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Loblaw expects food business to grow, considers home delivery

Canadian food retailer reports a $201 million net profit in Q4 of 2016

Canada's largest grocery business delivered stronger than expected results in the final quarter of last year and anticipates its food business will grow despite a decline in prices.

Loblaw Companies reported a $201 million net profit in its fourth quarter of 2016 -- up 57% from the year before -- partly due to operational improvements and special items in both years.

The company lowered prices during the quarter, mostly for produce, meat and baked goods, Galen G. Weston, chairman and CEO, said during a conference call with analysts.

"Customers are responding to those lower prices," he said, adding it's premature to say whether that trend would continue for the rest of the year.

The Brampton, Ont.-based company will continue expanding its Click & Collect program, which is at 100 locations and allows customers to order groceries online and pick them up at the store. He also said home delivery was a possibility in the future.

"Lots of consideration about home delivery," he said.

There are few options for grocery home delivery in Canada. Some companies, like Grocery Gateway, which partners with Longo's in the Toronto area, deliver boxes of groceries to the doorsteps of customers. IGA, Thrifty Foods and Costco also offer some delivery services.

But, it's not a move shoppers should expect soon, Weston said, adding that Loblaw customers appeared to prefer picking up groceries on their schedule instead of waiting at home at a designated delivery time.

"Certainly our view is today that Click & Collect is in the best interest of the consumer," he said.

Revenue for the quarter was $11.13 billion, up $265 million.

Loblaw's revenue was above analyst estimates of $10.98 billion and adjusted earnings were in line with estimates compiled by Thomson Reuters.

In the fourth quarter of 2015, Loblaw had $10.87 billion of revenue and $128 million of net profit.

The food retail segment, excluding revenue from gasoline sales, saw same-store sales at Loblaw rise 1.1% and same-store sales at Shoppers up 3.4% -- reflecting sales growth at locations open at least a year.

Loblaw owns Canada's largest grocery business and the Shoppers Drug Mart pharmacy chain, as well as the Joe Fresh clothing business, PC Financial personal banking and a stake in the Choice Properties real estate investment trust.

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