income for the 52-week years ended December 30, 2023 and
December 31, 2022;
• the consolidated statements of changes in equity for the 52-week years ended December 30, 2023 and
December 31, 2022;
• the consolidated balance sheets as at December 30, 2023 and December 31, 2022;
• the consolidated statements of cash flows for the 52-week years ended December 30, 2023 and December 31,
2022; and
• the notes to the consolidated financial statements, comprising material accounting policy information and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance
with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the 52-week year ended December 30, 2023. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Impairment assessment of fixed assets and right-of-use assets for retail locations
Refer to note 2 –Accounting Policies, note 3 – Critical Accounting Estimates and Judgments, note 14 – Fixed
Assets and note 27 – Leases to the consolidated financial statements.
As at December 30, 2023, the Company had fixed assets of $6,346 million and right-of-use assets of
$7,662 million. At each balance sheet date, management reviews the carrying amounts of its fixed assets and right-
of-use assets at the Cash Generating Unit (CGU) level to determine whether there is any indication of impairment.
Judgment is used to determine whether an indication of impairment exists; if any such indication exists, the CGU is
then tested for impairment. In applying this judgment, management considers profitability of the CGU and other
qualitative factors. Management determined that each retail location is a separate CGU for purposes of fixed asset
and right-of-use asset impairment testing. The fixed assets and right-of-use assets related to the retail location
CGUs represent a significant portion of the Company’s fixed assets and right-of-use assets.
Management identified indications of impairment for certain retail location CGUs and therefore an impairment test
was performed for these CGUs. An impairment loss is recognized for the amount by which the CGU’s carrying
value exceeds its recoverable amount.
2023 Annual Report - Financial Review Loblaw Companies Limited 69
The recoverable amount of each CGU is the higher of its value in use and its fair value less costs to sell (FVLCTS).
Value in use is based on the estimated future cash flows from the CGU discounted to their present value using a
pre-tax discount rate (discounted cash flow model). The FVLCTS reflects the amount that could be obtained from
the disposal of the CGU in an arm's length transaction between knowledgeable and willing parties, net of estimates
of the costs of disposal.
Assumptions utilized by management to determine the recoverable amount based on value in use include discount
rates, projected future sales and earnings. Assumptions utilized by management to determine the recoverable
amount based on FVLCTS include market rental rates, discount rates and capitalization rates.
For the year ended December 30, 2023, the Company recorded $39 million of impairment losses on fixed assets
and $11 million of impairment losses on right-of-use assets in respect of 17 retail location CGUs.
We considered this a key audit matter due to the judgments made by management in assessing the indications of
impairment and developing the assumptions to determine the recoverable amounts of the retail location CGUs.
This resulted in significant audit effort and subjectivity in performing procedures to assess the indications of
impairment and to test the recoverable amounts of the retail location CGUs. In addition, the audit effort involved the
use of professionals with specialized skill and knowledge in the field of valuation.
Our approach to addressing the matter included the following procedures, among others:
• Evaluated management’s assessment of indications of impairment, which included the following:
◦ Assessed the reasonableness of the profitability of the CGUs on a sample basis by considering the actual
historical performance of the CGUs.
◦ Assessed other qualitative factors by considering evidence obtained in other areas of the audit.
◦ Tested the underlying data used in the indications of impairment assessment on a sample basis by tracing
to supporting documentation and testing the mathematical accuracy.
◦ Performed a sensitivity analysis over indications of impairment.
• Tested how management determined the recoverable amounts for a sample of retail location CGUs that had
indications of impairment, which included the following:
◦ Evaluated the appropriateness of the methods used by management.
◦ Tested underlying data used in the recoverable amount calculations and tested the mathematical
accuracy.
◦ Evaluated the reasonableness of the projected future sales and earnings used in the discounted cash flow
models by (i) comparing to actual historical sales and earnings generated by the retail location CGUs; and
(ii) considering management’s budget and strategic plans.
◦ Professionals with specialized skill and knowledge in the field of valuation assisted in assessing the
reasonableness of the discount rates and the market rental rates.
• Tested the disclosures made in the consolidated financial statements with regards to the impairment
assessments of the retail location CGUs
Other information
Management is responsible for the other information. The other information comprises the Management's
Discussion and Analysis and the information, other than the consolidated financial statements and our auditor's
report thereon, included in the 2023 Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
70 2023 Annual Report - Financial Review Loblaw Companies Limited
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
2023 Annual Report - Financial Review Loblaw Companies Limited 71
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Anita McOuat.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 21, 2024
72 2023 Annual Report - Financial Review Loblaw Companies Limited
Consolidated Statements of Earnings
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars except where otherwise indicated)
Revenue
Cost of sales
Selling, general and administrative expenses
Operating income
Net interest expense and other financing charges (note 6)
Earnings before income taxes
Income taxes (note 7)
Net earnings
Attributable to:
Shareholders of the Company (note 8)
Non-controlling interests
Net earnings
Net earnings per common share ($) (note 8)
Basic
Diluted
Weighted average common shares outstanding (millions) (note 8)
Basic
Diluted
See accompanying notes to the consolidated financial statements.
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2023
59,529
40,492
15,333
3,704
803
2,901
714
2,187
2,100
87
2,187
6.59
6.52
316.7
320.0
2022
56,504
38,528
14,634
3,342
683
2,659
665
1,994
1,921
73
1,994
5.82
5.75
328.1
331.7
2023 Annual Report - Financial Review Loblaw Companies Limited 73
Consolidated Statements of Comprehensive Income
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
Net earnings
Other comprehensive income, net of taxes
Items that are or may be subsequently reclassified to profit or loss:
Foreign currency translation gains
Gains on cash flow hedges (note 28)
Gain (loss) on long term securities (note 28)
Items that will not be reclassified to profit or loss:
Net defined benefit plan actuarial gains (losses) (note 24)
Other comprehensive income, net of taxes
Total comprehensive income
Attributable to:
Shareholders of the Company
Non-controlling interests
Total comprehensive income
See accompanying notes to the consolidated financial statements.
2023
2,187
$
2022
1,994
—
4
1
199
204
2,391
$
$
$
2,304
$
87
2,391
$
2
16
(2)
(227)
(211)
1,783
1,710
73
1,783
$
$
$
$
$
$
74 2023 Annual Report - Financial Review Loblaw Companies Limited
Shares released from trust (note 22
and 25)
Dividends declared per common
share – $1.743 (note 22)
Dividends declared per preferred
share – $1.325 (note 22)
Net distribution to non-controlling
interests
Consolidated Statements of Changes in Equity
(millions of Canadian dollars except where otherwise
indicated)
Common
Share
Capital
Preferred
Share
Capital
Total
Share
Capital
Retained
Earnings
Contributed
Surplus
Foreign
Currency
Translation
Adjustment
Cash
Flow
Hedges
Accumulated
Other
Comprehensive
Income
Non-
Controlling
Interests
Fair Value
Adjustments
Total
Equity
Balance as at December 31, 2022 $ 6,465 $ 221 $ 6,686 $ 4,461 $
122 $
41 $ (15) $
Net earnings
$ — $ — $
— $ 2,100 $
— $
— $ — $
Other comprehensive income
—
—
—
199
—
—
4
Total comprehensive income
$ — $ — $
— $ 2,299 $
— $
— $
4 $
4 $
— $
1
1 $
30 $
157 $ 11,456
— $
87 $ 2,187
5
—
204
5 $
87 $ 2,391
Common shares purchased and
cancelled (note 22)
Effect of equity-based
(277)
—
(277) (1,352)
—
— —
—
—
— (1,629)
compensation (note 22 and 25)
69
—
69
—
14
— —
—
—
—
83
Shares purchased and held in trust
(note 22)
(13)
—
(13)
(59)
—
— —
—
—
—
(72)
12
—
12
29
—
— —
—
—
—
41
—
—
—
(550)
—
— —
—
—
—
(550)
—
—
—
(12)
—
— —
—
—
—
—
—
— —
$ (209) $ — $ (209) $ 355 $
14 $
— $
4 $
—
—
1 $
5 $
—
—
(12)
—
(89)
(89)
5 $
(2) $ 163
35 $
155 $ 11,619
Balance as at December 30, 2023 $ 6,256 $ 221 $ 6,477 $ 4,816 $
136 $
41 $
(11) $
(millions of Canadian dollars except where otherwise
indicated)
Common
Share
Capital
Preferred
Share
Capital
Total
Share
Capital
Retained
Earnings
Contributed
Surplus
Foreign
Currency
Translation
Adjustment
Cash
Flow
Hedges
Accumulated
Other
Comprehensive
Income
Non-
Controlling
Interests
Fair Value
Adjustments
Total
Equity
Balance as at January 1, 2022
$ 6,631 $ 221 $ 6,852 $ 4,591 $
116 $
39 $ (29) $
Net earnings
$
— $ — $ — $ 1,921 $
— $
— $ — $
Other comprehensive income
—
—
—
(227)
—
2
14
Total comprehensive income
$
— $ — $ — $ 1,694 $
— $
2 $
14 $
4 $
— $
—
— $
14 $
164 $ 11,737
— $
73 $ 1,994
16
—
(211)
16 $
73 $ 1,783
Common shares purchased and
cancelled (note 22)
Effect of equity-based
(254)
—
(254) (1,204)
—
— —
—
—
— (1,458)
compensation (note 22 and 25)
100
—
100
—
6
— —
—
—
—
106
Shares purchased and held in trust
(note 22)
(23)
—
(23)
(115)
—
— —
—
—
—
(138)
Shares released from trust (note 22
and 25)
Dividends declared per common
share – $1.580 (note 22)
Dividends declared per preferred
share – $1.325 (note 22)
Net distribution to non-controlling
interests
11
—
11
24
—
— —
—
—
—
35
—
—
—
(517)
—
— —
—
—
—
(517)
—
—
—
(12)
—
— —
—
—
—
(12)
—
—
—
—
—
— —
$
(166) $ — $ (166) $ (130) $
6 $
2 $
14 $
—
— $
4 $
—
(80)
(80)
16 $
(7) $ (281)
30 $
157 $ 11,456
Balance as at December 31, 2022 $ 6,465 $ 221 $ 6,686 $ 4,461 $
122 $
41 $ (15) $
See accompanying notes to the consolidated financial statements.
2023 Annual Report - Financial Review Loblaw Companies Limited 75
Consolidated Balance Sheets
(millions of Canadian dollars)
Assets
Current assets
Cash and cash equivalents (note 9)
Short term investments (note 9)
Accounts receivable (note 10)
Credit card receivables (note 11)
Inventories (note 12)
Prepaid expenses and other assets
Assets held for sale (note 13)
Total current assets
Fixed assets (note 14)
Right-of-use assets (note 27)
Investment properties (note 15)
Intangible assets (note 16)
Goodwill (note 17)
Deferred income tax assets (note 7)
Other assets (note 18)
Total assets
Liabilities
Current liabilities
Bank indebtedness (note 31)
Trade payables and other liabilities
Loyalty liability
Provisions (note 19)
Income taxes payable
Demand deposits from customers
Short term debt (note 11)
Long term debt due within one year (note 20)
Lease liabilities due within one year (note 27)
Associate interest
Total current liabilities
Provisions (note 19)
Long term debt (note 20)
Lease liabilities (note 27)
Deferred income tax liabilities (note 7)
Other liabilities (notes 21)
Total liabilities
Equity
Share capital (note 22)
Retained earnings
Contributed surplus (note 25)
Accumulated other comprehensive income
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
Contingent Liabilities (note 30).
See accompanying notes to the consolidated financial statements.
76 2023 Annual Report - Financial Review Loblaw Companies Limited
As at
December 30, 2023
As at
December 31, 2022
$
$
$
$
$
$
$
$
$
$
1,488
464
1,298
4,132
5,820
324
52
13,578
6,346
7,662
53
5,994
4,349
125
872
38,979
13
6,324
123
115
240
166
850
1,191
1,455
370
10,847
123
6,661
8,003
1,132
594
27,360
6,477
4,816
136
35
11,464
155
11,619
38,979
$
$
$
$
$
$
$
$
$
$
1,608
326
1,199
3,954
5,855
353
81
13,376
5,696
7,409
60
6,505
4,323
86
692
38,147
8
6,218
180
110
195
125
700
727
1,401
434
10,098
109
7,056
7,714
1,279
435
26,691
6,686
4,461
122
30
11,299
157
11,456
38,147
Consolidated Statements of Cash Flows
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
Operating activities
Net earnings
Add (deduct):
Income taxes (note 7)
Net interest expense and other financing charges (note 6)
Adjustments to investment properties (note 13 and 15)
Depreciation and amortization
Asset impairments, net of recoveries
Change in allowance for credit card receivables (note 11)
Change in provisions (note 19)
Change in non-cash working capital (note 9)
Change in gross credit card receivables (note 11)
Income taxes paid
Interest received
Other
Cash flows from operating activities
Investing activities
Fixed asset purchases (note 14)
Intangible asset additions (note 16)
(Purchase) disposal of short term investments (note 9)
Acquisition of Lifemark Health Group, net of cash acquired (note 5)
Proceeds from disposal of assets
Lease payments received from finance leases
Disposal (purchases) of long term securities (note 18)
Other
Cash flows used in investing activities
Financing activities
Increase (decrease) in bank indebtedness
Increase in short term debt (note 11)
Increase in demand deposits from customers
Long term debt (note 20)
Issued
Repayments
Interest paid
Cash rent paid on lease liabilities - Interest (note 6 and 27)
Cash rent paid on lease liabilities - Principal (note 27)
Dividends paid on common and preferred shares (note 22)
Common share capital
Issued (note 25)
Purchased and held in trust (note 22)
Purchased and cancelled (note 22)
Proceeds from financial liabilities (note 27)
Other
Cash flows used in financing activities
Effect of foreign currency exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to the consolidated financial statements.
2023
2022
$
2,187
$
1,994
714
803
9
2,906
17
50
19
(9)
(228)
(917)
24
79
5,654
(1,665)
(407)
(138)
—
321
17
45
(18)
(1,845)
5
150
41
833
(762)
(421)
(370)
(1,071)
(562)
61
(72)
(1,729)
115
(150)
(3,932)
3
(120)
1,608
1,488
$
$
$
$
$
$
$
$
665
683
(6)
2,795
34
1
(6)
(490)
(512)
(439)
38
(2)
4,755
(1,152)
(419)
138
(813)
164
15
(180)
(121)
(2,368)
(44)
250
50
1,818
(1,243)
(344)
(333)
(994)
(529)
88
(138)
(1,258)
15
(89)
(2,751)
(4)
(368)
1,976
1,608
$
$
$
$
$
$
$
$
2023 Annual Report - Financial Review Loblaw Companies Limited 77
Notes to the Consolidated Financial Statements
For the years ended December 30, 2023 and December 31, 2022 (millions of Canadian dollars except where otherwise indicated)
Note 1. Nature and Description of the Reporting Entity
Loblaw Companies Limited is a Canadian public company incorporated in 1956 and is Canada's food and pharmacy
leader, and the nation's largest retailer. Loblaw Companies Limited provides Canadians with grocery, pharmacy and
healthcare services, health and beauty products, apparel, general merchandise, financial services, and wireless
mobile products and services. Its registered office is located at 22 St. Clair Avenue East, Toronto, Canada M4T 2S5.
Loblaw Companies Limited and its subsidiaries are together referred to, in these consolidated financial statements,
as the “Company” or “Loblaw”.
The Company’s controlling shareholder is George Weston Limited (“Weston”), which owns approximately 52.6% of
the Company’s outstanding common shares. The Company’s ultimate parent is Wittington Investments, Limited
(“Wittington”). The remaining common shares are widely held.
The Company has two reportable operating segments: Retail and Financial Services (see note 33).
Note 2. Accounting Policies
Statement of Compliance The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS
Accounting Standards” or “GAAP”) and using the accounting policies described herein.
These consolidated financial statements were approved for issuance by the Company’s Board of Directors
(“Board”) on February 21, 2024.
Basis of Presentation The consolidated financial statements were prepared on a historical cost basis except for the
following items that were measured at fair value:
•
•
defined benefit pension plan assets with the obligations related to these pension plans measured at their
discounted present value as described in note 24;
investment properties as described in note 15;
•
•
liabilities for cash-settled equity-based compensation arrangements as described in note 25; and
certain financial instruments as described in note 28.
The accounting policies set out below have been applied consistently in the preparation of the consolidated
financial statements for all years presented.
The consolidated financial statements are presented in Canadian dollars.
Certain prior year amounts have been reclassified to conform to the fiscal 2023 presentation.
Fiscal Year The fiscal year of the Company ends on the Saturday closest to December 31. Under an accounting
convention common in the retail industry, the Company follows a 52-week reporting cycle, which periodically
necessitates a fiscal year of 53 weeks. The years ended December 30, 2023 and December 31, 2022 both
contained 52 weeks.
78 2023 Annual Report - Financial Review Loblaw Companies Limited
Basis of Consolidation The consolidated financial statements include the accounts of the Company and other
entities that the Company controls. Control exists when the Company has the existing rights that give it the current
ability to direct the activities that significantly affect the entities’ returns. The Company assesses control on an
ongoing basis.
Structured entities are entities controlled by the Company which were designed so that voting or similar rights are
not the dominant factor in deciding who controls the entity. Structured entities are consolidated if, based on an
evaluation of the substance of its relationship with the Company, the Company concludes that it controls the
structured entity. Structured entities controlled by the Company were established under terms that impose strict
limitations on the decision-making powers of the structured entities’ management and that results in the Company
receiving the majority of the benefits related to the structured entities’ operations and net assets, being exposed to
the majority of risks incident to the structured entities’ activities, and retaining the majority of the residual or
ownership risks related to the structured entities or their assets.
Transactions and balances between the Company and its consolidated entities have been eliminated on
consolidation.
Non-controlling interests are recorded in the consolidated financial statements and represent the non-controlling
shareholders’ equity in an entity consolidated by the Company for which the Company’s ownership is less than
100%. Transactions with non-controlling interests are treated as transactions with equity owners of the Company.
Changes in the Company’s ownership interest in its subsidiaries are accounted for as equity transactions.
Loblaw consolidates the Associates as well as the franchisees of its food retail stores that are subject to a simplified
franchise agreement implemented in 2015 (“Franchise Agreement”). An “Associate” is a pharmacist-owner of a
corporation that is licensed to operate a retail drug store at a specific location using the Company’s trademarks.
The consolidation of Associates and franchisees is based on the concept of control, for accounting purposes,
which was determined to exist through the agreements that govern the relationships between the Company and
the Associates and franchisees. Loblaw does not have any direct or indirect shareholdings in the corporations that
operate the Associates. Associate interest reflects the investment the Associates have in the net assets of their
businesses. Under the terms of the Associate Agreements, Shoppers Drug Mart Inc. (or an affiliate thereof) agrees
to purchase the assets that the Associates use in store operations, primarily at the carrying value to the Associate,
when Associate Agreements are terminated by either party. The Associates’ corporations and the franchisees
remain separate legal entities.
Business Combinations Business combinations are accounted for using the acquisition method as of the date
when control is transferred to the Company. The Company measures goodwill as the excess of the sum of the fair
value of the consideration transferred over the net identifiable assets acquired and liabilities assumed, all
measured as at the acquisition date. Transaction costs that the Company incurs in connection with a business
combination, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Net Earnings per Common Share Basic net earnings per common share (“EPS”) is calculated by dividing the net
earnings available to common shareholders by the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated by adjusting the net earnings available to common shareholders and
the weighted average number of common shares outstanding for the effects of all dilutive instruments.
2023 Annual Report - Financial Review Loblaw Companies Limited 79
Notes to the Consolidated Financial Statements
Revenue Recognition The Company recognizes revenue when control of the goods or services has been
transferred. Revenue is measured at the amount of consideration to which the Company expects to be entitled to.
Retail Retail segment revenue includes the sale of goods and services to customers through corporate, franchise-
owned retail food and Associate-owned drug stores, which includes in-store pharmacies, health care services and
other health and beauty products, apparel and other general merchandise. Revenue is measured at the amount of
consideration to which the Company expects to be entitled to, net of estimated returns and sales incentives. The
Company recognizes revenue made through corporate, franchise and Associate stores at the time the point of sale
is made or when service is delivered to the customers. The Company recognizes revenue made through
independent wholesale customers at the time of delivery of inventory and when administrative and management
services are rendered.
For certain sale of goods in which the Company earns commissions, including but not limited to lottery and third
party gift cards, the Company records net revenue as an agent on the basis that the Company does not control
pricing or bear inventory risk.
Financial Services Financial Services revenue includes interest income on credit card loans, credit card service
fees, commissions, and other revenue related to financial services. Interest income is recognized using the
effective interest method. Credit card service fees are recognized when services are rendered. Commission
revenue is recorded on a net basis. Other revenue is recognized periodically or according to contractual provisions.
Income Taxes Current and deferred taxes are recognized in the consolidated statement of earnings, except for
current and deferred taxes related to a business combination, or amounts charged directly to equity or other
comprehensive income, which are recognized in the consolidated balance sheet.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognized using the asset and liability method of accounting on temporary differences arising
between the financial statement carrying values of existing assets and liabilities and their respective income tax
bases. Deferred tax is measured using enacted or substantively enacted income tax rates expected to apply in the
years in which those temporary differences are expected to be recovered or settled. A deferred tax asset is
recognized for temporary differences as well as unused tax losses and credits to the extent that it is probable that
future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be
realized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on
different taxable entities where the Company intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is recorded on temporary differences arising on investments in subsidiaries, except where the timing
of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary
difference will not reverse in the foreseeable future.
Cash Equivalents Cash equivalents consist of highly liquid marketable investments such as government treasury
bills and banker’acceptances with an original maturity date of 90 days or less from the date of acquisition. Credit
card and debit card transactions that typically process in three days or less are also classified as cash and cash
equivalents.
Short Term Investments Short term investments are investments in highly liquid and rated certificates of deposit,
commercial paper or other securities, primarily Canadian and United States government securities and notes of
other creditworthy parties, with an original term to maturity of more than 90 days and remaining term to maturity of
less than one year from the date of acquisition.
