Loblaw earnings miss puts stock under pressure

A third-quarter earnings miss sent shares of Loblaw Cos. Ltd. down more than 12 per centon the TSXThursday.

The stock tumbled $5.04 to finish at $35.55 its lowest level in more than seven years.

Earlier in the day, the grocery chain said price cuts and consulting costs pulled its quarterly earnings lower.

The company, which has been in the midst of a revamp of its stores and its supply chain, said it made $117 million, or 43 cents a share, down from $203 million, or 74 cents a share, in the same quarter of last year.

After factoring out one-time charges for restructuring, stock options, and inventory liquidation, Loblaw made 56 cents a share. Analysts polled by Thomson Financial had been looking for a profit of 76 cents a share, excluding special items.

The company said its sales came in at $9.14 billion, up from $9.01 billion year-over-year.

"This quarter was heavily affected by the costs of implementing our initiatives for the future including our continued investment in pricing," said company chairman Galen G. Weston.

"We expect continued margin pressure and risk to earnings. In the short term, we expect solid sales volume growth in the fourth quarter but continued reduced margins," he said.

Weston cautioned that financial results in the first half of next year "may be affected by more difficult comparables" from the previous year.