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Loblaw boosts quarterly dividend as profit falls

Loblaw executive chairman Galen G. Weston answers shareholders questions during their annual general meeting in Toronto May 3, 2012.

MIKE CASSESE/REUTERS

Loblaw Companies Ltd. is increasing its dividend by nearly 5 per cent despite lacklustre growth in the latest quarter.

The grocery, pharmacy and general merchandise retailer says the higher quarterly dividend, which rises by a penny to 22 cents per share, reflects the board's confidence in Loblaw's long-term strategy.

The owner of the Loblaws, Real Canadian Super Store, Joe Fresh, President's Choice and other brands has been undergoing several years of operational changes as it upgrades its information technology and adjusts its retail network.

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Its third quarter showed slightly higher revenue and adjusted earnings than last year.

Overall revenue grew by $100-million or 1 per cent to $9.8-billion from $9.7-billion in the comparable in 2011 while earnings before items was $646-million, up 1.1 per cent.

Loblaw's net income fell by 5.9 per cent to $222-million or 79 cents per share, however, due to several items excluded from the adjusted earnings.

"In the third quarter, the team executed the plan. Targeted investments in the customer proposition are delivering clear results, the infrastructure program remains on track and planned efficiencies are beginning to come through," executive chairman Galen G. Weston said Wednesday in remarks accompanying the earnings report.

"We are pleased with the fundamental progress to date – the dividend increase announced this morning reflects the board's confidence that management's long-term strategy will build shareholder value over time."

On Tuesday, a group representing Canadian drug plan sponsors announced it had chosen Loblaw as its preferred provider of pharmacy services.

Coalition leader Towers Watson says the initiative would help employers contain the expense of providing drug and health benefits while also giving employees convenient access to pharmacy and health-care services through Loblaw's retail locations.

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Loblaw has about 500 pharmacies within its grocery stores, which operate under various banners including Loblaws, Real Canadian Superstore and Zehrs.

It also has more than 100 medical clinics, 100 optical shops and 60 Goodlife fitness facilities within or near Loblaw-owned locations.

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