Food distributor Loblaw has announced higher sales for the first quarter ended March 26, 2005, but income fell, hit by restructuring costs.

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Sales increased to C$6.1bn (US$4.9bn) from $5.7bn in 2004 with all regions enjoying good growth. Net earnings fell to $142m from $176m in the same period a year ago.


Operating income before restructuring and other charges for the quarter was $314 million compared to $306 million in 2004 and generated an operating margin of 5.1% compared to 5.4% in 2004. 


These first quarter results include the effect of special provisions for the previously announced supply chain network reorganization as well as the reorganizations involving the merchandising, procurement and operations groups the company said. In addition, the results include certain costs associated with the establishment of a new national head office to open in Brampton, Ontario in the third quarter of 2005
and the relocation of general merchandise operations from Calgary, Alberta to the new office.


In the first quarter, earnings grew at a slower pace than sales as some of the indirect costs associated with these initiatives were absorbed. The company has commenced the reorganization of its supply chain network which will include the closure of a number of smaller, less efficient distribution centres over the next several years to be replaced by a modern network of significantly larger, more cost effective and productive facilities. The total restructuring cost to complete this initiative will be approximately $90 million, much of which will be recognized in 2005, it said.

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