Loblaw warns on profit for 2013, third-quarter earnings drop 29% Loblaw Cos. Ltd. posted a 29-per-cent drop in net profit in the third quarter and is lowering its earnings growth forecast for 2013 in an increasingly tough competitive landscape. The grocery giant said on Wednesday that third-quarter sales in its retail business rose just 1.5 per cent and financing charges and net interest expense increased by $64-million. The higher costs included $11-million related to the $12.4-billion acquisition of Shoppers Drug Mart Corp. as well as $43-million in transaction expenses in connection with the company's real estate spin-off Choice Properties. Loblaw said investments in more food categories and expansion costs because of heightened competition will result in flat adjusted operating income and operating income for the full year. The company warned that it will incur a $30-million restructuring charge in the fourth quarter. Net profit in the third quarter was $154-million or 55 cents, down from $217-million or 77 cents in the year-earlier period. Adjusted net profit per common share was off 3.7 per cent to 78 cents versus 81 cents. Revenue was $10-billion, up 1.9 per cent. Loblaw and other retailers face intense competition from U.S. rivals such as Wal-Mart and Target and Loblaw's acquisition of Shoppers is part of its strategy to further broaden its mix of products beyond groceries. Sales growth in food was modest in the third quarter, while sales in general merchandise - excluding apparel - declined slightly, Loblaw said. Sales growth in apparel - the Joe Fresh brand - was strong, it said. Same-store sales growth was just 0.4 per cent in the third quarter and excluding gas bar sales was 0.1 per cent, hit by the timing of the Thanksgiving holiday. Gross profit percentage was 21.5 per cent, down 40 basis points compared with the third quarter of 2012, mostly due to continued investments in food margins and a change in sales mix, said Loblaw. That was partly offset by margin improvements in general merchandise, including apparel and other factors, said Loblaw. "Unfortunately, due to incremental margin investment in the back half of the year, we are lowering our earnings growth expectations for 2013," said executive chairman Galen G. Weston. "Despite this disappointment, confidence remains high: our customer proposition continues to improve; cost reductions and efficiencies have momentum...," he said. Over the next three quarters, we will carefully balance our commitment to competitiveness and financial performance. Looking forward, the strength of the core business, combined with the acquisition of Shoppers Drug Mart, will powerfully position Loblaw Companies to deliver long-term earnings growth.