80 2023 Annual Report - Financial Review Loblaw Companies Limited
Credit Card Receivables The Company, through President’s Choice Bank (“PC Bank”), a wholly owned subsidiary
of the Company, has credit card receivables that are stated net of an allowance. Interest income is recorded in
revenue and interest expense is recorded in net interest expense and other financing charges using the effective
interest method. The effective interest rate is the rate that discounts the estimated future cash receipts through the
expected life of the credit card receivable (or, where appropriate, a shorter period) to the carrying amount. When
calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of
the financial instrument, but not future credit losses. For credit-impaired credit card receivables, a credit-adjusted
effective interest rate is calculated using estimated future cash flows including expected credit losses.
The Company applies the expected credit loss (“ECL”) model to assess impairment on its credit card receivables at
each balance sheet date. Credit card receivables are assessed collectively for impairment by applying the three-
stage approach. Refer to the Impairment of Financial Assets policy for details of each stage. The application of the
ECL model requires PC Bank to apply significant judgments, assumptions and estimations (see note 3 “Impairment
of Credit Card Receivables”).
Impairment losses and reversals are recorded in selling, general and administrative expenses (“SG&A”) in the
consolidated statements of earnings with the carrying amount of the credit card receivables adjusted through the
use of allowance accounts.
The Company, through PC Bank, participates in various securitization programs that provide the primary source of
funds for the operation of its credit card business. PC Bank maintains and monitors co-ownership interest in credit
card receivables with independent securitization trusts, in accordance with its financing requirements. PC Bank is
required to absorb a portion of the related credit losses. As a result, Loblaw has not transferred all of the risks and
rewards related to these assets and continues to recognize these assets in credit card receivables. The transferred
receivables are accounted for as financing transactions. The associated liabilities secured by these assets are
included in either short term debt or long term debt based on their characteristics and are carried at amortized
cost. Loblaw provides a standby letter of credit for the benefit of the independent securitization trusts.
Eagle Credit Card Trust® PC Bank participates in a single seller revolving co-ownership securitization program with
Eagle Credit Card Trust® (“Eagle”) and continues to service the credit card receivables on behalf of Eagle, but does
not receive any fee for its servicing obligations and has a retained interest in the securitized receivables
represented by the right to future cash flows after obligations to investors have been met. The Company
consolidates Eagle as a structured entity.
Other Independent Securitization Trusts The Other Independent Securitization Trusts administer multi-seller,
multi-asset securitization programs that acquire assets from various participants, including credit card receivables
from PC Bank. These trusts are managed by major Canadian chartered banks. PC Bank does not control the trusts
through voting interests and does not exercise any control over the trusts’ management, administration or assets.
The activities of these trusts are conducted on behalf of the participants and each trust is a conduit through which
funds are raised to purchase assets through the issuance of senior and subordinated short term and medium term
asset backed notes. These trusts are unconsolidated structured entities.
Inventories The Company values inventories at the lower of cost and net realizable value.
Cost includes the costs of purchases net of vendor allowances plus other costs, such as transportation, that are
directly incurred to bring inventories to their present location and condition. The cost of inventories are measured
at weighted average cost.
The Company estimates net realizable value as the amount that inventories are expected to be sold taking into
consideration fluctuations in retail prices due to seasonality less estimated costs necessary to make the sale.
Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable
due to obsolescence, damage or declining selling prices. When circumstances that previously caused inventories
to be written down below cost no longer exist or when there is clear evidence of an increase in selling prices, the
amount of the write-down previously recorded is reversed. Storage costs, indirect administrative overhead and
certain selling costs related to inventories are expensed in the period that these costs are incurred.
2023 Annual Report - Financial Review Loblaw Companies Limited 81
Notes to the Consolidated Financial Statements
Vendor Allowances The Company receives allowances from certain of its vendors whose products it purchases.
These allowances are received for a variety of buying and/or merchandising activities, including vendor programs
such as volume purchase allowances, purchase discounts, listing fees and exclusivity allowances. Allowances
received from a vendor are a reduction in the cost of the vendor’s products and services, and are recognized as a
reduction in the cost of sales and the related inventory in the consolidated statement of earnings and the
consolidated balance sheet, respectively, when it is probable that they will be received and the amount of the
allowance can be reliably estimated. Amounts received but not yet earned are presented in other liabilities as
deferred vendor allowances.
Certain exceptions apply if the consideration is a payment for goods or services delivered to the vendor or for
direct reimbursement of selling costs incurred to promote goods. The consideration is then recognized as a
reduction of the cost incurred in the consolidated statements of earnings.
Assets Held for Sale Non-current assets are classified as assets held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. Assets classified as held for
sale are measured at the lower of the carrying amount or fair value less cost to sell and are not depreciated. The
fair value measurement of assets held for sale is categorized within Level 2 of fair value hierarchy. Assets that were
previously classified as investment properties are measured using the fair value model consistent with properties
classified as investment properties.
Fixed Assets Fixed assets are recognized and subsequently measured at cost less accumulated depreciation and
any net accumulated impairment losses.
Borrowing costs directly attributable to the acquisition, construction or production of fixed assets that necessarily
take a substantial period of time to prepare for their intended use and a proportionate share of general borrowings,
are capitalized to the cost of those fixed assets, based on a quarterly weighted average cost of borrowing. All other
borrowing costs are expensed as incurred and recognized in net interest expense and other financing charges.
Gains and losses on disposal of fixed assets are determined by comparing the fair value of proceeds from disposal
with the net book value of the assets and are recognized net, in operating income. For transactions in which the
sale of a fixed asset satisfies the requirements of IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”),
and the asset is leased back by the Company, the Company recognizes, in operating income, only the amount of
gains or losses that relate to the rights transferred to the purchaser.
Fixed assets are depreciated on a straight-line basis over their estimated useful lives to their estimated residual
value when the assets are available for use. When significant parts of a fixed asset have different useful lives, they
are accounted for as separate components and depreciated separately. Estimated useful lives are as follows:
Buildings
Equipment and fixtures
Building improvements
Leasehold improvements
2 to 10 years
up to 10 years
Lesser of term of the lease and useful life up to 25 years(i)
10 to 40 years
(i)
If it is reasonably certain that the Company will obtain ownership of the leased asset by the end of the lease term, the associated leasehold
improvements are depreciated over the useful life of the asset on the same basis as owned assets.
Fixed assets are reviewed at each balance sheet date to determine whether there is any indication of impairment.
Refer to the Impairment of Non-Financial Assets policy.
82 2023 Annual Report - Financial Review Loblaw Companies Limited
Leases
As a Lessee At inception of a contract, the Company determines whether a contract is or contains a lease. When
a contract contains both lease and non-lease components, the Company will allocate the consideration in the
contract to each of the components on the basis of the relative stand-alone price of the lease component and the
aggregate stand-alone price of the non-lease components. Relative stand-alone prices are determined by
maximizing the most observable supplier prices for a similar asset and/or service.
The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease
payments when the leased asset is available for use by the Company. Lease payments for assets that are exempt
through the short-term exemption and variable payments not based on an index or rate are recognized in cost of
sales and SG&A expenses on the most systematic basis.
The measurement of lease liabilities includes the fixed and in-substance fixed payments and variable lease
payments that depend on an index or a rate, less any lease incentives receivable. If applicable, lease liabilities
will also include a purchase option exercise price if the Company is reasonably certain to exercise that option,
termination penalties if the lease term also reflects the termination option and amounts expected to be payable
under a residual value guarantee. Subsequent to initial measurement, the Company measures lease liabilities at
amortized cost using the effective interest method. Lease liabilities are remeasured when there is a change in
management’s assessment of whether it will exercise a renewal or termination option or a change in future lease
payments due to a change in index or rate. Right-of-use assets are adjusted by the same remeasurement
amount.
Right-of-use assets are measured at the initial amount of the lease liabilities plus any initial direct costs, lease
payments made at or before the commencement date net of lease incentives received, and decommissioning
costs. Subsequent to initial measurement, the Company applies the cost model with the exception of the fair
value model application to right-of-use assets that meet the definition of investment properties. Right-of-use
assets are measured at cost less accumulated depreciation, net accumulated impairment losses, and any
remeasurements of lease liabilities. The assets are depreciated on a straight-line basis over the earlier of the
assets’ useful lives or the end of the lease terms. Right-of-use assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. Refer to the Impairment of Non-Financial Assets policy.
Discount rates used in the present value calculation are the interest rates implicit in the leases, or if the rates
cannot be readily determined, the Company's incremental borrowing rates. Lease terms applied are the
contractual non-cancellable periods of the leases plus periods covered by an option to renew the leases if the
Company is reasonably certain to exercise that option and the periods covered by an option to terminate the
leases if the Company is reasonably certain not to exercise that option.
For sale and leaseback transactions, the Company applies the requirements of IFRS 15 to determine whether the
transfer of the asset should be accounted for as a sale. If the transfer of the asset is a sale in accordance with
IFRS 15, the Company will measure the right-of-use asset arising from the leaseback at the proportion of the
previous carrying amount of the asset that relates to the right of use retained by the Company. If the transfer of the
asset is not a sale in accordance with IFRS 15, the Company will continue to account for the asset under
International Accounting Standard (“IAS”) 16, “Property, Plant and Equipment” and recognize the proceeds
received as financial liabilities.
2023 Annual Report - Financial Review Loblaw Companies Limited 83
Notes to the Consolidated Financial Statements
Investment Properties Investment properties are properties owned by the Company that are held to either earn
rental income, for capital appreciation, or both. The Company’s investment properties include single tenant
properties held to earn rental income and certain multiple tenant properties. Land and buildings leased to
franchisees are not accounted for as investment properties as these properties are related to the Company’s
operating activities.
Investment property assets are measured using the fair value model. Under the fair value model, investment
properties are initially measured at cost and subsequently measured at fair value. Gains and losses arising from
changes in the fair value are recognized in operating income in the period in which they arise. Gains and losses
from disposal of investment properties are determined by comparing the fair value of disposal proceeds and the
carrying amount and are recognized in operating income.
When a property changes from own use to investment property, the property is remeasured to fair value. Any gain
arising from the remeasurement is recognized in operating income to the extent that it reverses a previous
impairment loss on that property, with any remaining gain recognized in other comprehensive income. Any loss on
remeasurement is recognized in operating income. All subsequent changes in fair value of the property are
recognized in operating income. Upon sale of an investment property that was previously classified as fixed assets,
amounts included in the revaluation reserve are transferred to retained earnings.
When an investment property carried at fair value changes to own use, the property is recognized in fixed assets at
the fair value at the date of change in use. The property is subsequently accounted for under the accounting policy
for fixed assets.
Goodwill Goodwill arising in a business combination is recognized as an asset at the date that control is acquired.
Goodwill is subsequently measured at cost less accumulated impairment losses. Goodwill is not amortized but is
tested for impairment on an annual basis or more frequently if there are indicators that goodwill may be impaired as
described in the Impairment of Non-Financial Assets policy.
Intangible Assets Intangible assets with finite lives are measured at cost less accumulated amortization and any
accumulated impairment losses. These intangible assets are amortized on a straight-line basis over their estimated
useful lives and are tested for impairment as described in the Impairment of Non-Financial Assets policy. Useful
lives, residual values and amortization methods for intangible assets with finite useful lives are reviewed at least
annually. Amortization expense for intangible assets is recognized in selling, general and administrative expenses.
Estimated useful lives are as follows:
Software
Prescription files
Loyalty program
Customer relationships
3 to 10 years
7 to 8 years
18 years
5 to 20 years
Indefinite life intangible assets are measured at cost less any accumulated impairment losses. These intangible
assets are tested for impairment on an annual basis or more frequently if there are indicators that intangible assets
may be impaired as described in the Impairment of Non-Financial Assets policy.
84 2023 Annual Report - Financial Review Loblaw Companies Limited
Impairment of Non-Financial Assets At each balance sheet date, the Company reviews the carrying amounts of its
non-financial assets at the cash generating unit (“CGU”) level, other than inventories, deferred tax assets and
investment properties, to determine whether there is any indication of impairment. If any such indication exists, the
asset is then tested for impairment by comparing its recoverable amount to its carrying value. Goodwill and
indefinite life intangible assets are tested for impairment at least annually.
For the purpose of impairment testing, assets, including right-of-use assets, are grouped together into the smallest
group of assets that generate cash inflows from continuing use that are largely independent of cash inflows of
other assets or groups of assets. This grouping is referred to as a CGU. The Company has determined that each
retail location is a separate CGU for purposes of impairment testing.
Goodwill arising from a business combination is tested for impairment at the minimum grouping of CGUs that are
expected to benefit from the synergies of the business combination from which the goodwill arose.
The recoverable amount of a CGU or CGU grouping is the higher of its value in use and its fair value less costs to
sell. Value in use is based on the estimated future cash flows from the CGU or CGU grouping discounted to their
present value using a pre-tax discount rate in a discounted cash flow model that reflects current market
assessments of the time value of money and the risks specific to the CGU or CGU grouping. If the CGU or CGU
grouping includes right-of-use assets in its carrying amount, the pre-tax discount rate reflects the risks associated
with the exclusion of lease payments from the estimated future cash flows. The fair value less costs to sell reflects
the amount that could be obtained from the disposal of the CGU or CGU grouping in an arm’s length transaction
between knowledgeable and willing parties, net of estimates of the costs of disposal.
An impairment loss is recognized if the carrying amount of a CGU or CGU grouping exceeds its recoverable
amount. For asset impairments other than goodwill, the impairment loss reduces the carrying amounts of the non-
financial assets in the CGU on a pro-rata basis, up to an asset’s individual recoverable amount. Any loss identified
from goodwill impairment testing is first applied to reduce the carrying amount of goodwill allocated to the CGU
grouping, and then to reduce the carrying amounts of the other non-financial assets in the CGU or CGU grouping
on a pro-rata basis.
For assets other than goodwill, an impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.
Impairment losses and reversals are recognized in SG&A.
Customer Loyalty Awards Programs The Company defers revenue at the time the award is earned by loyalty
program members (“members”) based on the relative fair value of the award. The relative fair value is determined
by allocating consideration between the fair value of the loyalty awards earned by members, net of breakage, and
the goods and services on which the awards were earned, based on their relative stand-alone selling price. The
estimated fair value per point for the PC Optimum™ Program is determined based on the program reward schedule
and is $1 for every 1,000 points earned. The breakage rate of the program is an estimate of the amount of points
that will never be redeemed. The rate is reviewed on an ongoing basis and is estimated utilizing historical
redemption activity and anticipated earn and redeem behaviour of members. The majority of the Company’s loyalty
liability, which is contract liability, is expected to be redeemed and recognized as revenue within one year of
issuance.
Financial Instruments and Derivative Financial Instruments Financial assets and liabilities are recognized when
the Company becomes party to the contractual provisions of the financial instrument. Upon initial recognition,
financial instruments, including derivatives and embedded derivatives in certain contracts, are measured at fair
value plus or minus transaction costs that are directly attributable to the acquisition or issue of financial instruments
that are not classified as fair value through profit or loss.
Fair values are based on quoted market prices where available from active markets, otherwise fair values are
estimated using valuation methodologies, primarily discounted cash flows taking into account external market
inputs where possible. The amortized cost of a financial asset or liability is the amount at which the financial asset
or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortization
using the effective interest method of any difference between the initial amount recognized and the maturity
amount, minus any reduction for impairment.
2023 Annual Report - Financial Review Loblaw Companies Limited 85
Notes to the Consolidated Financial Statements
The following table summarizes the classification and measurement of the Company’s financial assets and
liabilities:
Asset / Liability
Classification / Measurement
Cash and cash equivalents
Amortized cost
Short term investments
Accounts receivable
Credit card receivables
Certain other assets
Long term securities
Bank indebtedness
Trade payables and other liabilities
Demand deposits from customers
Short term debt
Long term debt
Associate Interest
Certain other liabilities
Derivatives
Amortized cost / fair value through other comprehensive income
Amortized cost
Amortized cost
Amortized cost / fair value through profit and loss
Fair value through other comprehensive income
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss / fair value through other
comprehensive income
Financial derivative instruments in the form of forwards and futures, as well as non-financial derivatives in the form
of futures contracts, options contracts and forward contracts, are recorded at fair value on the consolidated
balance sheet. The Company does not use derivative instruments for speculative purposes. Embedded derivatives
are separated from the host contract and accounted for separately on the consolidated balance sheet at fair value
if the host contract is not a financial asset. Derivative instruments are recorded in current or non-current assets and
liabilities based on their remaining terms to maturity. All changes in fair values of the derivative instruments are
recorded in net earnings unless the derivative qualifies and is effective as a hedging item in a designated hedging
relationship.
The Company has cash flow hedges which are used to manage exposure to fluctuations in foreign currency
exchange and interest rates. The effective portion of the change in fair value of the hedging item is recorded in
other comprehensive income. If the change in fair value of the hedging item is not completely offset by the change
in fair value of the hedged item, the ineffective portion of the hedging relationship is recorded in net earnings.
Amounts accumulated in other comprehensive income are reclassified to net earnings when the hedged item is
recognized in net earnings. The Company ensures that the hedge accounting relationships are aligned with the
Company’s risk management objectives and strategy and applies a more qualitative and forward-looking approach
to assessing hedge effectiveness. The Company’s risk management strategy and hedging activities are disclosed
in note 28 “Financial Instruments” and note 29 “Financial Risk Management”.
Gains and losses on financial assets and financial liabilities classified as fair value through profit and loss (“FVTPL”)
are recognized in net earnings in the period in which they are incurred. Settlement date accounting is used to
account for the purchase and sale of financial assets. Gains or losses between the trade date and settlement date
on FVTPL financial assets are recorded in net earnings.
86 2023 Annual Report - Financial Review Loblaw Companies Limited
Valuation Process The determination of the fair value of financial instruments is performed by the Company’s
treasury and financial reporting departments on a quarterly basis. There was no change in the valuation techniques
applied to financial instruments during the current year. The following table describes the valuation techniques
used in the determination of the fair values of financial instruments:
Type
Valuation Approach
Cash and cash equivalents, short term investments,
accounts receivable, credit card receivables, bank
indebtedness, trade payables and other liabilities,
demand deposits from customers and short term debt
Derivatives
Long term debt and certain other financial instruments
The carrying amount approximates fair value due to the
short term maturity of these instruments.
Specific valuation techniques used to value derivative
financial instruments include:
l Quoted market prices or dealer quotes for similar
instruments; and
l The fair values of other derivative instruments are
determined based on observable market information
as well as valuations determined by external
valuators with experience in financial markets.
The fair value is based on the present value of
contractual cash flows, discounted at the Company’s
current incremental borrowing rate for similar types of
borrowing arrangements or, where applicable, quoted
market prices.
Impairment of Financial Assets The Company applies a forward-looking ECL model at each balance sheet date to
financial assets measured at amortized cost or those measured at fair value through other comprehensive income
("FVOCI”), except for investments in equity instruments.
The ECL model applied to financial assets requires judgment, assumptions and estimations on changes in credit
risks, forecasts of future economic conditions and historical information on the credit quality of the financial asset.
Consideration of how changes in economic factors affect ECLs are determined on a probability-weighted basis.
Impairment losses and reversals are recorded in SG&A with the carrying amount of the financial asset or group of
financial assets adjusted through the use of allowance accounts.
Foreign Currency Translation The functional currency of the Company is the Canadian dollar.
Transactions in foreign currencies are translated into the functional currency at the foreign currency exchange
rates that approximate the rates in effect at the dates when such items are transacted. Monetary assets and
liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the
balance sheet date. Non-monetary items that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction. Foreign currency differences are recognized in
operating income.
The assets and liabilities of foreign operations that have a functional currency different from that of the Company,
including goodwill and fair value adjustments arising on acquisition, are translated into the functional currency at
the foreign currency exchange rate in effect at the balance sheet date. Revenues and expenses of foreign
operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates
in effect at the dates when such items are transacted. The resulting foreign currency exchange gains or losses are
recognized in the foreign currency translation adjustment as part of other comprehensive income. When such
foreign operation is disposed of, the related foreign currency translation reserve is recognized in net earnings as
part of the gain or loss on disposal. On the partial disposal of such foreign operation, the relevant proportion is
reclassified to net earnings.
2023 Annual Report - Financial Review Loblaw Companies Limited 87
Notes to the Consolidated Financial Statements
Defined Benefit Post-Employment Plans The Company has a number of contributory and non-contributory defined
benefit post-employment plans providing pension and other benefits to eligible employees. The defined benefit
pension plans provide a pension based on length of service and eligible pay. The other defined benefits include
health care, life insurance and dental benefits provided to eligible employees who retire at certain ages having met
certain service requirements. The Company’s net defined benefit plan obligations (assets) for each plan are
actuarially calculated by a qualified actuary at the end of each annual reporting period using the projected unit
credit method pro-rated based on service and management’s best estimate of the discount rate, the rate of
compensation increase, retirement rates, termination rates, mortality rates and expected growth rate of health care
costs. The discount rate used to value the defined benefit plan obligation is based on high quality corporate bonds
denominated in the same currency with cash flows that match the terms of the defined benefit plan obligations.
Past service costs (credits) arising from plan amendments are recognized in operating income in the year that they
arise. The actuarially determined net interest costs on the net defined benefit plan obligation are recognized in net
interest expense and other financing charges.
The fair values of plan assets are deducted from the defined benefit plan obligations to arrive at the net defined
benefit plan obligations (assets). For plans that result in a net defined benefit asset, the recognized asset is limited
to the present value of economic benefits available in the form of future refunds from the plan or reductions in
future contributions to the plan (“asset ceiling”). If it is anticipated that the Company will not be able to recover the
value of the net defined benefit asset, after considering minimum funding requirements, the net defined benefit
asset is reduced to the amount of the asset ceiling. When the payment in the future of minimum funding
requirements related to past service would result in a net defined benefit surplus or an increase in a surplus, the
minimum funding requirements are recognized as a liability to the extent that the surplus would not be fully
available as a refund or a reduction in future contributions.
Remeasurements including actuarial gains and losses, the effect of the asset ceiling (if applicable) and the impact of
any minimum funding requirements are recognized through other comprehensive income and subsequently
reclassified from accumulated other comprehensive income to retained earnings.
