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Originally Posted by bizaro86
I'd be quite interested in the underlying source of that data. I just pulled Loblaws quarterly financials from Sedar. They report 2 segments: Retail and Financial Services, with retail producing $1.39 billion of adjusted EBITDA in the quarter compared to financial services at $58 MM. So financial services basically doesn't matter.
They do separately report sales for their food retail and drugstore operations, and drugstore sales were up more than grocery sales. But they don't report costs or margins separately since they don't formally segment the financials. I'm generally pro-business and qualified to review financial statements, and imo they don't report enough detail to determine where the increases in profits are coming from, so I don't really see where those claims are coming from. It seems to me the other half of superstore is included in food retail sales, so there really isn't a way to isolate food specifically.
I do think this line in the MD&A is somewhat telling: "the improvement in underlying operating performance of $63 million was primarily from an increase in adjusted gross profit, partially offset by an increase in SG&A and depreciation and amortization"
Finally, I think it's extremely borderline that they don't report Shoppers as a separate segment. I'm not an accountant, but IFRS 8 has the following requirements for segment reporting.
Shoppers clearly meets the first criteria of being a business. it has a separate President, so I think it's very likely they budget it separately internally, although obviously I can't prove that, which would meet criteria 2. And they obviously have separate financials since they report sales, so it definitely meets criteria 3.
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IFRS 8 permits and even sometimes requires the aggregation of operating segments if they share enough similarities. The essence of this rule was to not have 100 reportable segments in the financials that just adds to the confusion. However, given the higher focus on groceries, their auditors may make the call that carving out grocery from other retail to be required given the focus of many of the users of the financial statements.
Here is the note on judgements used to make that assessment from their 2022 FS.
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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
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