The Company also participates in pension plans with Weston. The Company has established a stated policy to
allocate the net defined benefit cost to the Company and Weston based on the obligation attributable to plan
participants, provided by a third-party actuary. Both the service cost and contribution to be paid are determined
based on the actuarial valuation.
Other Long Term Employee Benefit Plans The Company offers other long term employee benefits including
contributory long term disability benefits and non-contributory continuation of health care and dental benefits to
employees who are on long term disability leave. As the amount of the long term disability benefit does not depend
on length of service, the obligation is recognized when an event occurs that gives rise to an obligation to make
payments. The accounting for other long term employee benefit plans is similar to the method used for defined
benefit plans except that all actuarial gains and losses are recognized in operating income.
Defined Contribution Plans The Company maintains a number of defined contribution pension plans for
employees in which the Company pays fixed contributions for eligible employees into a registered plan and has no
further significant obligation to pay any further amounts. The costs of benefits for defined contribution plans are
expensed as employees have rendered service.
Multi-Employer Pension Plans The Company participates in multi-employer pension plans (“MEPPs”) which are
accounted for as defined contribution plans. The Company’s responsibility to make contributions to these plans is
limited to amounts established pursuant to its collective agreements. Defined benefit MEPPs are accounted for as
defined contribution plans as adequate information to account for the Company’s participation in the plans is not
available due to the size and number of contributing employers in the plans. The contributions made by the
Company to MEPPs are expensed as contributions are due.
88 2023 Annual Report - Financial Review Loblaw Companies Limited
Equity-Settled Equity-Based Compensation Plans Stock options, Restricted Share Units (“RSUs”), Performance
Share Units (“PSUs”), Director Deferred Share Units (“DSUs”) and Executive Deferred Share Units (“EDSUs”) issued
by the Company are substantially all settled in common shares and are accounted for as equity-settled awards.
Stock options outstanding have a seven year term to expiry, vest 20% cumulatively on each anniversary date of the
grant and are exercisable at the designated common share price, which is based on the greater of the volume
weighted average trading price of the Company’s common share for either the five trading days prior to the date of
grant or the trading day immediately preceding the grant date. The fair value of each tranche of options granted is
measured separately at the grant date using a Black-Scholes option pricing model, and includes the following
assumptions:
• The expected dividend yield is estimated based on the expected annual dividend prior to the option grant date
and the closing share price as at the option grant date;
• The expected share price volatility is estimated based on the Company’s historical volatility over a period
consistent with the expected life of the options;
• The risk-free interest rate is estimated based on the Government of Canada bond yield in effect at the grant
date for a term to maturity equal to the expected life of the options; and
• The effect of expected exercise of options prior to expiry is incorporated into the weighted average expected
life of the options, which is based on historical experience and general option holder behaviour.
RSUs and PSUs vest after the end of a three year performance period. The number of PSUs that vest is based on
the achievement of specified performance measures. The fair value of each RSU and PSU granted is measured
separately at the grant date based on the market value of a Loblaw common share. Dividends paid may be
reinvested in RSUs and PSUs and are treated as capital transactions.
The Company established a trust for each of the RSU and PSU plans to facilitate the purchase of shares for future
settlement upon vesting. The Company is the sponsor of the respective trusts and has assigned Computershare
Trust Company of Canada as the trustee. The trusts are considered structured entities and are consolidated in the
Company’s financial statements with the cost of the acquired shares recorded at book value as a reduction to
share capital. Any premium on the acquisition of the shares above book value is applied to retained earnings until
the shares are issued to settle RSU and PSU plan obligations.
Members of the Board, who are not management of the Company, may elect to receive a portion of their annual
retainers and fees in the form of DSUs. Eligible executives of the Company may elect to defer up to 100% of the
Short Term Incentive Plan earned in any year into the EDSU plan. Dividends paid earn fractional DSUs and EDSUs,
respectively and are treated as capital transactions. DSUs and EDSUs vest upon grant.
The compensation expense for equity-settled plans is prorated over the vesting or performance period, with a
corresponding increase to contributed surplus. Forfeitures are estimated at the grant date and are revised to reflect
changes in expected or actual forfeitures.
Upon exercise of options, the amount accumulated in contributed surplus for the award plus the cash received
upon exercise is recognized as an increase in share capital. Upon settlement of RSUs and PSUs, the amount
accumulated in contributed surplus for the award is reclassified to share capital, with any premium or discount
applied to retained earnings.
Employee Share Ownership Plan The Company’s contributions to the Employee Share Ownership Plan (“ESOP”)
are measured at cost and recorded as compensation expense in operating income when the contribution is made.
The ESOP is administered through a trust which purchases the Company’s common shares on the open market on
behalf of its employees.
2023 Annual Report - Financial Review Loblaw Companies Limited 89
Notes to the Consolidated Financial Statements
Note 3. Critical Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to make estimates and judgments
in applying the Company’s accounting policies that affect the reported amounts and disclosures made in the
consolidated financial statements and accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in
respect of the application of an accounting policy, a recognized or unrecognized financial statement amount and/or
note disclosure, following an analysis of relevant information that may include estimates and assumptions.
Estimates and assumptions are used mainly in determining the measurement of balances recognized or disclosed
in the consolidated financial statements and are based on a set of underlying data that may include management’s
historical experience, knowledge of current events and conditions and other factors that are believed to be
reasonable under the circumstances. Management continually evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key estimation uncertainty that the Company
believes could have the most significant impact on the amounts recognized in the consolidated financial
statements. The Company’s accounting policies are disclosed in note 2.
Consolidation
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining the
entities that it controls and therefore consolidates. The Company controls an entity when the Company has the
existing rights that give it the current ability to direct the activities that significantly affect the entity’s returns. The
Company consolidates all of its wholly owned subsidiaries. Judgment is applied in determining whether the
Company controls the entities in which it does not have ownership rights or does not have full ownership rights.
Most often, judgment involves reviewing contractual rights to determine if rights are participating (giving power
over the entity) or protective rights (protecting the Company’s interest without giving it power).
Business Combinations - Valuation of Intangible Assets
Key Estimations The Company applies significant judgment in estimating the fair value of intangible assets. In
determining the fair value of customer relationships and brands, various valuation techniques are used. Specifically,
the Company used the multi-period excess earnings method to fair value customer relationships and the royalty
relief method to fair value brands using a discounted cash flow model. Under these valuation approaches, the
Company developed assumptions related to revenue and gross margin forecasts, attrition rate, royalty rate and
discount rates.
Inventories
Key Estimations Inventories are carried at the lower of cost and net realizable value which requires the Company
to utilize estimates related to fluctuations in shrink, future retail prices, the impact of vendor rebates on cost,
seasonality and costs necessary to sell the inventory.
Impairment of Non-Financial Assets (Goodwill, Intangible Assets, Fixed Assets and Right-of-Use Assets)
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining CGUs
for the purpose of testing fixed assets, right-of-use assets and intangible assets for impairment. Judgment is also
used to determine the goodwill CGUs for the purpose of testing goodwill for impairment. The Company has
determined that each retail location is a separate CGU. Intangible assets are allocated to the CGUs (or groups of
CGUs) to which they relate. Goodwill is allocated to CGUs (or groups of CGUs) based on the level at which
management monitors goodwill, which cannot be higher than an operating segment. The allocation of goodwill is
made to CGUs (or groups of CGUs) that are expected to benefit from the synergies and future growth of the
business combination from which they arose. In addition, judgment is used to determine whether a triggering event
has occurred requiring an impairment test to be completed. In applying this judgment management considers
profitability of the CGU and other qualitative factors.
Key Estimations In determining the recoverable amount of a CGU or a group of CGUs, various estimates are
employed. The Company determines fair value less costs to sell using such estimates as market rental rates for
comparable properties, discount rates and capitalization rates. The Company determines value in use by using
estimates including projected future sales and earnings, and discount rates consistent with external industry
information reflecting the risk associated with the specific cash flows.
90 2023 Annual Report - Financial Review Loblaw Companies Limited
Impairment of Credit Card Receivables
Judgments Made in Relation to Accounting Policies Applied and Key Estimations In each stage of the ECL
model, impairment is determined based on the probability of default, loss given default, and expected exposures at
default on drawn and undrawn exposures on credit card receivables. The application of the ECL model requires
management to apply the following significant judgments, assumptions and estimations:
• Movement of impairment measurement between the three stages of the ECL model, based on the assessment
of the increase in credit risks on credit card receivables. The assessment of changes in credit risks includes
qualitative and quantitative factors of the accounts, such as historical credit loss experience and external credit
scores;
•
•
Thresholds for significant increase in credit risk based on changes in probability of default over the expected
life of the instrument relative to initial recognition; and
Forecasts of future economic conditions, namely the unemployment rate. Management uses an average of
unemployment rate forecasts published by major Canadian Chartered Banks and the Conference Board of
Canada to establish the base case scenario and other representative ranges of possible forecast scenarios.
Income and Other Taxes
Judgments Made in Relation to Accounting Policies Applied The calculation of current and deferred income
taxes requires management to make certain judgments including expectations about future operating results, the
timing and reversal of temporary differences, and the interpretation of tax rules in jurisdictions where the Company
performs activities. Where the amount of tax payable or recoverable is uncertain, the Company establishes
provisions based on the most likely amount of the liability or recovery.
Segment Information
Judgments Made in Relation to Determining the Aggregation of Operating Segments The Company uses
judgment in assessing the criteria used to determine the aggregation of operating segments. The Retail reportable
operating segment consists of several operating segments comprised primarily of food retail and Associate-owned
drug stores, and also includes in-store pharmacies and healthcare services and other health and beauty products,
apparel and other general merchandise. The Company has aggregated its retail operating segments on the basis
of their similar economic characteristics, customers and nature of products. This similarity in economic
characteristics reflects the fact that the Company’s retail operating segments operate primarily in Canada and are
therefore subject to the same economic market pressures and regulatory environment. The Company’s retail
operating segments are subject to similar competitive pressures such as price and product innovation and
assortment from existing competitors and new entrants into the marketplace. The similar economic characteristics
also include the provision of centralized, common functions such as marketing and information technology (“IT”)
across all retail operating segments.
The retail operating segments’ customer profile is primarily individuals who are purchasing goods for their own or
their family’s personal needs and consumption. The nature of products and the product assortment sold by each of
the retail operating segments is also similar and includes grocery, pharmaceuticals, cosmetics, electronics and
housewares. The aggregation of the retail operating segments reflects the nature and financial effects of the
business activities in which the Company engages and the economic environment in which it operates.
Provisions
Judgments made in Relation to Accounting Policies Applied and Key Estimations The recording of provisions
requires management to make certain judgments regarding whether there is a present legal or constructive
obligation as a result of a past event, it is probable that the Company will be required to settle the obligation and if
a reliable estimate of the amount of the obligation can be made. The Company has recorded provisions primarily in
respect of self-insurance, legal claims and charges related to PC Bank commodity tax matters. The Company
reviews the merits, risks and uncertainties of each provision, based on current information, and the amount
expected to be required to settle the obligation. Provisions are reviewed on an ongoing basis and are adjusted
accordingly when new facts and events become known to the Company.
2023 Annual Report - Financial Review Loblaw Companies Limited 91
Notes to the Consolidated Financial Statements
Leases
Judgments Made in Relation to Accounting Policies Applied Management exercises judgment in determining
the appropriate lease term on a lease by lease basis. Management considers all facts and circumstances that
create an economic incentive to exercise a renewal option or to not exercise a termination option including
investments in major leaseholds, store performances, past business practice and the length of time remaining
before the option is exercisable. The periods covered by renewal options are only included in the lease term if
management is reasonably certain to renew. Management considers reasonably certain to be a high threshold.
Changes in the economic environment or changes in the retail industry may impact management’s assessment of
lease term, and any changes in management’s estimate of lease terms may have a material impact on the
Company’s consolidated balance sheets and statements of earnings.
Key Estimations In determining the carrying amount of right-of-use assets and lease liabilities, the Company is
required to estimate the incremental borrowing rate specific to each leased asset or portfolio of leased assets if
the interest rate implicit in the lease is not readily determined. Management determines the incremental borrowing
rate using a base risk-free interest rate estimated by reference to the Government of Canada bond yield with an
adjustment that reflects the Company’s credit rating, the security, lease term and value of the underlying leased
asset, and the economic environment in which the leased asset operates. The incremental borrowing rates are
subject to change due to changes in the business and macroeconomic environment.
Note 4. Amendments to IFRS Accounting Standards
Amendments to IAS 1 In February 2021, the International Accounting Standards Board issued amendments to
International Accounting Standard 1 Presentation of Financial Statements ("IAS 1") and IFRS Practice Statement 2
Making Materiality Judgments ("IFRS Practice Statement 2"). The amendments to IAS 1 require companies to
disclose their material accounting policy information rather than their significant accounting policies. The
amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to
accounting policy disclosures. The adoption of these amendments did not have a material impact on the
Company’s consolidated financial statements.
Amendments to IAS 12 The Company adopted the amendments to IAS 12, “Income Taxes” (“IAS 12”), issued in May
2023, introducing a mandatory temporary exception to the requirements of IAS 12 under which a company does
not recognize or disclose information about deferred tax assets and liabilities related to the proposed Organization
for Economic Co-operation and Development (“OECD”) Pillar Two model rules (“Pillar Two”). The Company applied
the temporary exception as of December 30, 2023 as disclosed in note 7.
92 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 5. Business Acquisitions
Acquisition of Lifemark Health Group On May 10, 2022, the Company acquired all of the outstanding common
shares of Lifemark Health Group (“Lifemark”) for total cash purchase consideration of $829 million. Lifemark is the
Canadian leading provider of outpatient physiotherapy, massage therapy, occupational therapy, chiropractic,
mental health, and other ancillary rehabilitation services through its more than 300 clinics across Canada. The
acquisition of Lifemark adds to the Company’s growing role as a healthcare service provider, with a network of
health and wellness solutions, accessible in-person and digitally.
The Lifemark acquisition was accounted for using the acquisition method in accordance with IFRS 3, “Business
Combinations”, with the results of operations consolidated with those of the Company effective May 10, 2022.
In the third quarter of 2022, the Company finalized the purchase price allocation which is summarized as follows:
(millions of Canadian dollars)
Net Assets Acquired:
Cash and cash equivalents
Accounts receivable(i)
Prepaid expenses and other assets
Fixed assets
Right-of-use assets
Intangible assets
Goodwill
Trade payables and other liabilities
Lease liabilities
Deferred income tax liabilities
Other liabilities
Total Net Assets Acquired
$
$
15
54
2
16
75
564
365
(38)
(75)
(145)
(4)
829
(i)
Trade and other receivables is net of a loss allowance of $2 million.
Goodwill is attributable to expected growth in customers and expansion of the Lifemark footprint. The goodwill
arising from this acquisition was not deductible for tax purposes.
Intangible assets are comprised of the following:
(millions of Canadian dollars)
Intangible Assets:
Brand
Customer relationships
Computer software
Total Intangible Assets
Estimated Useful Life
Indefinite
10-20 years
3 years
$
$
265
295
4
564
Selling, general and administrative expense in 2022 included $16 million of transaction costs related to the
acquisition.
2023 Annual Report - Financial Review Loblaw Companies Limited 93
Notes to the Consolidated Financial Statements
Note 6. Net Interest Expense and Other Financing Charges
The components of net interest expense and other financing charges were as follows:
(millions of Canadian dollars)
Interest expense and other financing charges
Lease liabilities (note 27)
Long term debt(i)
Borrowings related to credit card receivables
Post-employment and other long term employee benefits (note 24)
Independent funding trusts
Financial liabilities (note 27)
Bank indebtedness
Interest income
Accretion income
Short term interest income
Post-employment and other long term employee benefits (note 24)
Recovery related to Glenhuron Bank Limited (note 7)
Net interest expense and other financing charges
2023
2022
$
370
$
321
82
14
37
12
1
837
$
(3) $
(31)
—
(34) $
—
803
$
$
$
$
$
$
$
333
303
52
—
22
5
1
716
(4)
(14)
(4)
(22)
(11)
683
(i) Included in 2022 is an early repayment premium charge of $7 million related to the early redemption of an $800 million debenture bearing
interest at 4.86% with an original maturity date of September 12, 2023.
Note 7. Income Taxes
The components of income taxes recognized in the consolidated statements of earnings were as follows:
(millions of Canadian dollars)
Current income taxes
Current period
Recovery related to Glenhuron Bank Limited
Adjustments in respect of prior periods
Deferred income taxes
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Income taxes
2023
2022
$
1,005
$
—
(36)
969
$
(252)
$
(3)
(255)
714
$
$
$
$
$
$
818
(33)
8
793
(113)
(15)
(128)
665
In 2021, the Supreme Court of Canada ruled in favour of the Company on the Glenhuron Bank Limited
(“Glenhuron”) matter. As a result of related reassessments received during the first quarter of 2022, the Company
reversed $35 million of previously recorded charges, of which $2 million was recorded as interest income and
$33 million was recorded as an income tax recovery, and an additional $9 million, before taxes, was recorded in
respect of interest income earned on expected cash tax refunds.
94 2023 Annual Report - Financial Review Loblaw Companies Limited
Income tax expense (recovery) recognized in other comprehensive income was as follows:
(millions of Canadian dollars)
Net defined benefit plan actuarial gains (losses) (note 24)
Gains on cash flow hedges (note 28)
Gain on long term securities (note 28)
Net income tax expense (recovery) recognized in other comprehensive income
2023
71
2
—
73
$
$
2022
(83)
4
1
(78)
$
$
The effective tax rate in the consolidated statement of earnings was reported at rates different than the weighted
average basic Canadian federal and provincial statutory income tax rates for the following reasons:
Weighted average basic Canadian federal and provincial statutory income tax rate
Net increase (decrease) resulting from:
Recovery related to Glenhuron
Non-deductible and non-taxable items
Adjustments in respect of prior periods
Other
Effective tax rate applicable to earnings before income taxes
2023
26.5 %
— %
(0.5) %
(1.3) %
(0.1) %
24.6 %
2022
26.5 %
(1.2) %
0.3 %
(0.3) %
(0.3) %
25.0 %
Unrecognized deferred income tax assets Deferred income tax assets were not recognized on the consolidated
balance sheets in respect of the following items:
(millions of Canadian dollars)
Deductible temporary differences
Non-capital loss carryforwards
Unrecognized deferred tax assets
2023
14
180
194
$
$
2022
15
176
191
$
$
The non-capital loss carryforwards expire in the years 2029 to 2043. The deductible temporary differences do not
expire under current income tax legislation. Deferred income tax assets were not recognized in respect of these
items because it is not probable that future taxable income will be available to the Company to utilize the benefits.
2023 Annual Report - Financial Review Loblaw Companies Limited 95
Notes to the Consolidated Financial Statements
Recognized deferred income tax assets and liabilities Deferred income tax assets and liabilities were attributable
to the following:
(millions of Canadian dollars)
Trade payables and accrued liabilities
Other liabilities
Lease liabilities
Fixed assets
Right-of-use assets
Goodwill and intangible assets
Non-capital loss carryforwards (expiring 2029 to 2043)
Other
Net deferred income tax liabilities
Recorded on the consolidated balance sheets as follows:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liabilities
As at
December 30, 2023
As at
December 31, 2022
$
94
$
204
2,476
(588)
(2,004)
(1,282)
64
29
(1,007)
$
$
125
(1,132)
(1,007)
$
$
$
$
74
217
2,405
(641)
(1,969)
(1,347)
43
25
(1,193)
86
(1,279)
(1,193)
Global Minimum Tax (Pillar Two) In December 2021, the OECD issued model rules for a new global minimum tax
framework. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the
Company operates, and will be effective for the Company’s fiscal year ended December 28, 2024.
The Company is in the process of assessing its exposure to Pillar Two legislation based on the most recent tax
filings, country-by-country reporting and financial statements of the Company. The Company does not expect Pillar
Two top-up taxes to have a material impact on the Company’s consolidated results of operations.
The Company is applying the exception to recognizing and disclosing information about deferred tax asset and
liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023.
96 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 8. Basic and Diluted Net Earnings per Common Share
(millions of Canadian dollars except where otherwise indicated)
Net earnings attributable to shareholders of the Company
Dividends on preferred shares in equity (note 22)
Net earnings available to common shareholders
Weighted average common shares outstanding (note 22)
Dilutive effect of equity-based compensation
Dilutive effect of certain other liabilities
Diluted weighted average common shares outstanding
Basic net earnings per common share ($)
Diluted net earnings per common share ($)
$
$
2023
2,100
(12)
2,088
316.7
2.6
0.7
320.0
6.59
6.52
$
$
$
$
$
$
2022
1,921
(12)
1,909
328.1
3.0
0.6
331.7
5.82
5.75
In 2023, 49,863 (2022 – 1,106,204) potentially dilutive instruments were excluded from the computation of diluted
net earnings per common share as they were anti-dilutive.
Note 9. Cash and Cash Equivalents, Short Term Investments and Change in Non-cash Working Capital
The components of cash and cash equivalents, short term investments and change in non-cash working capital
were as follows:
Cash and cash equivalents
(millions of Canadian dollars)
Cash
Cash equivalents
Total cash and cash equivalents
Short Term Investments
(millions of Canadian dollars)
Government treasury bills
Bankers’ acceptances
Guaranteed investment certificates
Other
Total short term investments
Changes in Non-cash Working Capital
(millions of Canadian dollars)
Change in:
Accounts receivable
Prepaid expenses and other assets
Inventories
Trade payables and other liabilities
Other
Change in non-cash working capital
As at
December 30, 2023
As at
December 31, 2022
$
$
$
947
541
1,488
$
777
831
1,608
As at
December 30, 2023
353
$
87
22
2
464
$
As at
December 31, 2022
299
$
3
21
3
326
$
December 30, 2023
December 31, 2022
$
(163) $
19
35
116
(16)
$
(9) $
(214)
(94)
(689)
507
—
(490)
2023 Annual Report - Financial Review Loblaw Companies Limited 97
Notes to the Consolidated Financial Statements
Note 10. Accounts Receivable
The following are continuities of the Company’s allowances for uncollectible accounts receivable:
(millions of Canadian dollars)
Allowances, beginning of year
Net addition
Allowances, end of year
2023
2022
$
$
(31)
$
(5)
(36)
$
(23)
(8)
(31)
Credit risk associated with accounts receivable is discussed in note 29.
Note 11. Credit Card Receivables
The components of credit card receivables were as follows:
(millions of Canadian dollars)
Gross credit card receivables
Allowance for credit card receivables
Credit card receivables
Securitized to independent securitization trusts:
Securitized to Eagle Credit Card Trust® (note 20)
Securitized to Other Independent Securitization Trusts
Total securitized to independent securitization trusts
$
$
$
As at
December 30, 2023
4,388
$
As at
December 31, 2022
$
$
$
(256)
4,132
1,350
850
2,200
$
4,160
(206)
3,954
1,350
700
2,050
The Company, through PC Bank, participates in various securitization programs that provide a source of funds for
the operation of its credit card business. PC Bank maintains and monitors a co-ownership interest in credit card
receivables with independent securitization trusts, including Eagle and Other Independent Securitization Trusts, in
accordance with its financing requirements.
The associated liability of Eagle is recorded in long term debt (see note 20). The associated liabilities of credit card
receivables securitized to the Other Independent Securitization Trusts are recorded in short term debt.
The securitization agreements between PC Bank and the Other Independent Securitization Trusts are renewed and
extended on an annual basis. The existing agreements were renewed in 2023, with their respective maturity dates
extended to 2025 and with all other terms and conditions remaining substantially the same.
As at December 30, 2023, PC Bank recorded a $150 million net increase of co-ownership interest in the securitized
receivables held with the Other Independent Securitization Trusts as a result of growth in the credit card portfolio.
The undrawn commitments on facilities available from the Other Independent Securitization Trusts as at
December 30, 2023 were $100 million (December 31, 2022 – $250 million).
The Company has arranged letters of credit on behalf of PC Bank for the benefit of the independent securitization
trusts (see note 31).
Under its securitization programs, PC Bank is required to maintain, at all times, a credit card receivable pool
balance equal to a minimum of 107% of the outstanding securitized liability. PC Bank was in compliance with this
requirement as at December 30, 2023 and throughout 2023.
98 2023 Annual Report - Financial Review Loblaw Companies Limited
The following table provides gross carrying amounts of credit card receivables by internal risk ratings for credit risk
management purposes:
As at December 30, 2023
Low risk
Moderate risk
High risk
Total gross carrying amount
ECL allowance
Net carrying amount
Low risk
Moderate risk
High risk
Total gross carrying amount
ECL allowance
Net carrying amount
12-month ECL
(Stage 1)
Lifetime ECL-
not credit
impaired
(Stage 2)
Lifetime ECL-
credit
impaired
(Stage 3)
$
2,194 $
13 $
— $
1,215
461
3,870 $
(104)
3,766 $
$
$
38
414
465 $
(110)
355 $
Total
2,207
1,253
928
—
53
53 $
4,388
(42)
11 $
(256)
4,132
As at December 31, 2022
12-month ECL
(Stage 1)
Lifetime ECL-
not credit
impaired
(Stage 2)
Lifetime ECL-
credit
impaired
(Stage 3)
$
2,113 $
13 $
— $
1,163
424
3,700 $
(79)
3,621 $
$
$
35
370
418 $
(92)
326 $
—
42
42 $
(35)
7 $
Total
2,126
1,198
836
4,160
(206)
3,954
2023 Annual Report - Financial Review Loblaw Companies Limited 99
Notes to the Consolidated Financial Statements
The following are continuities of the Company’s allowance for credit card receivables for the years ended
December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
As at December 30, 2023
Balance, beginning of year
Increase / (decrease) during the year:
Transfers(i)
To Stage 1
To Stage 2
To Stage 3
New loans originated(ii)
Net remeasurements(iii)
Write-offs
Recoveries
Balance, end of year
Stage 1
Stage 2
Stage 3
$
79 $
92 $
35 $
27
(7)
(3)
15
(7)
—
—
(27)
9
(20)
8
48
—
—
$
104 $
110 $
—
(2)
23
4
140
(183)
25
42 $
Total
206
—
—
—
27
181
(183)
25
256
(i) Transfers reflect allowance movements between stages for loans that were recognized as of the beginning of the year.
(ii) New loans originated reflect the stage of loan, and the related loan balance, as of the end of the year.
(iii) Net remeasurements includes the impact from changes in loan balances, model enhancements and credit quality during the year.
(millions of Canadian dollars)
As at December 31, 2022
Balance, beginning of year
Increase / (decrease) during the year:
Transfers(i)
To Stage 1
To Stage 2
To Stage 3
New loans originated(ii)
Net remeasurements(iii)
Write-offs
Recoveries
Balance, end of year
Stage 1
Stage 2
Stage 3
$
75 $
98 $
32 $
22
(5)
(2)
13
(24)
—
—
(22)
7
(15)
8
16
—
—
—
(2)
17
5
81
(127)
29
$
79 $
92 $
35 $
Total
205
—
—
—
26
73
(127)
29
206
(i) Transfers reflect allowance movements between stages for loans that were recognized as of the beginning of the year.
(ii) New loans originated reflect the stage of loan, and the related loan balance, as of the end of the year.
(iii) Net remeasurements includes the impact from changes in loan balances, model enhancements and credit quality during the year.
The allowances for credit card receivables recorded in the consolidated balance sheets are maintained at a level
which is considered adequate to endure credit-related losses on credit card receivables.
Note 12. Inventories
For inventories recorded as at December 30, 2023, the Company has an inventory provision of $46 million
(December 31, 2022 – $43 million) for the write-down of inventories below cost to net realizable value. The write-
down was included in cost of sales. There were no reversals of previously recorded write-downs of inventories
during 2023 and 2022.
Note 13. Assets Held for Sale
The Company classifies certain assets, primarily land and buildings, that it expects to sell in the next 12 months, as
assets held for sale. These assets were either originally used in the Company’s retail business segment or held in
investment properties. In 2023, the Company disposed of nine properties (2022 – eleven) included in assets held
for sale for proceeds of $38 million (2022 – $151 million) and recognized a net gain of $12 million (2022 – net gain
of $76 million). A net fair value write-down of $14 million (2022 – nominal fair value gain) was recognized on assets
held for sale in 2023.
100 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 14. Fixed Assets
The following are continuities of the cost and the accumulated depreciation of fixed assets for the years ended
December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
Cost
Balance, beginning of year
Additions(i)
Business acquisitions
Disposals
2023
Buildings and
building
improvements
Land
Equipment
and fixtures
Leasehold
improvements
Assets
under
construction
Total
$ 212 $
1,872 $ 9,955 $
4,435 $
479 $ 16,953
—
—
—
—
149
1
33
1
(30)
(188)
(86)
(12)
—
—
1,520
1,702
2
(316)
2
—
Net transfer to assets held for sale
Transfer from assets under construction
1
6
1
15
—
721
—
271
—
(1,013)
Balance, end of year
Accumulated depreciation
Balance, beginning of year
Depreciation
Impairment losses
Reversal of impairment losses
Disposals
Balance, end of year
Carrying amount as at:
December 30, 2023
$
189 $
1,700 $ 10,740 $
4,728 $
986 $ 18,343
$
4 $
—
—
(1)
—
957 $ 7,495 $
53
5
(1)
(104)
565
33
(6)
(86)
2,799 $
295
2 $ 11,257
913
—
4
(6)
(11)
—
—
—
42
(14)
(201)
$
3 $
910 $ 8,001 $
3,081 $
2 $ 11,997
$
186 $
790 $ 2,739 $
1,647 $
984 $ 6,346
(i) Additions to fixed assets include $37 million of prepayments that were transferred from other assets in 2023.
(millions of Canadian dollars)
Cost
Balance, beginning of year
Additions(i)
Business acquisitions (note 5)
Disposals
Net transfer to assets held for sale
Transfer from assets under construction
Balance, end of year
Accumulated depreciation
Balance, beginning of year
Depreciation
Impairment losses
Reversal of impairment losses
Disposals
Balance, end of year
Carrying amount as at:
December 31, 2022
Buildings and
building
improvements
Land
Equipment
and fixtures
Leasehold
improvements
Assets
under
construction
Total
2022
$
219 $
1,834 $ 9,343 $
4,204 $
361 $ 15,961
—
—
(1)
(6)
—
—
—
147
6
55
10
(27)
(104)
(38)
—
65
—
563
—
204
950
1,152
—
—
—
(832)
16
(170)
(6)
—
$
212 $
1,872 $ 9,955 $
4,435 $
479 $ 16,953
$
1 $
926 $
7,070 $
2,515 $
2 $ 10,514
—
3
—
—
54
—
(1)
(22)
522
11
(5)
(103)
308
15
(2)
(37)
—
—
—
—
884
29
(8)
(162)
$
4 $
957 $
7,495 $
2,799 $
2 $ 11,257
$ 208 $
915 $ 2,460 $
1,636 $
477 $ 5,696
(i)
Includes $16 million related to the acquisition of Lifemark (see note 5).
2023 Annual Report - Financial Review Loblaw Companies Limited 101
Notes to the Consolidated Financial Statements
Fixed Asset Commitments As at December 30, 2023, the Company had entered into commitments of $704 million
(December 31, 2022 – $866 million) for the construction, expansion and renovation of buildings and the purchase
of real property.
Impairment Losses and Reversals of Fixed Assets and Right-of-Use Assets Management identified indications of
impairment for certain retail location CGUs and therefore an impairment test was performed for these CGUs. For
the year ended December 30, 2023, the Company recorded $39 million (2022 – $22 million) of impairment losses
on fixed assets and $11 million (2022 – $14 million) of impairment losses on right-of-use assets (see note 27) in
respect of 17 CGUs (2022 – 18 CGUs) in the retail operating segment. The recoverable amount was based on the
greater of the CGU’s fair value less costs to sell and its value in use. No CGUs (2022 – nil) were impaired on the
basis of their carrying values exceeding their fair value less costs to sell (2022 – nil).
For the year ended December 30, 2023, the Company recorded $14 million (2022 – $8 million) of impairment
reversals on fixed assets and $22 million (2022 – $6 million) of impairment reversals on right-of-use assets (see
note 27) in respect of 12 CGUs (2022 – 7 CGUs) in the retail operating segment. Impairment reversals are recorded
where the recoverable amount of the retail location exceeds its carrying values. No CGUs (2022 – nil) with
impairment reversals had fair value less costs to sell greater than their carrying values (2022 – nil).
When determining the value in use of a retail location, the Company develops a discounted cash flow model for
each CGU. The duration of the cash flow projections for individual CGUs varies based on the remaining useful life
of the significant assets within the CGU for owned locations or the remaining lease term of the CGU for leased
locations. Projected future sales and earnings for cash flows are based on actual operating results, operating
budgets, and long term growth rates that are consistent with industry averages, all of which are consistent with
strategic plans presented to the Company’s Board. The estimate of the value in use of relevant CGUs was
determined using a pre-tax discount rate of 8.3% to 9.6% at December 30, 2023 (December 31, 2022 – 8.4% to
9.1%).
Additional impairment losses on fixed assets of $3 million (2022 – $7 million) were incurred related to store
closures, renovations and conversions of retail locations.
Note 15. Investment Properties
The following are continuities of investment properties for the years ended December 30, 2023 and
December 31, 2022:
(millions of Canadian dollars)
Balance, beginning of year
Adjustment to fair value of investment properties
Net transfer to assets held for sale
Balance, end of year
2023
2022
$
$
60
5
(12)
53
$
$
111
6
(57)
60
The valuations of investment properties using the income approach include assumptions as to market rental rates
for properties of similar size and condition located within the same geographical areas, recoverable operating costs
for leases with tenants, non-recoverable operating costs, vacancy periods, tenant inducements and terminal
capitalization rates for the purposes of determining the estimated net proceeds from the sale of the property. As at
December 30, 2023, the pre-tax discount rates used in the valuations for investment properties ranged from 6.25%
to 8.87% (December 31, 2022 – 6.5% to 8.75%) and the terminal capitalization rates ranged from 5.5% to 7.5%
(December 31, 2022 – 5.0% to 7.0%).
102 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 16. Intangible Assets
The following are continuities of the cost and the accumulated amortization of intangible assets for the years ended
December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
Cost
2023
Indefinite life
intangible
assets
Software
Other definite
life intangible
assets(i)
Total
Balance, beginning of year
$
3,756 $
4,239 $
6,204 $
14,199
Additions
Business acquisitions
Disposals
Balance, end of year
Accumulated amortization
Balance, beginning of year
Amortization
Disposal
Balance, end of year
Carrying amount as at:
December 30, 2023
—
—
—
402
—
(12)
5
12
—
407
12
(12)
3,756 $
4,629 $
6,221 $
14,606
— $
3,151 $
4,543 $
7,694
—
—
413
(12)
517
—
930
(12)
— $
3,552 $
5,060 $
8,612
3,756 $
1,077 $
1,161 $
5,994
$
$
$
$
(i) Other definite life intangible assets includes prescription files with a net book value of $557 million related to the acquisition of Shoppers
Drug Mart in 2014 which will be fully amortized by 2025.
(millions of Canadian dollars)
Cost
2022
Indefinite life
intangible
assets
Other definite
life intangible
assets(ii)
Software
Total
Balance, beginning of year
$
3,491 $
3,821 $
5,892 $
13,204
Additions
Business acquisitions(i)
Balance, end of year
Accumulated amortization
Balance, beginning of year
Amortization
Impairment losses
Balance, end of year
Carrying amount as at:
December 31, 2022
—
265
418
—
1
311
419
576
3,756 $
4,239 $
6,204 $
14,199
— $
—
—
— $
2,765 $
381
5
3,151 $
4,037 $
506
—
4,543 $
6,802
887
5
7,694
3,756 $
1,088 $
1,661 $
6,505
$
$
$
$
(i) Includes $564 million related to the acquisition of Lifemark (see note 5).
(ii) Other definite life intangible assets includes prescription files with a net book value of $1,009 million related to the acquisition of Shoppers
Drug Mart in 2014 which will be fully amortized by 2025.
2023 Annual Report - Financial Review Loblaw Companies Limited 103
Notes to the Consolidated Financial Statements
Indefinite Life Intangible Assets Indefinite life intangible assets are comprised of brand names, trademarks, import
purchase quotas and certain liquor licenses. The brand names and trademarks are a result of the Company’s
acquisition of Shoppers Drug Mart Corporation (“Shoppers Drug Mart”), Lifemark and T&T Supermarket Inc. The
Company expects to renew the registration of the brand names, trademarks, import purchase quotas and liquor
licenses at each expiry date indefinitely, and expects these assets to generate economic benefit in perpetuity. As
such, the Company has assigned these intangible assets indefinite useful lives.
Software Software is comprised of software purchases and development costs. There were no capitalized
borrowing costs included in 2023 and 2022.
Other Definite Life Intangible Assets Other definite life intangible assets primarily consist of prescription files, the
customer loyalty awards program and customer relationships.
Note 17. Goodwill
The following are continuities of the cost and the accumulated impairment of goodwill for the years ended
December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
Cost
Balance, beginning of year
Business acquisitions(i)
Balance, end of year
Accumulated impairment losses
Balance, beginning of year
Impairment losses
Balance, end of year
Carrying amount as at the end of the year
2023
2022
$
5,317
$
4,943
26
$
5,343
$
$
$
$
994
$
—
994
4,349
$
$
374
5,317
994
—
994
4,323
(i)
Includes $365 million related to the acquisition of Lifemark in 2022 (see note 5).
The carrying amount of goodwill attributed to each CGU grouping was as follows:
(millions of Canadian dollars)
Shoppers Drug Mart
Market
Discount(i)
Lifemark
T&T Supermarket Inc.
All other
As at
December 30, 2023
As at
December 31, 2022
$
2,996
$
2,981
238
603
376
129
7
376
461
369
129
7
Carrying amount as at the end of the year
$
4,349
$
4,323
(i)
Includes goodwill reallocated from the Market division as a result of store conversions.
104 2023 Annual Report - Financial Review Loblaw Companies Limited
Impairment Testing of Goodwill and Indefinite Life Intangibles
The Company tests goodwill and indefinite-life intangible assets for impairment annually or more frequently if
indicators of impairment are identified.
The key assumptions used to calculate the fair value less costs to sell are revenue and gross margin forecasts,
growth/attrition rates, discount rate, and terminal rate. These assumptions are considered to be Level 3 in the fair
value hierarchy.
The weighted average cost of capital was determined to be 7.1% to 10.1% (December 31, 2022 – 7.1% to 9.3%) and is
based on a risk-free rate, an equity risk premium adjusted for betas of comparable publicly traded companies, an
unsystematic risk premium, an after-tax cost of debt based on corporate bond yields and the capital structure of
comparable publicly traded companies.
Cash flow projections have been discounted using a rate derived from an after-tax weighted average cost of
capital. At December 30, 2023, the after-tax discount rate used in the recoverable amount calculations was 7.1% to
10.1% (December 31, 2022 – 7.1% to 9.3%).
The Company included a minimum of three years of cash flows in its discounted cash flow model. The cash flow
forecasts were extrapolated beyond the three year period using an estimated long term growth rate of 2.0% to
2.5% (December 31, 2022 – 2.0%). The budgeted EBITDA growth was based on the Company’s strategic plan
approved by the Board of Directors.
The Company completed its annual impairment tests for goodwill and indefinite life intangible assets and
concluded there was no impairment.
Note 18. Other Assets
The components of other assets were as follows:
(millions of Canadian dollars)
Sundry investments and other receivables
Accrued benefit plan asset
Finance lease receivable
Investments accounted for under the equity method(i)
Long term securities
Other(ii)
Total other assets
As at
December 30, 2023
As at
December 31, 2022
$
$
115
297
68
80
201
111
872
$
$
66
52
77
87
246
164
692
(i) During 2022, the Company agreed to invest a total of $42 million in Rapid Retail Canada Inc. (“Rapid”) in exchange for a minority interest.
Rapid will provide on-demand grocery and convenience items to customers in Canada. As at December 30, 2023, the Company had
invested $18 million, with no additional investment made in 2023. ( December 31, 2022 – $18 million).
(ii) As at December 30, 2023, other includes $33 million related to fixed asset prepayments (December 31, 2022 – $70 million).
2023 Annual Report - Financial Review Loblaw Companies Limited 105
Notes to the Consolidated Financial Statements
Note 19. Provisions
The following are continuities of provisions for the years ended December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
Balance, beginning of year
Additions
Payments
Reversals
Balance, end of year
$
$
2023
219
105
(77)
(9)
$
238
$
2022
225
191
(192)
(5)
219
(millions of Canadian dollars)
Recorded on the consolidated balance sheets as follows:
Current portion of provisions
Non-current portion of provisions
Total provisions
As at
December 30, 2023
As at
December 31, 2022
$
$
115
123
238
$
$
110
109
219
Provisions consist primarily of amounts recorded in respect of self-insurance, legal claims and charges related to
PC Bank commodity tax matters.
Charges related to PC Bank commodity tax matters In July 2022, the Tax Court of Canada (“Tax Court”) released
a decision relating to PC Bank, a subsidiary of the Company. The Tax Court of Canada ruled that PC Bank is not
entitled to claim notional input tax credits for certain payments it made to Loblaws Inc. in respect of redemptions of
loyalty points. On September 29th, 2022, PC Bank filed a Notice of Appeal with the Federal Court of Appeal and in
the first half of 2023 both PC Bank and the Crown submitted their respective facta for the appeal. Subsequent to
December 30, 2023, the Federal Court of Appeal scheduled the hearing of the appeal for March 6, 2024. The
Company has not reversed any portion of the charge of $111 million, inclusive of interest, recorded in the second
quarter of 2022. The Company believes that this provision is sufficient to cover its liability, if the appeal is ultimately
unsuccessful.
In the second quarter of 2023, the Federal government enacted certain commodity tax legislation that applies to
PC Bank on a retroactive basis. A charge of $37 million, inclusive of interest, was recorded for this matter. In the
fourth quarter of 2023, the Company reversed $13 million of previously recorded charges. The reversal was a result
of new guidance issued by the Canada Revenue Agency.
Competition Bureau Investigation In 2017, the Company and Weston announced actions taken to address their
involvement in an industry wide price-fixing arrangement. In connection with the arrangement, the Company
offered customers a $25 Loblaw Card, which can be used to purchase items sold in Loblaw grocery stores
across Canada. As at December 30, 2023, the Loblaw Card Program liability was $15 million (December 31, 2022 –
$15 million). The Company expects that Loblaw Cards issued to customers will be an offset against civil liability. The
charge recorded for the Loblaw Card Program should not be viewed as an estimate of damages (see note 30).
106 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 20. Long Term Debt
The components of long term debt were as follows:
(millions of Canadian dollars)
Debentures
Loblaw Companies Limited Notes
3.92%, due 2024
6.65%, due 2027
6.45%, due 2028
4.49%, due 2028
6.50%, due 2029
2.28%, due 2030
11.40%, due 2031
Principal
Effect of coupon repurchase
5.01%, due 2032
6.85%, due 2032
6.54%, due 2033
8.75%, due 2033
6.05%, due 2034
6.15%, due 2035
5.90%, due 2036
6.45%, due 2039
7.00%, due 2040
5.86%, due 2043
5.34%, due 2052
Guaranteed Investment Certificates
0.40% – 5.36%, due 2023 – 2027
Independent Securitization Trust
3.10%, due 2023
2.28%, due 2024
1.34%, due 2025
1.61%, due 2026
4.78%, due 2027
5.63%, due 2027
6.83%, due 2027
5.13%, due 2028
6.11%, due 2028
7.36%, due 2028
Independent Funding Trusts
Transaction costs and other
Total long term debt
Less amount due within one year
Long Term Debt
As at
December 30, 2023
As at
December 31, 2022
$
$
400
100
200
400
175
350
151
28
400
200
200
200
200
200
300
200
150
55
400
400
100
200
400
175
350
151
30
400
200
200
200
200
200
300
200
150
55
400
1,654
1,567
—
250
300
300
232
9
9
232
9
9
558
(19)
7,852
1,191
$
6,661
$
$
$
250
250
300
300
232
9
9
—
—
—
574
(19)
7,783
727
7,056
2023 Annual Report - Financial Review Loblaw Companies Limited 107
Notes to the Consolidated Financial Statements
Significant long term debt transactions are described below.
Debentures There were no debentures issued in 2023. The following table summarizes the debentures issued
in 2022.
(millions of Canadian dollars except where otherwise indicated)
Loblaw Companies Limited Notes(i)
Loblaw Companies Limited Notes(i)
Total debentures issued
Interest
Rate
5.01%
5.34%
Maturity Date
September 13, 2032
September 13, 2052
Principal
Amount
2022
$
$
400
400
800
(i) During 2022, the Company completed a dual-tranche issuance of $800 million aggregate principal amount of senior unsecured notes. In
connection with this issuance, the Company used the net proceeds of the issuance to redeem $800 million outstanding principal amount of
its Series 2023 unsecured notes.
There were no debentures repaid in 2023. The following table summarizes the debentures repaid in 2022.
(millions of Canadian dollars except where otherwise indicated)
Loblaw Companies Limited Notes(i)
Total debentures repaid
Interest
Rate
4.86%
Maturity Date
September 12, 2023
Principal
Amount
2022
$
$
800
800
(i) The Company recorded an early repayment premium charge of $7 million in net interest expense and other financing charges when the
Company redeemed the $800 million outstanding principal amount of its Series 2023 senior unsecured notes with original maturity date of
September 12, 2023 on September 21, 2022.
Guaranteed Investment Certificates The following table summarizes PC Bank’s Guaranteed Investment
Certificates (“GICs”) activity, before commissions, in 2023 and 2022:
(millions of Canadian dollars)
Balance, beginning of year
GICs issued
GICs matured
Balance, end of year
2023
$
1,567
$
583
(496)
2022
996
764
(193)
$
1,654
$
1,567
Independent Securitization Trust The notes issued by Eagle are debentures, which are collateralized by
PC Bank’s credit card receivables (see note 11).
During 2023, Eagle issued $250 million (2022 – $250 million) of senior and subordinated term notes with a
maturity date of June 17, 2028 (2022 – July 17, 2027). These notes have a weighted average interest rate of 5.25%
(2022 – 4.89%). In connection with this issuance, $125 million (2022 – $140 million) of bond forward agreements
were settled, resulting in a realized fair value gain of $4 million (2022 – gain of $8 million) before income taxes,
which was cumulatively recorded in other comprehensive income as unrealized prior to the settlement of the
agreement. The gain will be reclassified to net earnings over the life of the Eagle notes. This settlement resulted in
a net effective interest rate of 4.95% (2022 – 4.24%) on the Eagle notes issued (see note 28).
During 2023, $250 million (2022 – $250 million) of senior and subordinated term notes at weighted average
interest rate of 3.10% (2022 – 2.71%), previously issued by Eagle, matured and were repaid on July 17, 2023 (2022
– October 17, 2022). As a result, during 2023, there was no net change in the balances related to Eagle notes.
Independent Funding Trusts As at December 30, 2023, the independent funding trusts had drawn $558 million
(December 31, 2022 – $574 million) from the revolving committed credit facility that is the source of funding to the
independent funding trusts.
The Company has a $700 million revolving committed credit facility that is the source of funding to the
independent funding trusts that has a maturity date of April 14, 2025.
108 2023 Annual Report - Financial Review Loblaw Companies Limited
Committed Credit Facility The Company has a committed credit facility with a maturity date of July 15, 2027,
provided by a syndicate of lenders. On December 14, 2023, the Company increased the committed credit facility
from $1.0 billion to $1.5 billion with all other terms and conditions remaining substantially the same. This committed
credit facility contains certain financial covenants (see note 23). As at December 30, 2023 and December 31, 2022,
there were no amounts drawn under this facility.
Long Term Debt Due Within One Year The following table summarizes long term debt due within one year:
(millions of Canadian dollars)
Loblaw Companies Limited notes
Guaranteed investment certificates
Independent securitization trust
Long term debt due within one year
As at
December 30, 2023
As at
December 31, 2022
$
$
$
400
541
250
1,191
$
—
477
250
727
Schedule of Repayments The schedule of repayments of long term debt, based on maturity, is as follows:
(millions of Canadian dollars)
2024
2025
2026
2027
2028
Thereafter
Total long term debt (excludes transaction costs)
See note 28 for the fair value of long term debt.
As at
December 30, 2023
$
$
1,191
1,191
559
616
1,105
3,209
7,871
Reconciliation of Long Term Debt The following table reconciles the changes in cash flows from financing
activities for long term debt:
(millions of Canadian dollars)
Long term debt, beginning of year
Long term debt issuances(i)
Long term debt repayments
Total cash flow from long term debt financing activities
Other non-cash changes
Long term debt, end of year
2023
7,783
833
(762)
71
(2)
7,852
$
$
$
$
$
$
$
$
$
$
2022
7,213
1,818
(1,243)
575
(5)
7,783
(i)
Includes net movements from the Independent Funding Trust, which are revolving debt instruments.
2023 Annual Report - Financial Review Loblaw Companies Limited 109
Notes to the Consolidated Financial Statements
Note 21. Other Liabilities
The components of other liabilities were as follows:
(millions of Canadian dollars)
Net defined benefit plan obligation (note 24)
Other long term employee benefit obligation
Financial liabilities (note 27)
Equity-based compensation liabilities (note 25)
Other
Total other liabilities
Note 22. Share Capital
As at
As at
December 30, 2023
December 31, 2022
$
$
242
$
128
179
3
42
594
$
237
106
69
3
20
435
First Preferred Shares (authorized - 1.0 million shares) There were no First Preferred Shares outstanding as at
December 30, 2023 and December 31, 2022.
Second Preferred Shares (authorized - unlimited) The Company has outstanding 9.0 million 5.30% non-voting
Second Preferred Shares, Series B, with a face value of $225 million, which were issued for net proceeds of
$221 million. These preferred shares are presented as a component of equity on the consolidated balance sheets.
Common Shares (authorized – unlimited) Common shares issued are fully paid and have no par value. The
activities in the common shares issued and outstanding were as follows:
(millions of Canadian dollars except where otherwise indicated)
December 30, 2023
(52 weeks)
Number of
Common
Shares
Common
Share
Capital
December 31, 2022
(52 weeks)
Number of
Common
Shares
Common
Share
Capital
Issued and outstanding, beginning of period
324,062,608 $ 6,489
333,527,369 $ 6,643
Issued for settlement of stock options (note 25)
984,923
69
1,487,377
100
Purchased and cancelled
Issued and outstanding, end of period
Shares held in trust, beginning of period
Purchased for future settlement of RSUs and PSUs
Released for settlement of RSUs and PSUs (note 25)
Shares held in trust, end of period
(14,521,152)
(277)
(10,952,138)
(254)
310,526,379 $ 6,281
324,062,608 $ 6,489
(1,222,278) $
(24)
(595,495) $
(625,000)
578,039
(13)
12
(1,172,000)
545,217
(12)
(23)
11
(1,269,239) $
(25)
(1,222,278) $
(24)
Issued and outstanding, net of shares held in trust, end of period
309,257,140 $ 6,256
322,840,330 $ 6,465
Weighted average outstanding, net of shares held in trust (note 8)
316,732,641
328,068,749
110 2023 Annual Report - Financial Review Loblaw Companies Limited
Dividends The declaration and payment of dividends on the Company’s common shares and the amount thereof
are at the discretion of the Board, which takes into account the Company’s financial results, capital requirements,
available cash flow, future prospects of the Company’s business and other factors considered relevant from time to
time. Over the long term, it is the Company’s intention to increase the amount of the dividend while retaining
appropriate free cash flow to finance future growth. In the second quarter of 2023 and in the second quarter of
2022, the Board raised the quarterly dividend by $0.041 to $0.446 and $0.04 to $0.405 per common share,
respectively.
The following table summarizes the Company’s cash dividends declared for the periods as indicated:
Dividends declared per share ($)
Common Share
Second Preferred Share, Series B
2023(i)
2022
$
$
1.743
1.325
$
$
1.580
1.325
(i) The Common Share dividends declared in the fourth quarter of 2023 of $0.446 per share had a payment date of December 30, 2023.
The Second Preferred Shares, Series B dividends declared in the fourth quarter of 2023 of $0.33125 per share had a payment date of
December 31, 2023.
(millions of Canadian dollars)
Dividends declared
Common Share
Second Preferred Share, Series B (note 5)
Total dividends declared
2023
2022
$
$
550
12
562
$
$
517
12
529
Subsequent to December 30, 2023, the Board declared a quarterly dividend of $0.446 per common share, payable
on April 1, 2024 to shareholders of record on March 15, 2024 and a quarterly dividend of $0.33125 per share on the
Second Preferred Shares, Series B payable on March 31, 2024 to shareholders of record on March 15, 2024.
Normal Course Issuer Bid Activities under the Company’s Normal Course Issuer Bid (“NCIB”) during the periods
were as follows:
(millions of Canadian dollars except where otherwise indicated)
Common shares repurchased under the NCIB for cancellation (number of shares)(i)
2023
2022
14,521,152
10,952,138
Cash consideration paid
Premium charged to retained earnings(ii)
Reduction in common share capital(iii)
$
$
1,729
1,352
277
1,258
1,204
254
Common shares repurchased under the NCIB and held in trust (number of shares)
625,000
1,172,000
Cash consideration paid
Premium charged to retained earnings
Reduction in common share capital
$
$
72
59
13
138
115
23
(i) Common shares repurchased and cancelled as at December 30, 2023 do not include the shares that may be repurchased subsequent to
the end of the quarter under the automatic share repurchase plan, as described below.
(ii) Includes $84 million related to the automatic share purchase plan, as described below.
(iii) Includes $16 million related to the automatic share purchase plan, as described below.
2023 Annual Report - Financial Review Loblaw Companies Limited 111
Notes to the Consolidated Financial Statements
In the second quarter of 2023, the Company renewed its NCIB to purchase on the Toronto Stock Exchange or
through alternative trading systems up to 16,055,686 of the Company’s common shares, representing
approximately 5% of issued and outstanding common shares. As at December 30, 2023, the Company had
purchased 10,992,986 common shares for cancellation under its current NCIB. The Company is still permitted to
purchase its common shares from Weston under its NCIB, pursuant to an automatic disposition plan agreement
among the Company’s broker, the Company and Weston, in order for Weston to maintain its proportionate
ownership interest in the Company. The maximum number of common shares that may be purchased pursuant to
the NCIB will be reduced by the number of common shares purchased from Weston.
During 2023, 14,521,152 common shares (2022 – 10,952,138) were purchased under the NCIB for cancellation, for
aggregate consideration of $1,729 million (2022 – $1,258 million), including 7,132,579 common shares (2022 –
4,868,949) purchased from Weston, for aggregate consideration of $847 million (2022 – $558 million).
From time to time, the Company participates in an automatic share purchase plan (“ASPP”) with a broker in order to
facilitate the repurchase of the Company’s common shares under its NCIB. During the effective period of the ASPP,
the Company’s broker may purchase common shares at times when the Company would not be active in the
market. As at December 30, 2023, an obligation to repurchase shares of $100 million was recognized under the
ASPP in trade payables and other liabilities.
Note 23. Capital Management
In order to manage its capital structure, the Company may, among other activities, adjust the amount of dividends
paid to shareholders, purchase shares for cancellation pursuant to its NCIB, issue new shares or issue or repay
long term debt with the objective of:
•
ensuring sufficient liquidity is available to support its financial obligations and to execute its operating and
strategic plans;
• maintaining financial capacity and flexibility through access to capital to support future development of the
business;
• minimizing the after-tax cost of its capital while taking into consideration current and future industry, market
and economic risks and conditions;
•
•
•
utilizing short term funding sources to manage its working capital requirements and long term funding sources
to manage the long term capital investments of the business;
returning an appropriate amount of capital to shareholders; and
targeting an appropriate leverage and capital structure for the Company and each of its reportable operating
segments.
The Company has policies in place which govern debt financing plans and risk management strategies for liquidity,
interest rates and foreign exchange. These policies outline measures and targets for managing capital, including a
range for leverage consistent with the desired credit rating. Management and the Audit Committee regularly review
the Company’s compliance with, and performance against, these policies. In addition, management regularly
reviews these policies to ensure they remain consistent with the risk tolerance acceptable to the Company.
112 2023 Annual Report - Financial Review Loblaw Companies Limited
The following table summarizes the Company’s total capital under management:
(millions of Canadian dollars)
Bank indebtedness
Demand deposits from customers
Short term debt(i)
Long term debt due within one year
Long term debt
Certain other liabilities(ii)
Total debt excluding lease liabilities
Lease liabilities due within one year
Lease liabilities
Total debt including lease liabilities
Equity attributable to shareholders of the Company
Total capital under management
As at
December 30, 2023
As at
December 31, 2022
$
13
$
166
850
1,191
6,661
280
9,161
$
1,455
8,003
18,619
$
11,464
30,083
$
$
$
$
8
125
700
727
7,056
153
8,769
1,401
7,714
17,884
11,299
29,183
(i) During 2023, PC Bank recorded a $150 million net increase of co-ownership interest in the securitized receivables held with the Other
Independent Securitization Trusts.
(ii) As at December 30, 2023, certain other liabilities include financial liabilities of $190 million related to the sale and leaseback of retail
properties (December 31, 2022 – $73 million) (see note 27).
Covenants and Regulatory Requirements The Company is subject to certain key financial and non-financial
covenants under its existing committed credit facility, certain debentures and letters of credit. These covenants,
which include interest coverage and leverage ratios, as defined in the respective agreements, are measured by the
Company on a quarterly basis to ensure compliance with these agreements. As at December 30, 2023 and
throughout the year, the Company was in compliance with each of the covenants under these agreements.
The Company is subject to externally imposed capital requirements from the Office of the Superintendent of
Financial Institutions (“OSFI”), the primary regulator of PC Bank. PC Bank’s capital management objectives are to
maintain a consistently strong capital position while considering the economic risks generated by its credit card
receivables portfolio and to meet all regulatory capital requirements as defined by OSFI. PC Bank uses Basel III as
its regulatory capital management framework, which includes a target common equity Tier 1 capital ratio of 7.0%, a
Tier 1 capital ratio of 8.5% and a total capital ratio of 10.5%. In addition to the regulatory capital ratios requirement,
PC Bank is subject to the Basel III Leverage ratio. PC Bank is also subject to the OSFI’s Guideline on Liquidity
Adequacy Requirements (“LARs”). The LARs guideline establishes standards based on the Basel III framework,
including a Liquidity Coverage Ratio standard. As at December 30, 2023 and throughout the year, PC Bank has
met all applicable regulatory requirements.
2023 Annual Report - Financial Review Loblaw Companies Limited 113
Notes to the Consolidated Financial Statements
Note 24. Post-Employment and Other Long Term Employee Benefits
The Company sponsors a number of pension plans, including registered defined benefit pension plans, registered
defined contribution pension plans and supplemental unfunded arrangements providing pension benefits in excess
of statutory limits. Certain obligations of the Company under these supplemental pension arrangements are
secured by a standby letter of credit issued by a major Canadian chartered bank.
The Company’s Pension Committee oversees the Company’s pension plans. The Pension Committee is
responsible for assisting the Board in fulfilling its general oversight responsibilities for the plans. The Pension
Committee assists the Board with oversight of management’s administration of the plans, pension investment and
monitoring responsibilities, and compliance with legal and regulatory requirements.
The Company’s defined benefit pension plans are primarily funded by the Company, predominantly non-
contributory and the benefits are, in general, based on career average earnings subject to limits. The funding is
based on regulatory going concern and solvency valuations for which the assumptions may differ from the
assumptions used for accounting purposes as detailed in this note.
The Company also offers certain other defined benefit plans other than pension plans. These other defined benefit
plans are generally not funded, are mainly non-contributory and include health care, life insurance and dental
benefits. Employees eligible for these other defined benefits are those who retire at certain ages having met
certain service requirements. The majority of other defined benefit plans for current and future retirees include a
limit on the total benefits payable by the Company.
The Company’s defined benefit pension plans and other defined benefit plans expose it to a number of actuarial
risks, such as longevity risk, interest rate risk and market risk.
In Canada, the Company also has a national defined contribution plan for salaried employees. All newly hired
salaried employees are only eligible to participate in this defined contribution plan.
The Company also contributes to various MEPPs, which are administered by independent boards of trustees
generally consisting of an equal number of union and employer representatives. The Company’s responsibility to
make contributions to these plans is limited by amounts established pursuant to its collective agreements.
The Company expects to make contributions in 2024 to its defined benefit and defined contribution plans and the
MEPPs in which it participates as well as benefit payments to the beneficiaries of the supplemental unfunded
defined benefit pension plans, other defined benefit plans and other long term employee benefit plans.
Other Long Term Employee Benefits The Company offers other long term employee benefit plans that include
long term disability benefits and continuation of health care and dental benefits while on disability.
Defined Benefit Pension Plans and Other Defined Benefit Plans Information on the Company’s defined benefit
pension plans and other defined benefit plans, in aggregate, is summarized as follows:
(millions of Canadian dollars)
Present value of funded obligations
Present value of unfunded obligations
Total present value of defined benefit obligation
Fair value of plan assets
Total funded status of surpluses (obligations)
Assets not recognized due to asset ceiling
2023
2022
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
$ (1,429) $
(119)
$ (1,548) $
1,729
—
(114)
(114)
—
$
$
(1,249) $
(110)
(1,359) $
1,552
—
(116)
(116)
—
$
181 $
(114)
$
193 $
(116)
(12)
—
(262)
—
Total net defined benefit plan surpluses (obligations)
$
169 $
(114)
$
(69) $
(116)
Recorded on the consolidated balance sheets as follows:
Other assets (note 18)
Other liabilities (note 21)
$
$
297 $
—
(128) $
(114)
$
$
52 $
—
(121) $
(116)
114 2023 Annual Report - Financial Review Loblaw Companies Limited
The following are the continuities of the fair value of plan assets and the present value of the defined benefit plan
obligations:
(millions of Canadian dollars)
Changes in the fair value of plan assets
Fair value, beginning of year
Employer contributions
Employee contributions
Benefits paid
Interest income
Actuarial gains (losses) in other comprehensive income
Other
Fair value, end of year
Changes in the present value of the defined benefit
plan obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Employee contributions
Actuarial losses (gains) in other comprehensive income
Balance, end of year
Total funded status of surpluses (obligations)
Changes in the assets not recognized due to
asset ceiling
Balance, beginning of year
Change in liability arising from change in asset ceiling
Interest expense on assets not recognized due to asset
ceiling
Balance, end of year
2023
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
2022
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
Total
Total
$ 1,552 $ — $ 1,552
$ 2,130 $ — $ 2,130
21
2
(46)
82
121
(3)
—
—
—
—
—
—
21
2
(46)
82
121
(3)
1
3
(54)
69
(593)
(4)
—
—
—
—
—
—
1
3
(54)
69
(593)
(4)
$ 1,729 $ — $ 1,729
$ 1,552 $ — $ 1,552
$ 1,359 $ 116 $ 1,475
$ 1,810 $
145 $ 1,955
44
69
4
6
48
75
62
57
3
5
65
62
(52)
(2)
(54)
(60)
(5)
(65)
2
126
—
2
3
—
3
(10)
116
(513)
(32)
(545)
$ 1,548 $ 114 $ 1,662
$ 1,359 $
116 $ 1,475
$ 181 $ (114) $ 67
$
193 $
(116) $
77
$ 262 $ — $ 262
$ — $ — $ —
(265)
—
(265)
262
—
262
15
—
$
12 $ — $
15
12
—
—
—
$ 262 $ — $ 262
Total net defined benefit plan surpluses (obligations)
$ 169 $ (114) $ 55
$
(69) $
(116) $ (185)
For 2023, the actual gain on plan assets was $203 million (2022 – loss of $524 million).
The net defined benefit obligation can be allocated to the plans’ participants as follows:
• Active plan participants 51% (2022 – 58%);
• Deferred plan participants 13% (2022 – 12%); and
•
Retirees 36% (2022 – 30%).
During 2024, the Company expects to contribute approximately $20 million (2023 – contributed $21 million) to its
registered defined benefit pension plans. The actual amount of contributions may vary from the estimate
depending on the funded positions of the plans, filing of any actuarial valuations, any new regulatory requirements
or other factors.
2023 Annual Report - Financial Review Loblaw Companies Limited 115
Notes to the Consolidated Financial Statements
The net cost recognized in earnings before income taxes for the Company’s defined benefit pension plans and
other defined benefit plans was as follows:
(millions of Canadian dollars)
Current service cost
Net interest cost (income) on net defined benefit
plan assets (obligations)
Other
Defined
Benefit
Pension
Plans
2023
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
2022
Other
Defined
Benefit
Plans
Total
Total
$
44 $
4 $
48
$
62 $
3 $
65
2
3
6
—
8
3
(12)
4
5
—
(7)
4
Net post-employment defined benefit cost
$
49 $
10 $
59
$
54 $
8 $
62
The actuarial gains (losses) recognized in other comprehensive income (loss) net of taxes for defined benefit plans
were as follows:
(millions of Canadian dollars)
Return (loss) on plan assets, excluding amounts
included in net interest expense and other
financing charges
Experience adjustments
Actuarial gains (losses) from change in
demographic assumptions
Actuarial (losses) gains from change in financial
assumptions(i)
Change in liability arising from change in asset
ceiling(i)
Total net actuarial gains (losses) recognized in
other comprehensive income (loss) before
income taxes
Income tax (expenses) recoveries on actuarial
gains (losses) (note 7)
Actuarial gains (losses) net of income tax
recoveries (expenses)
Defined
Benefit
Pension
Plans
2023
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
2022
Other
Defined
Benefit
Plans
Total
Total
$
121 $
— $
121
$
(593) $
— $
(593)
(20)
35
12
8
(8)
43
—
—
3
(6)
3
(6)
(141)
(10)
(151)
513
35
548
265
—
265
(262)
—
(262)
$ 260 $
10 $ 270
$
(342) $
32 $
(310)
(69)
(2)
(71)
91
(8)
83
$
191 $
8 $
199
$
(251) $
24 $
(227)
(i) The actuarial losses and the change in liability arising from change in asset ceiling were primarily driven by a decrease in discount rates.
116 2023 Annual Report - Financial Review Loblaw Companies Limited
The cumulative actuarial gains (losses) before income taxes recognized in equity for the Company’s defined benefit
plans were as follows:
2023
2022
(millions of Canadian dollars)
Cumulative amount, beginning of year
Net actuarial gains (losses) recognized in the
year before income taxes
Cumulative amount, end of year
Defined
Benefit
Pension
Plans
$
66 $
Other
Defined
Benefit
Plans
132 $
Defined
Benefit
Pension
Plans
$ 408 $
Other
Defined
Benefit
Plans
Total
100 $ 508
Total
198
260
$ 326 $
10
270
142 $ 468
(342)
$
66 $
32
132 $
(310)
198
Composition of Plan Assets The defined benefit pension plan assets are held in trust and consist of the following
asset categories:
(millions of Canadian dollars, except where otherwise indicated)
Equity securities
Canadian - pooled funds
Foreign - pooled funds
Total equity securities
Debt securities
Fixed income securities:
- government
- corporate
Total debt securities
Other investments
Cash and cash equivalents
Total
2023
2022
$
22
783
$ 805
1 %
45 %
46 %
$
24
832
$ 856
2 %
53 %
55 %
$ 515
149
$ 664
220
40
$ 1,729
30 %
9 %
39 %
13 %
2 %
100 %
$ 382
78
$ 460
202
34
$ 1,552
25 %
5 %
30 %
13 %
2 %
100 %
As at December 30, 2023 and December 31, 2022, the defined benefit pension plans did not directly include any
of the Company’s securities.
All equity and debt securities and other investments are valued based on quoted prices (unadjusted) in active
markets for identical assets or liabilities or based on inputs other than quoted prices in active markets that are
observable for the asset or liability, either directly as prices or indirectly, either derived from prices or as per
agreements for contractual returns.
The Company’s asset allocation reflects a balance of interest-rate sensitive investments, such as fixed income
investments, and equities, which are expected to provide higher returns over the long term. The Company’s
targeted asset allocations are actively monitored and adjusted on a plan by plan basis to align the asset mix with
the liability profiles of the plans.
2023 Annual Report - Financial Review Loblaw Companies Limited 117
Notes to the Consolidated Financial Statements
Principal Actuarial Assumptions The principal actuarial assumptions used in calculating the Company’s defined
benefit plan obligations and net defined benefit plan cost for the year were as follows (expressed as
weighted averages):
Defined Benefit Plan Obligations
Discount rate
Rate of compensation increase
Mortality table(i)
Net Defined Benefit Plan Cost
Discount rate
Rate of compensation increase
Mortality table(i)
2023
2022
Defined Benefit
Pension Plans
Other Defined
Benefit Plans
Defined Benefit
Pension Plans
Other Defined
Benefit Plans
4.60 %
4% for 2023
and 3%
thereafter
4.60 %
n/a
5.30 %
4% for 2022 and
2023 and 3%
thereafter
5.30 %
n/a
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
5.30 %
4.00 %
5.30 %
n/a
3.30 %
3.00 %
3.20 %
n/a
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
CPM-RPP2014
Pub/Priv
Generational
n/a – not applicable
(i) An adjusted public or private sector mortality table is used depending on the prominent demographics and actual experience for each plan.
The weighted average duration of the defined benefit obligation as at December 30, 2023 is 14.2 years
(December 31, 2022 – 14.3 years).
The growth rate of health care costs, primarily drug and other medical costs, for the other defined benefit plan
obligations as at the end of the year was estimated at 4.90% and is expected to increase to 5.10% as at year end
2024.
118 2023 Annual Report - Financial Review Loblaw Companies Limited
Sensitivity of Key Actuarial Assumptions The following table outlines the key assumptions for 2023 (expressed as
weighted averages) and the sensitivity of each of these assumptions on the defined benefit plan obligations.
The sensitivity analysis provided in the table is hypothetical and should be used with caution. The sensitivities of
each key assumption have been calculated independently of any changes in other key assumptions. Actual
experience may result in changes in a number of key assumptions simultaneously. Changes in one factor may
result in changes in another, which could amplify or reduce the impact of such assumptions.
Increase (Decrease)
(millions of Canadian dollars except where otherwise indicated)
Discount rate
Impact of:
1% increase
1% decrease
Expected growth rate of health care costs
Impact of:
1% increase
1% decrease
Mortality rates
Impact of:
One year increase in life expectancy
One year decrease in life expectancy
n/a – not applicable
Defined Benefit
Pension Plans
Defined
Benefit Plan
Obligations
Other Defined
Benefit Plans
Defined
Benefit Plan
Obligations
4.60 %
4.60 %
$
$
$
$
(190)
236
n/a
n/a
26
(25)
$
$
$
$
$
$
(13)
16
4.90 %
11
(9)
2
(1)
Multi-Employer Pension Plans During 2023, the Company recognized an expense of $69 million (2022 –
$70 million) in operating income, which represents the contributions made in connection with MEPPs. During 2024,
the Company expects to continue to make contributions into these MEPPs.
The Company, together with its franchises, is the largest participating employer in the Canadian Commercial
Workers Industry Pension Plan (“CCWIPP”), with approximately 54,000 (2022 – 57,000) employees as members.
Included in the 2023 expense described above are contributions of $69 million (2022 – $69 million) to CCWIPP.
Post-Employment and Other Long Term Employee Benefit Costs The net cost recognized in earnings before
income taxes for the Company’s post-employment and other long term employee benefit plans was as follows:
(millions of Canadian dollars)
2023
2022
Net post-employment defined benefit cost
Defined contribution costs(i)
Multi-employer pension plan costs(ii)
Total net post-employment benefit costs
Other long term employee benefit costs(iii)
Net post-employment and other long term employee benefit costs
Recorded on the consolidated statement of earnings as follows:
Selling, general and administrative expenses (note 26)
Net interest expense (income) and other financing charges (note 6)
Net post-employment and other long term employee benefit costs
$
$
$
$
$
59
32
69
160
58
218
204
14
218
$
$
$
$
$
62
31
70
163
24
187
191
(4)
187
(i) Amounts represent the Company’s contributions made in connection with defined contribution plans.
(ii) Amounts represent the Company's contributions made in connection with MEPPs.
(iii) Other long term employee benefit costs include $6 million (2022 – $3 million) of net interest expense and other financing charges.
2023 Annual Report - Financial Review Loblaw Companies Limited 119
Notes to the Consolidated Financial Statements
Note 25. Equity-Based Compensation
The Company’s equity-based compensation expense, which includes Stock Option, RSU, PSU, DSU and EDSU
plans, was $72 million during 2023 (2022 – $69 million). The expense was recognized in operating income.
The carrying amounts of the Company’s equity-based compensation arrangements, which include Stock Option,
RSU, PSU, DSU and EDSU plans, were recorded on the consolidated balance sheets as follows:
(millions of Canadian dollars)
Other liabilities (note 21)
Contributed surplus
As at
December 30, 2023
As at
December 31, 2022
$
3
$
136
3
122
The following are details related to the equity-based compensation plans of the Company:
Stock Option Plan The Company maintains a stock option plan for certain employees. Under this plan, the
Company may grant options up to 28,137,162 common shares.
The following is a summary of the Company’s stock option plan activity:
2023
2022
Options
(number of shares)
Weighted
Average Exercise
Price / Share
Options
(number of shares)
Weighted
Average Exercise
Price / Share
Outstanding options, beginning of year
5,782,615 $
Granted
Exercised (note 22)
Forfeited/cancelled
Outstanding options, end of year
Options exercisable, end of year
857,666 $
(984,923) $
(159,134) $
5,496,224 $
2,321,812 $
71.07
118.94
61.48
83.80
79.89
67.05
6,431,449 $
1,162,625 $
(1,487,377) $
(324,082) $
5,782,615 $
2,100,204 $
63.15
100.05
59.47
71.04
71.07
62.26
The following is the weighted average remaining contractual life and exercise price of outstanding and exercisable
stock options as at December 30, 2023:
Range of Exercise Prices
$55.18-$65.51
$65.52-$78.81
$78.82-$124.14
2023 Outstanding Options
2023 Exercisable Options
Number of
Options
Outstanding
1,641,844
1,936,377
1,918,003
5,496,224
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price/Share
Number of
Exercisable
Options
Weighted
Average
Exercise
Price/Share
2.9 $ 60.33
976,131 $ 58.74
2.9 $ 68.56
1,135,056 $
68.19
5.6 $ 108.08
210,625 $ 99.47
$
79.89
2,321,812 $ 67.05
During 2023, the Company issued common shares on the exercise of stock options with a weighted average
market share price of $120.31 (2022 – $114.22). The Company received cash consideration of $61 million (2022 –
$88 million) related to the exercise of these options.
120 2023 Annual Report - Financial Review Loblaw Companies Limited
The fair value of stock options granted during 2023 was $21 million (2022 – $21 million). The assumptions used to
measure the fair value of options granted during 2023 and 2022 under the Black-Scholes valuation model at date
of grant were as follows:
Expected dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of options
2023
1.5 %
2022
1.4 %
19.4% – 22.5%
18.4% – 22.2%
3.0% – 4.2%
1.6% – 3.5%
3.8 – 6.2 years
3.7 – 6.2 years
Estimated forfeiture rates are incorporated into the measurement of stock option plan expense. The forfeiture rate
applied as at December 30, 2023 was 11.0% (December 31, 2022 – 11.0%).
Restricted Share Unit Plan The following is a summary of the Company’s RSU plan activity:
(number of awards)
Restricted share units, beginning of year
Granted
Reinvested
Settled
Forfeited
Restricted share units, end of year
2023
716,827
252,588
10,481
(204,779)
(22,269)
752,848
The fair value of RSUs granted during 2023 was $30 million (2022 – $26 million).
Performance Share Unit Plan The following is a summary of the Company’s PSU plan activity:
(number of awards)
Performance share units, beginning of year
Granted
Reinvested
Settled
Forfeited
Performance share units, end of year
2023
648,199
319,671
8,707
(376,108)
(24,394)
576,075
2022
799,345
244,686
10,105
(294,115)
(43,194)
716,827
2022
616,417
310,100
8,570
(258,411)
(28,477)
648,199
The fair value of PSUs granted during 2023 was $20 million (2022 – $26 million).
Settlement of Awards from Shares Held in Trust During 2023, the Company settled RSUs and PSUs totaling
580,887 (2022 – 552,526), of which 578,039 (2022 – 545,218) were settled through the trusts established for
settlement of each of the RSU and PSU plans (see note 22). The settlements resulted in a $12 million (2022 –
$11 million) increase to share capital and a net increase of $29 million (2022 – $24 million) to retained earnings.
2023 Annual Report - Financial Review Loblaw Companies Limited 121
Notes to the Consolidated Financial Statements
Director Deferred Share Unit Plan The following is a summary of the Company’s DSU plan activity:
(number of awards)
Director deferred share units, beginning of year
Granted
Reinvested
Settled
Director deferred share units, end of year
2023
325,231
21,458
4,947
—
351,636
The fair value of DSUs granted during 2023 was $3 million (2022 – $2 million).
Executive Deferred Share Unit Plan The following is a summary of the Company’s EDSU plan activity:
(number of awards)
Executive deferred share units, beginning of year
Granted
Reinvested
Settled
Forfeited
Executive deferred share units, end of year
2023
65,498
3,303
888
(31,339)
(10)
38,340
The fair value of EDSUs granted during 2023 was nominal (2022 – $1 million).
Note 26. Employee Costs
Included in operating income are the following employee costs:
(millions of Canadian dollars)
2023
Wages, salaries and other short term employment benefits
$
7,595
$
Post-employment benefits (note 24)
Other long term employee benefits (note 24)
Equity-based compensation
Capitalized to fixed assets and intangible assets
Total employee costs
152
52
69
(133)
$
7,735
$
2022
361,316
21,744
4,532
(62,361)
325,231
2022
62,473
7,719
914
(5,608)
—
65,498
2022
7,233
170
21
65
(129)
7,360
122 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 27. Leases
The Company leases certain of its retail stores, distribution centres, corporate offices, passenger vehicles, trailers
and IT equipment. Leases of retail stores are a substantial portion of the Company’s lease portfolio. Retail store
leases typically have an initial contractual period of 10 to 15 years with additional renewal options available
thereafter.
Right-of-Use Assets The following are continuities of the cost and accumulated depreciation of right-of-use assets
for the years ended December 30, 2023 and December 31, 2022:
(millions of Canadian dollars)
Cost
Balance, beginning of year
Lease additions, net of lease terminations
Lease extensions and other items
Retired leases
Balance, end of year
Accumulated depreciation
Balance, beginning of year
Depreciation
Impairment losses, net of reversals (note 14)
Retired leases
Balance, end of year
Carrying amount, end of year
2023
2022
Property
Other
Total
Property
Other
Total
$ 11,278 $
284
961
(85)
$ 12,438 $
127 $ 11,405
313
29
986
25
(85)
—
181 $ 12,619
$ 3,913 $
1,035
(11)
(85)
$ 4,852 $
$ 7,586 $
83 $ 3,996
1,057
22
(11)
—
(85)
—
105 $ 4,957
76 $ 7,662
$ 10,041 $
316
921
—
$ 11,278 $
$ 2,900 $
1005
8
—
$ 3,913 $
$ 7,365 $
98 $ 10,139
336
20
930
9
—
—
127 $ 11,405
64 $ 2,964
1024
19
8
0
—
—
83 $ 3,996
44 $ 7,409
Lease Liabilities The following are continuities of lease liabilities for the years ended December 30, 2023 and
December 31, 2022:
(millions of Canadian dollars)
Balance, beginning of year
Lease additions, net of lease terminations
Lease extensions and other items
Lease payments
Interest expense on lease liabilities (note 6)
Balance, end of year
Lease liabilities due within one year
Lease liabilities
Total lease liabilities
2023
2022
$
9,115
$
8,839
434
980
(1,441)
370
9,458
1,455
8,003
9,458
$
$
$
320
950
(1,327)
333
9,115
1,401
7,714
9,115
$
$
$
2023 Annual Report - Financial Review Loblaw Companies Limited 123
Notes to the Consolidated Financial Statements
Liquidity The future undiscounted contractual lease obligations are as follows:
Due by year
December 30, 2023
December 31, 2022
As at
As at
(millions of Canadian dollars)
2024
2025
2026
2027
2028 Thereafter
Total
Total
Lease
obligations
$ 1,484 $ 1,509 $ 1,242 $ 1,092 $ 852 $ 3,040 $
9,219
$
9,238
As at December 30, 2023, the Company also had commitments of $741 million (December 31, 2022 – $579 million)
related to leases not yet commenced.
Short-Term Leases The Company has short-term leases that are primarily related to trailer rentals and certain
properties. During 2023, $45 million (2022 – $27 million) was recognized in cost of sales and SG&A.
Variable Lease Payments The Company makes variable lease payments for property tax and insurance charges
on leased properties. The Company also has certain retail store leases where portions of the lease payments are
contingent on a percentage of retail sales. During 2023, $390 million (2022 – $385 million) of variable lease
payments were recognized in SG&A.
Extension Options Substantially all of the retail store leases have extension options for additional lease terms. As
at December 30, 2023, approximately 20% (December 31, 2022 – 16%) of the lease liabilities are related to
extension options that were deemed reasonably certain to be exercised.
As at December 30, 2023, approximately $16 billion (December 31, 2022 – $16 billion) of discounted future lease
payments are related to extension options that were not deemed to be reasonably certain to be exercised and
were not included in lease liabilities. These future lease payments are discounted at the incremental borrowing
rates associated with the current lease liability profile.
Sale and Leaseback Transactions During 2023, the Company disposed of and leased back twenty-one retail
properties and three distribution centres (2022 – one retail property) for proceeds of $276 million (2022 –
$13 million), and recognized a gain of $38 million (2022 – loss of $1 million) in SG&A. The dispositions include three
retail properties and one distribution centre disposed to Choice Properties Real Estate Investment Trust (“Choice
Properties”) (see note 32).
Financial Liabilities During 2023, there were a total of three additional retail properties (2022 – two) disposed of
which were leased back by the Company and did not meet the criteria for sale in accordance with IFRS 15,
“Revenue from Contracts with Customers”. The Company received proceeds of $115 million (2022 – $15 million) in
2023 which have been recognized as financial liabilities and are presented in other liabilities. The dispositions
include two retail properties disposed to Choice Properties. (see note 21 and 32).
As at December 30, 2023, $11 million (December 31, 2022 – $4 million) was recorded in trade payables and other
liabilities and $179 million (December 31, 2022 – $69 million) was recorded in other liabilities for all properties sold
to date that did not meet the criteria for sale. During 2023, $12 million (2022 – $5 million) of interest expense was
recognized in net interest expense and other financing charges (see note 6) and repayments of $10 million (2022 –
$4 million) were made on the financial liabilities.
124 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 28. Financial Instruments
The following table presents the fair value and fair value hierarchy of financial assets and financial liabilities,
excluding those classified as amortized cost that are short term in nature. The carrying values of the Company’s
financial instruments approximate their fair values except for long term debt.
As at
December 30, 2023
Total
Level 3
Level 1
Level 2
Level 1
Level 2
As at
December 31, 2022
Total
Level 3
(millions of Canadian dollars)
Financial assets
Fair value through other
comprehensive income:
Long term securities
$ 201 $
— $
— $ 201 $ 246 $
— $
— $ 246
Derivatives included in
prepaid expenses and
other assets
Fair value through profit and
loss:
Certain other assets(i)
Derivatives included in
prepaid expenses and
other assets
Financial liabilities
Amortized cost:
Long term debt
Associate Interest
Certain other liabilities(ii)
Fair value through other
comprehensive income:
Derivatives included in trade
payables and other
liabilities
Fair value through profit and
loss:
Derivatives included in trade
payables and other
liabilities
—
—
—
8
—
8
—
56
56
—
—
6
—
6
—
60
60
—
2
2
1
13
—
14
$
— $ 8,151 $
—
—
—
—
— $ 8,151 $
— $ 7,865 $
— $ 7,865
370
287
370
287
—
—
—
—
434
78
434
78
—
—
4
4
—
—
—
—
4
3
—
7
—
—
3
3
(i) Certain other assets relate primarily to Venture Fund I (see note 32).
(ii) Certain other liabilities relate primarily to financial liabilities associated with properties that did not meet the criteria for sale (see note 14).
There were no transfers between levels of the fair value hierarchy during the years presented.
During 2023, the Company recognized a loss of $3 million (2022 – gain of $4 million) in operating income on
financial instruments designated as amortized cost. In addition, during 2023, a net loss of $17 million (2022 – net
gain of $67 million) was recorded in earnings before income taxes related to financial instruments required to be
classified as fair value through profit and loss.
Securities Investments PC Bank holds investments which are considered part of the liquid securities required to
be held to meet its Liquidity Coverage Ratio. These securities are classified as fair value through other
comprehensive income and were included in long term securities and other assets on the consolidated balance
sheets. During 2023, PC Bank recorded an unrealized fair value gain of $1 million (2022 – unrealized fair value loss
of $2 million) in other comprehensive income related to these investments.
2023 Annual Report - Financial Review Loblaw Companies Limited 125
Notes to the Consolidated Financial Statements
Other Derivatives The Company uses bond forwards, interest rate swaps and foreign exchange forwards to
mitigate the impact of increases in interest rates and manage its anticipated exposure to exchange rates on its
underlying operations and anticipated fixed asset purchases. The Company also uses swaps, futures, options and
forward contracts to manage its anticipated exposure to fluctuations in commodity prices and exchange rates in its
underlying operations. The following is a summary of the fair values recognized in the consolidated balance sheets
and the net realized and unrealized gains (losses) before income taxes related to the Company’s other derivatives:
(millions of Canadian dollars)
Derivatives designated as cash flow hedges
Foreign Exchange Forwards(i)
Bond Forwards(ii)
Interest Rate Swaps and Other(iii)
Total derivatives designated as cash flow hedges
Derivatives not designated in a formal hedging relationship
Foreign Exchange and Other Forwards
Other Non-Financial Derivatives
Total derivatives not designated in a formal hedging relationship
Total derivatives
December 30, 2023
Gain/(loss)
recorded in
operating
income
Gain/(loss)
recorded
in OCI
Net asset/
(liability)
fair value
$
$
$
$
$
7 $
—
(3)
4 $
(3) $
(4)
(7) $
(3) $
(2) $
11
(4)
5 $
— $
—
— $
5 $
2
(4)
2
—
(4)
(7)
(11)
(11)
(i) PC Bank uses foreign exchange forwards, with a notional value of $9 million USD, to manage its foreign exchange risk related to certain U.S.
payables. The fair value of the derivatives is included in prepaid expenses and other assets.
(ii) PC Bank uses bond forwards to manage its interest risk related to future debt issuances. During 2023, PC Bank settled all of its outstanding
bond forwards.
(iii) PC Bank uses interest rate swaps, with a notional value of $180 million, to mitigate the impact of increases in interest rate. In the second
quarter of 2023, the Company entered into a 20 year arrangement to hedge energy pricing on its purchases in Alberta beginning on
January 1, 2025. The hedge has a notional value of $223 million and resulted in a fair value loss of $4 million in 2023, which has been
recorded in other comprehensive income. The fair values of the derivatives are included in both prepaid expenses and other assets and
trade payables and other liabilities.
(millions of Canadian dollars)
Derivatives designated as cash flow hedges
Foreign Exchange Forwards(i)
Bond Forwards(ii)
Interest Rate Swaps(iii)
Total derivatives designated as cash flow hedges
Derivatives not designated in a formal hedging relationship
Foreign Exchange and Other Forwards
Other Non-Financial Derivatives
Total derivatives not designated in a formal hedging relationship
Total derivatives
December 31, 2022
Gain/(loss)
recorded in
operating
income
Gain/(loss)
recorded
in OCI
Net asset/
(liability)
fair value
$
$
$
$
$
4 $
1
1
6 $
13 $
1
14 $
20 $
4 $
18
(1)
21 $
— $
—
— $
21 $
2
(5)
4
1
32
24
56
57
(i) PC Bank uses foreign exchange forwards, with a notional value of $37 million USD, to manage its foreign exchange risk related to certain
U.S. payables. The fair value of the derivatives is included in trade payables and other liabilities.
(ii) PC Bank uses bond forwards, with notional value of $25 million, to manage its interest risk related to future debt issuances. The fair value of
the derivatives is included in trade payables and other liabilities. During 2022, PC Bank settled $140 million of bond forwards (see note 20).
(iii) PC Bank uses interest rate swaps, with notional value of $180 million to mitigate the impact of increases in interest rate. The fair value of the
derivatives is included in prepaid expenses and other assets.
126 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 29. Financial Risk Management
As a result of holding and issuing financial instruments, the Company is exposed to liquidity, credit and market risk.
The following is a description of those risks and how the exposures are managed:
Liquidity Liquidity risk is the risk that the Company is unable to generate or obtain sufficient cash or its equivalents
in a cost effective manner to fund its obligations as they come due. The Company is exposed to liquidity risk
through, among other areas, PC Bank, which requires a reliable source of funding for its credit card business.
PC Bank relies on its securitization programs, demand deposits from customers and the acceptance of guaranteed
investment certificate deposits to fund the receivables of its credit cards. The Company would experience liquidity
risks if it fails to maintain appropriate levels of cash and short-term investments, is unable to access sources of
funding or fails to appropriately diversify sources of funding. If any of these events were to occur, they could
adversely affect the financial performance of the Company.
Liquidity risk is mitigated by maintaining appropriate levels of cash and cash equivalents and short term
investments, actively monitoring market conditions, and by diversifying sources of funding, including the
Company’s committed credit facilities, and maintaining a well diversified maturity profile of debt and capital
obligations.
The following are the undiscounted contractual maturities of significant financial liabilities (excluding lease liabilities
- see note 27) as at December 30, 2023:
Derivative financial liabilities
Foreign exchange forward contracts
$ 498 $ — $ — $ — $ — $
— $ 498
2024
2025
2026
2027
2028 Thereafter
Total
Non-derivative financial liabilities
Bank indebtedness
Trade Payables and other liabilities
Demand deposits from customers
Short term debt(i)
Associate Interest
Financial liabilities(ii)
Long term debt including interest payments(iii)
Other liabilities
Total
13
6,324
166
850
370
12
—
—
—
—
13
—
—
—
—
12
—
—
—
—
12
—
—
—
—
12
—
—
—
—
154
13
6,324
166
850
370
215
1,526
1,496
855
906
1,360
4,859
11,002
3
—
—
—
—
—
3
$ 9,762 $ 1,509 $ 867 $ 918 $ 1,372 $ 5,013 $ 19,441
(i) These are obligations owed to Other Independent Securitization Trusts which are collateralized by the Company’s credit card receivables
(see note 31).
(ii) These are the contractual payments that the Company is committed to related to the sale of retail properties to Choice Properties Real
Estate Investment Trust and third parties (see note 27).
(iii) Fixed interest payments are based on the maturing face values and annual interest for each instrument, including GICs, long term
independent securitization trusts and an independent funding trust, as well as annual payment obligations for structured entities. Variable
interest payments are based on the forward rates as at December 30, 2023.
2023 Annual Report - Financial Review Loblaw Companies Limited 127
Notes to the Consolidated Financial Statements
Credit The Company is exposed to credit risk resulting from the possibility that counterparties could default on
their financial obligations to the Company, including derivative instruments, cash and cash equivalents, short term
investments, security deposits, PC Bank’s credit card receivables, finance lease receivable, pension assets held in
the Company’s defined benefit plans and accounts receivable, including amounts due from government and third-
party drug plans arising from prescription drug sales, independent accounts and amounts owed from vendors.
Failure to manage credit risk could adversely affect the financial performance of the Company.
The risk related to derivative instruments, cash and cash equivalents and short term investments is reduced by
policies and guidelines that require that the Company enters into transactions only with counterparties or issuers
that have a minimum long term “A-” credit rating from a recognized credit rating agency and place minimum and
maximum limits for exposures to specific counterparties and instruments.
PC Bank manages its credit card receivable risk by employing stringent credit scoring techniques, actively
monitoring the credit card portfolio and reviewing techniques and technology that can improve the effectiveness of
the collection process. In addition, these receivables are dispersed among a large, diversified group of credit card
customers.
Finance lease receivable and accounts receivable, including amounts due from governments and third-party drug
plans arising from prescription drug sales, independent accounts and amounts owed from vendors and tenants, are
actively monitored on an ongoing basis and settled on a frequent basis in accordance with the terms specified in
the applicable agreements.
Interest Rates The Company is exposed to interest rate risk from fluctuations in interest rates on its floating rate
debt, and from the refinancing of existing financial instruments. An increase in interest rates could adversely affect
the operations or financial performance of the Company. The Company manages interest rate risk by monitoring
the respective mix of fixed and floating rate debt and by taking action as necessary to maintain an appropriate
balance considering current market conditions, with the objective of maintaining the majority of its debt at fixed
interest rates. The Company estimates that a 1% increase (decrease) in short term interest rates, with all other
variables held constant, would result in an increase (decrease) of $6 million to net interest expense and other
financing charges.
Currency Exchange Rates The Company is exposed to foreign currency exchange rate variability, primarily on its
USD denominated purchases in trade payables and other liabilities. A depreciating Canadian dollar relative to the
USD will have a negative impact on year-over-year changes in reported operating income and net earnings, while
an appreciating Canadian dollar relative to the USD will have the opposite impact. To manage a portion of this
exposure, the Company uses derivative instruments in the form of futures contracts and forward contracts to
minimize cost volatility related to foreign exchange.
Commodity Prices The Company is exposed to increases in the prices of commodities in operating its stores and
distribution networks, as well as to the indirect effect of changing commodity prices on the price of consumer
products. Rising commodity prices could adversely affect the financial performance of the Company. To manage a
portion of this exposure, the Company uses purchase commitments and derivative instruments in the form of
exchange traded futures contracts and forward contracts to minimize cost volatility related to commodities. The
Company estimates that based on the outstanding derivative contracts held by the Company as at December 30,
2023, a 10% decrease in relevant commodity prices, with all other variables held constant, would result in a loss of
$4 million on earnings before income taxes.
128 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 30. Contingent Liabilities
In the ordinary course of business, the Company is involved in and potentially subject to, legal actions and
proceedings. In addition, the Company is subject to tax audits from various tax authorities on an ongoing basis. As
a result, from time to time, tax authorities may disagree with the positions and conclusions taken by the Company in
its tax filings or legislation could be amended or interpretations of current legislation could change, any of which
events could lead to reassessments (see note 7).
There are a number of uncertainties involved in such matters, individually or in aggregate, and as such, there is a
possibility that the ultimate resolution of these matters may result in a material adverse effect on the Company’s
reputation, operations, financial condition or performance in future periods. It is not currently possible to predict the
outcome of the Company’s legal actions and proceedings with certainty. Management regularly assesses its
position on the adequacy of accruals or provisions related to such matters and will make any necessary
adjustments.
The following is a description of the Company’s significant legal proceedings:
Shoppers Drug Mart was previously served with an Amended Statement of Claim in a class action proceeding that
has been filed in the Ontario Superior Court of Justice (“Superior Court”) by licensed Associates (“Associates”),
claiming various declarations and damages resulting from Shoppers Drug Mart’s alleged breaches of the Associate
Agreement. The class action comprises all of Shoppers Drug Mart’s current and former licensed Associates
residing in Canada, other than in Québec, who were parties to Shoppers Drug Mart’s 2002 and 2010 forms of the
Associate Agreement. On July 9, 2013, the Superior Court certified as a class proceeding portions of the action. A
summary judgment trial of the matter was held in December 2022 and on February 17, 2023, the Superior Court
released its decision in relation to those summary judgment motions (the “Decision”). The Superior Court dismissed
the plaintiffs’ claims on the majority of the issues including a request for damages at this stage of proceedings. The
Court also held that Shoppers Drug Mart breached the 2002 form of Associate Agreement when it did not remit
certain amounts that it received from generic drug manufacturers to Associates. On March 20, 2023, the plaintiffs
filed a Notice of Appeal and on April 4, 2023, the Company filed a Notice of Cross-Appeal. A hearing for the
appeals was held on February 14, 2024 and on February 15, 2024, and a decision is pending. Accordingly, the
Company has not recorded any amounts related to the potential liability associated with this lawsuit. The Company
does not believe that the ultimate resolution of this matter will have a material adverse impact on its financial
condition or prospects.
In 2017, the Company and Weston announced actions taken to address their role in an industry-wide price-fixing
arrangement involving certain packaged bread products. The arrangement involved the coordination of retail and
wholesale prices of certain packaged bread products over a period extending from late 2001 to March 2015. Under
the arrangement, the participants regularly increased prices on a coordinated basis. Class action lawsuits have
been commenced against the Company and Weston as well as a number of other major grocery retailers and
another bread wholesaler. It is too early to predict the outcome of such legal proceedings. Neither the Company
nor Weston believes that the ultimate resolution of such legal proceedings will have a material adverse impact on
its financial condition or prospects. The Company’s cash balances far exceed any realistic damages scenario and
therefore it does not anticipate any impacts on its dividend, dividend policy or share buyback plan. The Company
has not recorded any amounts related to the potential civil liability associated with the class action lawsuits in 2023
or prior on the basis that a reliable estimate of the liability cannot be determined at this time. The Company will
continue to assess whether a provision for civil liability associated with the class action lawsuits can be reliably
estimated and will record an amount in the period at the earlier of when a reliable estimate of liability can be
determined or the matter is ultimately resolved. As a result of admission of participation in the arrangement and
cooperation in the Competition Bureau’s investigation, the Company and Weston will not face criminal charges or
penalties. In response to such class action lawsuits, certain major grocery retailers have cross claimed against the
Company and Weston, and the Company and Weston believe such crossclaims are without merit.
2023 Annual Report - Financial Review Loblaw Companies Limited 129
Notes to the Consolidated Financial Statements
In August 2018, the Province of British Columbia filed a class action against numerous opioid manufacturers and
distributors, including the Company and its subsidiaries, Shoppers Drug Mart Inc. and Sanis Health Inc. The claim
contains allegations of breach of the Competition Act, fraudulent misrepresentation and deceit and negligence, and
seeks unquantified damages for the expenses incurred by the federal government, provinces, and territories of
Canada in paying for opioid prescriptions and other healthcare costs related to opioid addiction and abuse in
Canada. During the second quarter of 2021, the claim against Loblaw Companies Limited was discontinued. In May
2019, two further opioid-related class actions were commenced in each of Ontario and Quebec against a large
group of defendants, including Sanis Health Inc. In February 2022, the plaintiff and Sanis Health Inc. agreed to
settle the Quebec action for a nominal amount, with no admission of liability and for the express purpose of
avoiding the delays, disruption, and expenses associated with the litigation. The settlement has been approved by
the court and is now final. In December 2019, a further opioid-related class action was commenced in British
Columbia against a large group of defendants, including Sanis Health Inc., Shoppers Drug Mart Inc. and the
Company. The allegations in the Ontario, Quebec, and the civil British Columbia class actions are similar to the
allegations against manufacturer defendants in the Province of British Columbia class action, except that these May
2019 and December 2019 claims seek recovery of damages on behalf of opioid users directly. In April 2021, the
Company, Shoppers Drug Mart Inc. and Sanis Health Inc. were served with another opioid-related class action that
was started in Alberta against multiple defendants. The claim seeks damages on behalf of municipalities and local
governments in relation to public safety, social service, and criminal justice costs allegedly incurred due to the
opioid crisis. In September 2021, the Company, Shoppers Drug Mart Inc. and Sanis Health Inc. were served with a
class action started in Saskatchewan by Peter Ballantyne Cree Nation and Lac La Ronge Indian Band on behalf of
all Indigenous, Metis, First Nation and Inuit communities and governments in Canada to recover costs they have
incurred as a result of the opioid crisis, including healthcare costs, policing costs and societal costs. In January
2024, Shoppers Drug Mart Inc. was served with a second class action in Saskatchewan started by Lac La Ronge
Indian Band. The case is brought on behalf of Band members and is claiming damages relating to abatement costs,
the diversion of financial and other resources, the reduction in the value of the reserve lands and interests, and lost
tax revenues. Shoppers Drug Mart Inc. is being sued as a representative of an international defendant subclass of
opioid “dealers” and Sanis Health Inc. is a proposed supplier class member. The Company believes these
proceedings are without merit and is vigorously defending them. The Company does not currently have any
significant accruals or provisions for these matters recorded in the consolidated financial statements.
In July 2022, the Tax Court of Canada released a decision relating to PC Bank, a subsidiary of the Company. The
Tax Court of Canada ruled that PC Bank is not entitled to claim notional input tax credits for certain payments it
made to Loblaws Inc. in respect of redemptions of loyalty points. On September 29th, 2022, PC Bank filed a Notice
of Appeal with the Federal Court of Appeal and in the first half of 2023 both PC Bank and the Crown submitted
their respective facta for the appeal. Subsequent to December 30, 2023, the Federal Court of Appeal scheduled
the hearing of the appeal for March 6, 2024. The Company has not reversed any portion of the charge of $111
million, inclusive of interest, recorded in the second quarter of 2022. The Company believes that this provision is
sufficient to cover its liability, if the appeal is ultimately unsuccessful.
Indemnification Provisions The Company from time to time enters into agreements in the normal course of its
business, such as service and outsourcing arrangements, lease agreements in connection with business or asset
acquisitions or dispositions, and other types of commercial agreements. These agreements by their nature may
provide for indemnification of counterparties. These indemnification provisions may be in connection with breaches
of representations and warranties or in respect of future claims for certain liabilities, including liabilities related to
tax and environmental matters. The terms of these indemnification provisions vary in duration and may extend for
an unlimited period of time. In addition, the terms of these indemnification provisions vary in amount and certain
indemnification provisions do not provide for a maximum potential indemnification amount. Indemnity amounts are
dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined at
this time. As a result, the Company is unable to reasonably estimate its total maximum potential liability in respect
of indemnification provisions. Historically, the Company has not made any significant payments in connection with
these indemnification provisions.
130 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 31. Financial Guarantees
The Company established letters of credit used in connection with certain obligations mainly related to real estate
transactions, benefit programs, purchase orders and guarantees with a gross potential liability of approximately
$301 million as at December 30, 2023 (December 31, 2022 – $296 million). In addition, the Company has provided
to third parties the following significant guarantees:
Associate Guarantees The Company has arranged for its Associates to obtain financing to facilitate their inventory
purchases and fund their working capital requirements by providing guarantees to various Canadian chartered
banks that support Associate loans. As at December 30, 2023, the Company’s maximum obligation in respect of
such guarantees was $580 million (December 31, 2022 – $580 million) with an aggregate amount of $476 million
(December 31, 2022 – $473 million) in available lines of credit allocated to the Associates by the various banks. As
at December 30, 2023, Associates had drawn an aggregate amount of $13 million (December 31, 2022 –
$8 million) against these available lines of credit. Any amounts drawn by the Associates are included in bank
indebtedness on the Company’s consolidated balance sheets. As recourse, in the event that any payments are
made under the guarantees, the Company holds a first-ranking security interest on all assets of Associates, subject
to certain prior-ranking statutory claims.
Independent Funding Trusts The full balance relating to the debt of the independent funding trusts has been
consolidated on the balance sheets of the Company (see note 20). As at December 30, 2023 the Company has
agreed to provide a credit enhancement of $64 million (December 31, 2022 – $64 million) in the form of a standby
letter of credit for the benefit of the independent funding trusts representing not less than 10% (December 31, 2022
– not less than 10%) of the principal amount of loans outstanding. This credit enhancement allows the independent
funding trusts to provide financing to the Company’s franchisees. As well, each franchisee provides security to the
independent funding trusts for its obligations by way of a general security agreement. In the event that a franchisee
defaults on its loan and the Company has not, within a specified time period, assumed the loan, or the default is not
otherwise remedied, the independent funding trusts would assign the loan to the Company and draw upon this
standby letter of credit. This standby letter of credit has never been drawn upon. The Company has agreed to
reimburse the issuing bank for any amount drawn on the standby letter of credit.
Lease Obligations In connection with historical dispositions of certain of its assets, the Company has assigned
leases to third parties. The Company remains contingently liable for these lease obligations in the event any of the
assignees are in default of their lease obligations. The Company has guaranteed lease obligations of a third party
distributor in the amount of $3 million (December 31, 2022 – $4 million).
Cash Collateralization As at December 30, 2023, the Company had agreements to cash collateralize certain of its
uncommitted credit facilities up to an amount of $93 million (December 31, 2022 – $93 million), of which a nominal
amount (December 31, 2022 – nominal) was deposited with major financial institutions and classified as security
deposits, which is included in other assets.
Financial Services The Company has provided a guarantee on behalf of PC Bank to Mastercard International
Incorporated (“Mastercard”) for accepting PC Bank as a card member and licensee of Mastercard. As at December
30, 2023, the guarantee on behalf of PC Bank to Mastercard was USD $190 million (December 31, 2022 –
USD $190 million).
Letters of credit for the benefit of independent securitization trusts with respect to the securitization programs of
PC Bank have been issued by major financial institutions. These standby letters of credit can be drawn upon in the
event of a major decline in the income flow from or in the value of the securitized credit card receivables. The
Company has agreed to reimburse the issuing banks for any amount drawn on the standby letters of credit. The
aggregate gross potential liability under these arrangements for the Other Independent Securitization Trusts was
$77 million (December 31, 2022 – $63 million), which represented approximately 9% (December 31, 2022 – 9%) of
the securitized credit card receivables amount (see note 11).
2023 Annual Report - Financial Review Loblaw Companies Limited 131
Notes to the Consolidated Financial Statements
Note 32. Related Party Transactions
The Company’s controlling shareholder is Weston, which owns, directly and indirectly, 163,473,491 of the
Company’s common shares, representing approximately 52.6% of the Company’s outstanding common shares.
Galen G. Weston beneficially owns or controls, directly and indirectly, including through Wittington, a total of
78,018,416 of Weston’s common shares, representing approximately 58.0% of Weston’s outstanding common
shares. Galen G. Weston also beneficially owns 473,636 of the Company’s common shares, representing
approximately 0.2% of the Company’s outstanding common shares.
Weston is the controlling shareholder of Choice Properties. Therefore, Choice Properties is a related party by virtue
of common control. As at December 30, 2023, Weston’s ownership interest in Choice Properties was
approximately 61.7% (December 31, 2022 – 61.7%). The Company is Choice Properties’ largest tenant, representing
approximately 57.1% (December 31, 2022 – 57.5%) of Choice Properties’ rental revenue as at December 30, 2023.
The Company also executes various agreements and transactions with Choice Properties.
In the ordinary course of business, the Company enters into various transactions with related parties. These
transactions are measured at the exchange amount, which is the amount of consideration established and agreed
upon by the related parties.
Transactions with Related Parties
(millions of Canadian dollars)
Included in cost of sales
Inventory purchases from a related party(i)
Operating income
Transactions with Weston and Wittington
Cost sharing agreements with Weston(ii)
Net administrative services provided by Weston(iii)
Dividends paid to Weston
Lease Payments to Wittington
Transactions with Choice Properties
Lease payments to Choice Properties(iv)
Lease surrender payments received from Choice Properties
Site intensification payments received from Choice Properties(v)
$
$
Transaction Value
2023
2022
41
$
39
$
58
19
290
1
71
16
272
1
$
763
$
753
(8)
(17)
—
(3)
(i) Associated British Foods plc is a related party by virtue of a common director of such entity’s parent company and Wittington. Total balance
outstanding owing to Associated British Foods plc as at December 30, 2023 was $4 million (December 31, 2022 – $6 million).
(ii) The Company and Weston have each entered into certain contracts with third parties for administrative and corporate services, including
telecommunication services and IT related matters on behalf of itself and the related party. Through cost sharing agreements that have been
established between the Company and Weston concerning these costs, the Company has agreed to be responsible to Weston for the
Company’s proportionate share of the total costs incurred.
(iii) The Company and Weston have entered into an agreement whereby certain administrative services are provided by one party to the other.
The services to be provided under this agreement include those related to commodity management, pension and benefits, information
systems, risk management, treasury, certain accounting functions and legal. Payments are made quarterly based on the actual costs of
providing these services. Where services are provided on a joint basis for the benefit of the Company and Weston together, each party pays
the appropriate proportion of the costs.
(iv) During 2023, lease payments paid to Choice Properties included base rent of $534 million (2022 – $528 million) and operating expenses of
$229 million (2022 – $225 million).
(v) During 2023, the Company received site intensification payments from Choice Properties. Included in certain investment properties sold to
Choice Properties is excess land with development potential. Choice Properties will compensate the Company, over time, with site
intensification payments, as Choice Properties pursues development, intensification or redevelopment of such excess lands. The payments
the Company receives are calculated in accordance with a payment grid, set out in the Strategic Alliance Agreement, that takes into account
the region, market ranking and type of use for the property.
132 2023 Annual Report - Financial Review Loblaw Companies Limited
The net balances due to (from) related parties are comprised as follows:
(millions of Canadian dollars)
Weston
Choice Properties
As at
December 30, 2023
As at
December 31, 2022
$
8
$
(31)
116
(18)
Other Transactions and Agreements with Choice Properties
Strategic Alliance Agreement The Strategic Alliance Agreement established on the initial public offering (“IPO”) of
Choice Properties creates a series of rights and obligations between Choice Properties and the Company, intended
to establish a preferential and mutually beneficial business and operating relationship. The Strategic Alliance
Agreement will expire on the earlier of July 5, 2033 or the date on which Weston and its affiliates own less than
50% effective interest in Choice Properties (on a fully diluted basis).
Commitments The following is a summary of the Company’s future undiscounted contractual lease payments to
Choice Properties:
Payments due by year
December 30, 2023
December 31, 2022
As at
As at
(millions of Canadian dollars)
2024
2025
2026
2027
2028 Thereafter
Total
Lease payments
$ 546 $ 591 $ 509 $ 461 $ 370 $
1,403
$
3,880
$
Total
4,151
Financial Liabilities with Choice Properties During 2023, the Company disposed of two retail properties (2022 –
two retail properties) to Choice Properties for total proceeds of $86 million (2022 – $15 million). The properties
were leased back by the Company. The transactions did not meet the criteria for sale of asset in accordance with
IFRS 15 as the Company did not relinquish control of the properties under the terms of the leases. (see note 27).
Disposition of Properties to Choice Properties During 2023, the Company sold four properties (2022 – one
property) to Choice Properties for proceeds of $92 million (2022 – $26 million) and recognized a gain of $11 million
(2022 – $19 million). All (2022 – none) of these properties were leased back by the Company.
2023 Annual Report - Financial Review Loblaw Companies Limited 133
Notes to the Consolidated Financial Statements
Other Transactions
Venture Fund During 2020, Loblaw, Weston and a wholly owned subsidiary of Wittington became limited partners
in a limited partnership formed by Wittington (“Venture Fund I”). A wholly owned subsidiary of Wittington is the
general partner of the Venture Fund, which hired an external fund manager to oversee it. The purpose of the
Venture Fund I is to pursue venture capital investing in innovative businesses that are in technology-oriented
companies at all stages of the start-up life cycle that operate in commerce, healthcare, and food sectors and are
based in North America. Each of the three limited partners have 33% interest in the Venture Fund I. The Company
has a total capital commitment of $33 million over a 10-year period (see note 18).
During 2022, Loblaw became a limited partner in another limited partnership formed by Wittington (“Venture Fund
II”). A wholly owned subsidiary of Wittington is also the general partner of Venture Fund II, and the purpose of
Venture Fund II is consistent with Venture Fund I. The Company has a 50% interest in Venture Fund II and has a
total capital commitment of $60 million over a 10-year period (see note 18).
Post-Employment Benefit Plans The Company sponsors a number of post-employment plans, which are related
parties. Contributions made by the Company to these plans are disclosed in note 22 to the consolidated financial
statements. Effective November 21, 2022, Loblaw became the sponsor of a group plan which was previously
sponsored by the parent company, Weston. As a participant of the group plan, the Company will continue to make
contributions for its share of defined benefit costs, including interest, service and administrative costs. In 2023 and
2022, the Company did not make any contributions to the group plan.
Income Tax Matters From time to time, the Company, Weston and its affiliates may enter into agreements to make
elections that are permitted or required under applicable income tax legislation with respect to affiliated
corporations.
Key Management Personnel The Company’s key management personnel are comprised of the Board and certain
members of the executive team of the Company, as well as both the Board and certain members of the executive
team of Weston and Wittington to the extent that they have the authority and responsibility for planning, directing
and controlling the day-to-day activities of the Company.
Compensation of Key Management Personnel Annual compensation of key management personnel that is
directly attributable to the Company was as follows:
(millions of Canadian dollars)
Salaries, director fees and other short term employee benefits
Equity-based compensation
Total compensation
2023
2022
$
$
10
1
11
$
$
8
2
10
Other transactions with related parties, as defined by IFRS Accounting Standards, were not significant during the
year.
134 2023 Annual Report - Financial Review Loblaw Companies Limited
Note 33. Segment Information
The Company has two reportable operating segments, with all material operations carried out in Canada:
•
The Retail segment consists primarily of corporate and franchise-owned retail food and Associate-owned drug
stores, and includes in-store pharmacies, health care services, other health and beauty products, apparel and
other general merchandise. This segment is comprised of several operating segments that are aggregated
primarily due to similarities in the nature of products and services offered for sale in the retail operations and
the customer base; and
•
The Financial Services segment provides credit card and everyday banking services, the PC Optimum loyalty
program, insurance brokerage services, and telecommunication services.
The Company’s chief operating decision maker evaluates segment performance on the basis of adjusted operating
income before depreciation and amortization (“adjusted EBITDA”), as reported to internal management, on a
periodic basis.
Information for each reportable operating segment is included below:
2023
2022
(millions of Canadian dollars)
Revenue(ii)
Operating income
Net interest expense
and other financing
charges
Earnings before
income taxes
Operating income
Depreciation and
amortization
Adjusting items(iii)
Adjusted EBITDA(iii)
Financial
Services
Total
Segment
Measure
Elimi-
nations(i)
Financial
Services
Total
Segment
Measure
Elimi-
nations(i)
Retail
Total
$ 58,345 $ 1,540 $ 59,885 $ (356) $ 59,529 $ 55,492 $ 1,338 $ 56,830 $ (326) $ 56,504
$ 3,500 $ 204 $ 3,704 $ — $ 3,704 $ 3,260 $ 82 $ 3,342 $ — $ 3,342
Retail
Total
660
143
803
—
803
599
84
683
—
683
$ 2,840 $ 61 $ 2,901 $ — $ 2,901 $ 2,661 $
(2) $ 2,659 $ — $ 2,659
$ 3,500 $ 204 $ 3,704 $ — $ 3,704 $ 3,260 $ 82 $ 3,342 $ — $ 3,342
2,848
13
58 2,906
37
24
$ 6,361 $ 286 $ 6,647
2,746
(67)
49 2,795
44
111
$ 5,939 $ 242 $ 6,181
(i)
Eliminations include intercompany revenue related to PC® Mastercard®
Included in Financial Services revenue is $634 million (2022 – $513 million) of interest income.
(ii)
(iii) Certain items are excluded from operating income to derive adjusted EBITDA.
loyalty awards in the Financial Services segment.
For the years ended December 30, 2023 and December 31, 2022
(millions of Canadian dollars)
Retail
Financial
Services
2023
(52 weeks)
Total
Segment
Measure
2022
(52 weeks)
Total
Segment
Measure
Retail
Financial
Services
Charges related to PC Bank commodity tax matters
$
— $
24 $
Fair value adjustment on fuel and foreign currency contracts
Lifemark transaction costs
Restructuring and other related recoveries
Fair value adjustment on non-operating properties(1)
Gain on sale of non-operating properties(1)
Adjusting items
16
—
—
9
(12)
—
—
—
—
—
24
16
—
—
9
(12)
$
— $
111 $
(5)
16
(15)
(6)
(57)
—
—
—
—
—
111
(5)
16
(15)
(6)
(57)
44
$
13 $
24 $
37
$
(67) $
111 $
(1) The fair value adjustment and gain on sale of non-operating properties relates to the Company’s investment properties.
2023 Annual Report - Financial Review Loblaw Companies Limited 135
Notes to the Consolidated Financial Statements
The Company’s revenue, by type of goods or services, is reconciled to the Company’s segment revenue:
(millions of Canadian dollars)
Food retail
Drug retail
Retail total
Financial Services
Eliminations(i)
Total
2023
2022
$
41,188
$
39,398
17,157
16,094
$ 58,345
$
55,492
1,540
(356)
1,338
(326)
$ 59,529
$ 56,504
(i) Eliminations include the reclassification of revenue related to PC® Mastercard®
loyalty awards in the Financial Services segment.
(millions of Canadian dollars)
Total assets
Retail
Financial Services
(millions of Canadian dollars)
Additions to fixed assets and intangible assets
Retail(i)
Financial Services
As at
December 30, 2023
As at
December 31, 2022
$
$
32,870
$
6,109
38,979
$
32,505
5,642
38,147
2023
2022
$
2,069
$
40
$
2,109
$
1,538
33
1,571
(i)
In 2023, additions to fixed assets in the retail segment include $37 million of prepayments that were transferred from other assets in 2023.
136 2023 Annual Report - Financial Review Loblaw Companies Limited
Three Year Summary(1)
As at or for the years ended December 30, 2023 and December 31, 2022 and January 1, 2022
(millions of Canadian dollars except where otherwise indicated)
Consolidated Results of Operations
Revenue
Revenue growth
Operating income
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(2)
Net earnings
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders of the Company
Adjusted net earnings available to common shareholders of the Company(2)
Consolidated Per Common Share ($)
Diluted net earnings
Adjusted diluted net earnings(2)
Consolidated Financial Position and Cash Flows
Cash and cash equivalents and short term investments
Cash flows from operating activities
Capital investments
Free cash flow(2)
Financial Measures
Retail debt to retail adjusted EBITDA(2)
Adjusted return on equity(2)
Adjusted return on capital(2)
2023
2022
2021
$ 59,529
$ 56,504
$ 53,170
5.4 %
6.3 %
0.9 %
$ 3,704
$ 3,342
$ 2,937
6,647
6,181
5,587
11.2 %
10.9 %
10.5 %
$ 803
$ 683
$
803
2,187
2,100
2,088
694
1,994
1,921
1,909
2,480
2,263
495
684
1,967
1,875
1,863
1,911
$ 6.52
$ 7.75
$ 5.75
$ 6.82
$ 5.45
$ 5.59
$ 1,952
$ 1,934
5,654
4,755
$ 2,440
4,827
2,109
1,700
1,571
1,528
1,183
1,959
2.3 x
22.2 %
11.5 %
2.4 x
20.2 %
10.8 %
2.6 x
17.3 %
9.8 %
2023 Annual Report - Financial Review Loblaw Companies Limited 137
Three Year Summary(1)
As at or for the years ended December 30, 2023 and December 31, 2022 and January 1, 2022
(millions of Canadian dollars except where otherwise indicated)
Retail Results of Operations
Sales
Operating income
Gross profit(2)
Gross profit %(2)
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Depreciation and amortization
Retail Operating Statistics
Food retail same-store sales growth
Drug retail same-store sales growth
Drug retail same-store pharmacy and healthcare services sales growth
Drug retail same-store front store sales growth
Total retail square footage (in millions)
Number of corporate stores
Number of franchise stores
Number of Associate-owned drug stores
Financial Services Results of Operations
Revenue
Earnings (Losses) before income taxes
Financial Services Operating Measures and Statistics
Average quarterly net credit card receivables
Credit card receivables
Allowance for credit card receivables
Annualized yield on average quarterly gross credit card receivables
Annualized credit loss rate on average quarterly gross credit card
receivables
2023
2022
2021
$ 58,345
3,500
18,083
$ 55,492
3,260
17,165
$ 52,269
2,713
16,041
31.0 %
30.9 %
30.7 %
$ 6,361
$ 5,939
$ 5,322
10.9 %
10.7 %
10.2 %
$ 2,848
$ 2,746
$ 2,623
3.9 %
5.4 %
6.8 %
4.2 %
71.2
569
535
1,351
4.7 %
6.9 %
5.7 %
8.2 %
71.2
547
551
1,346
0.3 %
5.0 %
8.4 %
2.1 %
71.2
548
551
1,342
$ 1,540
61
$ 1,338
(2)
$
1,182
160
$ 3,950
4,132
256
13.9 %
$ 3,607
3,954
206
13.0 %
$ 3,128
3,443
205
12.7 %
3.8 %
2.7 %
2.5 %
Three Year Summary Endnotes
For financial definitions and ratios refer to the Glossary of Terms section included within the Company’s 2023 Annual Report.
(1)
(2) See Section 17 Non-GAAP and Other Financial Measures of the Company’s Management’s Discussion and Analysis for the reconciliation of
such non-GAAP and other financial measures to the most directly comparable GAAP measures.
138 2023 Annual Report - Financial Review Loblaw Companies Limited
Glossary of Terms
Term
Definition
Adjusted diluted net earnings per common share
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted income tax
Adjusted effective tax rate
Adjusted net earnings available to common shareholders including the effects of all dilutive instruments divided by the
diluted weighted average number of common shares outstanding during the period (see Section 17 “Non-GAAP and Other
Financial Measures” of the Company’s Management’s Discussion and Analysis).
Adjusted operating income before depreciation and amortization (see Section 17 “Non-GAAP and Other Financial Measures”
of the Company’s Management’s Discussion and Analysis).
Adjusted EBITDA divided by revenue (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s
Management’s Discussion and Analysis).
Income taxes adjusted for the tax impact of items included in adjusted operating income less adjusted net interest and other
financing charges (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion
and Analysis).
Adjusted income taxes divided by adjusted operating income less adjusted net interest and other financing charges (see
Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion and Analysis).
Adjusted net earnings attributable to shareholders of the
Company
Net earnings attributable to shareholders of the Company adjusted for items that are not necessarily reflective of the
Company’s underlying operating performance (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s
Management’s Discussion and Analysis).
Adjusted net earnings available to common shareholders of
the Company
Adjusted net earnings attributable to shareholders of the Company less preferred dividends (see Section 17 “Non-GAAP and
Other Financial Measures” of the Company’s Management’s Discussion and Analysis).
Adjusted net interest expense and other financing charges
Adjusted operating income
Adjusted return on capital
Adjusted return on equity
Net interest expense and other financing charges adjusted for items that are not necessarily reflective of the Company’s
ongoing net financing costs (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s
Discussion and Analysis).
Operating income adjusted for items that are not necessarily reflective of the Company’s underlying operating performance
(see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion and Analysis).
Tax-effected adjusted operating income divided by average capital (see Section 17 “Non-GAAP and Other Financial
Measures” of the Company’s Management’s Discussion and Analysis).
Adjusted net earnings available to common shareholders of the Company divided by average total equity attributable to
common shareholders of the Company (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s
Management’s Discussion and Analysis).
Annualized credit loss rate on average quarterly gross
credit card receivables
Total credit card losses year-to-date divided by the number of days year-to-date times 365 divided by average quarterly
gross credit card receivables.
Annualized yield on average quarterly gross credit card
receivables
Interest earned on credit card receivables year-to-date divided by the number of days year-to-date times 365 divided by
average quarterly gross credit card receivables.
Average prescription value
Total prescription sales divided by total script count.
Basic net earnings per common share
Net earnings available to common shareholders divided by the weighted average number of common shares of the
Company outstanding during the period.
Capital under management
Capital investments
Control brand
Conversion
Total debt plus total equity attributable to shareholders of the Company.
Sum of fixed asset purchases, intangible asset additions, and prepayments transferred to fixed assets in the current year (see
notes 14 and 16 of the Company’s Consolidated Financial Statements).
A brand and associated trademark that is owned by the Company for use in connection with its own products and services.
A store that changes from one Company banner to another Company banner.
Diluted net earnings per common share
Net earnings available to common shareholders of the Company adjusted for the impact of dilutive items divided by the
weighted average number of common shares outstanding during the period adjusted for the impact of dilutive items.
Diluted weighted average common shares outstanding
Weighted average number of common shares outstanding including the effects of all dilutive instruments.
E-commerce sales
Free cash flow
Food Retail basket size
Food Retail traffic
Retail segment revenue earned through online sales.
Cash flows from operating activities less capital investments, interest paid and net lease payments (see Section 17 “Non-
GAAP and Other Financial Measures” of the Company’s Management’s Discussion and Analysis).
The dollar value of products sold in a single retail transaction.
The number of customers entering stores across all banners.
Net earnings attributable to shareholders of the Company
Net earnings less non-controlling interests.
Net earnings available to common shareholders of the
Company
Net earnings attributable to shareholders of the Company less preferred dividends.
Operating income
Net earnings before net interest expense and other financing charges and income taxes.
Retail debt to retail adjusted EBITDA
Retail segment adjusted gross profit
Retail segment total debt (see Section 7.2 “Liquidity and Capital Structure” of the Company’s Management Discussion and
Analysis) divided by Retail segment adjusted EBITDA.
Retail segment gross profit, adjusted for items that are not necessarily reflective of the Company’s underlying operating
performance (see Section 17 “Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion and
Analysis).
Retail segment adjusted gross profit percentage
Retail segment adjusted gross profit divided by Retail segment revenue.
Retail segment gross profit
Retail segment revenue less cost of sales.
Rightsizing
Same-store sales
A capital investment in a store resulting in a decrease to the store square footage.
Same-store sales are retail segment sales for stores in operation in both comparable periods, including relocated, converted,
expanded, contracted or renovated stores.
Total equity attributable to common shareholders of the
Company
Total equity less preferred shares outstanding and non-controlling interests.
Total equity attributable to shareholders of the Company
Total equity less non-controlling interests.
Total retail square footage
Total retail square footage includes corporate, franchised stores and associate-owned drug stores.
Weighted average common shares outstanding
The number of common shares outstanding determined by relating the portion of time within the period the common shares
were outstanding to the total time in that period.
2023 Annual Report - Financial Review Loblaw Companies Limited 139
Corporate Profile
National Head Office and Store Support Centre
Loblaw Companies Limited
1 President’s Choice Circle
Brampton, Canada L6Y 5S5
Tel: (905) 459-2500
Fax: (905) 861-2206
Website: loblaw.ca
Stock Exchange Listing and Symbol
The Company’s common shares and second preferred
shares are listed on the Toronto Stock Exchange and trade
under the symbols “L” and “L.PR.B.”, respectively.
Common Shares
At year-end 2023, Galen G. Weston, directly and indirectly,
including through his controlling interest in Weston, owns
approximately 52.6% of the Company’s common shares.
At year-end 2023, there were 310,526,379 common shares
issued and outstanding.
The average daily trading volume of the Company’s common
shares for 2023 was 427,160.
Preferred Shares
At year-end 2023, there were 9,000,000 second preferred
shares, Series B issued and outstanding.
The average daily trading volume of the Company’s second
preferred shares, Series B for 2023 was 4,401.
Trademarks
Loblaw Companies Limited and its subsidiaries own a
number of trademarks. Several subsidiaries are licensees of
additional trademarks. These trademarks are the exclusive
property of Loblaw Companies Limited, its subsidiaries or the
licensor and where used in this report, are marked with ™ or ®
symbols, or written in italics.
Normal Course Issuer Bid
The Company has a Normal Course Issuer Bid on the
Toronto Stock Exchange.
Value of Common Shares
For capital gains purposes, the valuation day (December 22,
1971) cost base for the Company is $0.958 per common
share. The value on February 22, 1994 was $7.67 per
common share.
Investor Relations
Shareholders, security analysts and investment professionals
should direct their requests to Investor Relations at the
Company’s National Head Office or by e-mail at
investor@loblaw.ca.
Registrar and Transfer Agent
Computershare Investor Services Inc.
100 University Avenue
Toronto, Canada M5J 2Y1
Toll free: 1-800-564-6253 (Canada and U.S.)
Fax (416) 263-9394
Toll free fax: 1-888-453-0330
International direct dial: (514) 982-7555
To change your address, eliminate multiple mailings or for
other shareholder account inquiries, please contact
Computershare Investor Services Inc.
Additional financial information has been filed electronically
with various securities regulators in Canada through the
System for SEDAR+ and with the Office of the Superintendent
of Financial Institutions (OSFI) as the primary regulator for the
Company’s subsidiary, President’s Choice Bank.
Company Dividend Policy
The Company’s dividend policy states: the declaration and
payment of dividends and the amount thereof on the
Company’s common shares are at the discretion of the Board
of Directors which takes into account the Company’s
financial results, capital requirements, available cash flow,
future prospects of the Company’s business and other
factors considered relevant from time to time.
Annual General Meeting
The 2023 Annual Meeting of Shareholders of Loblaw
Companies Limited will be held virtually via a live webcast on
Thursday, May 2, 2024 at 11:00 a.m. (EDT).
The Company holds an analyst call shortly following the
release of its quarterly results. These calls are archived in the
Investors section of the Company’s website (loblaw.ca).
Common Dividend Dates
The declaration and payment of quarterly dividends are
made subject to approval by the Board of Directors. The
anticipated record and payments dates for 2024 are:
Preferred Shares, Series B Dividend Dates
The declaration and payment of quarterly dividends are
made subject to approval by the Board of Directors. The
anticipated payment dates for 2024 are:
Record Date
March 15
June 15
September 15
December 15
Payment Date
April 1
July 1
October 1
December 30
Record Date
March 15
June 15
September 15
December 15
Payment Date
March 31
June 30
September 30
December 31
Ce rapport est disponible en français.
Apps
PC Express™
PC Optimum™
PC Health™
Shoppers Drug Mart®
PC Financial®
Joe Fresh®
T&T®
loblaw.ca
pcexpress.ca
shoppersdrugmart.ca
pharmaprix.ca
pcfinancial.ca
presidentschoice.ca
pcoptimum.ca
joefresh.com
noname.ca
tntsupermarket.com
wellwise.ca
loblawadvance.ca
Dipak is passionate
about President’s Choice
Children’s Charity
Dipak Pandya, Category Director for Natural Food in Market Merchandising,
has been volunteering with President’s Choice Children’s Charity for over
ten years. Initially, Dipak didn’t know much about the charity’s cause and
impact, but his involvement eventually became a passion that changed his
perspective on the world. Dipak grew up with access to quality education
and food, but as he learned about the number of children in his community
who lack nutritious food, he felt compelled to make a difference. President’s
Choice Children’s Charity’s mission – to feed 1 million kids annually by
2025 – touched Dipak’s heart. He recalls interacting with school children
during one of the charity’s events and witnessing the immediate impact
they were able to have on the community. Through his contributions to the
charity, Dipak found a new purpose in volunteerism, and he encourages his
colleagues to participate as well, believing even a small contribution can
lead to significant change.
FSC logo
to be placed
by printer
Environmental Savings Summary
By using 797.8 kg of paper manufactured with 30% post-consumer recycled fibre for the
2023 Annual Report and 1120.4 kg of paper manufactured with 100% post-consumer recycled
waste fibre for the 2023 Annual Report, Loblaw Companies Limited reduced its environmental
footprint by:
Wood Use:
Total Energy:
Greenhouse Gases:
Wastewater Flow:
Solid Waste:
5,262 kg
14.8 million BTUs
687 kg of CO2 equivalent
13,249 litres
56 kg
Environmental impact savings estimates were made using the Environmental Defense
Paper Calculator, www.papercalculator.org. Amounts calculated are approximate based
on industry averages.
Apps
PC Express™
PC Optimum™
PC Health™
Shoppers Drug Mart®
PC Financial®
Joe Fresh®
T&T®
loblaw.ca
pcexpress.ca
shoppersdrugmart.ca
pharmaprix.ca
pcfinancial.ca
presidentschoice.ca
pcoptimum.ca
joefresh.com
noname.ca
tntsupermarket.com
wellwise.ca
loblawadvance.ca
®/ ™ Trademarks of Loblaws Inc. Shoppers Drug Mart®
are trademarks of 911979 Alberta Ltd., used under license.
T&T® are trademarks of T&T Supermarket Inc., used under
license. Mastercard® is a registered trademark of Mastercard
International Incorporated. President’s Choice Bank is a
licensee of the marks.