Mr. Galen Weston reports

GEORGE WESTON LIMITED REPORTS SECOND QUARTER 2023 RESULTS

George Weston Ltd. has provided its consolidated unaudited results for the 12 weeks ended June 17, 2023.

The company's 2023 second quarter report has been filed on SEDAR and is available in the investor centre section of the company's website.

"GWL's positive results this quarter reflect the continued strength and stability of our operating businesses," said Galen G. Weston, chairman and chief executive officer of George Weston. "With Choice Properties delivering on its financial plan and development initiatives and Loblaw providing Canadians with the care, selection and value they need today, our group is well positioned for continued success."

Loblaw Companies Ltd. delivered another quarter of strong operational and financial results as it continued to execute on retail excellence. The quarter was characterized by increased sales, a focus on value, and lower gross margins. Loblaw's net earnings were up 31.3 per cent, unusually elevated by lapping a prior year charge at President's Choice Bank (PC Bank), while adjusted net earnings were up 10.6 per cent. Loblaw's ability to deliver everyday value and savings to Canadians was reflected in strong sales growth across its food and drug businesses. Food retail sales growth was led by a continued consumer shift to discount stores, as customers continued to find value in Loblaw's private label brands and personalized PC Optimum offers. Drug front-store and pharmacy sales remained strong, led by continued strength in beauty products. Retail gross margin declined slightly in both food and drug as Loblaw faced double digit supplier cost increases that were not fully passed on to consumers, and higher shrink. Higher sales and cost control initiatives drove adjusted net earnings growth in the quarter.

Choice Properties Real Estate Investment Trust delivered strong second quarter results, which reflect the continued demand for its necessity-based retail centres and well-located industrial assets. Choice Properties continues to make progress on its development initiatives and is on track to complete approximately 1.6-million square feet of industrial space and two residential projects this year. Choice Properties is also advancing Choice Caledon Business Park, its largest industrial development site located in the Greater Toronto Area, where site work has started and the first lease was executed, both important steps toward delivering high-quality industrial space to its portfolio.

The company also announced today that the Toronto Stock Exchange has accepted an amendment to the company's normal course issuer bid (NCIB) to allow Wittington Investments Ltd., the company's controlling shareholder, to participate in the NCIB in a fixed proportion of 50 per cent of Wittington's pro rata share of the issued and outstanding common shares of the company.

2023 second quarter highlights

• Net earnings available to common shareholders of the company from continuing operations were $498-million, a decrease of $142-million, or 22.2 per cent. Diluted net earnings per common share from continuing operations were $3.55, a decrease of 81 cents per common share, or 18.6 per cent. The decrease was due to the unfavourable year-over-year net impact of adjusting items, primarily driven by the unfavourable year-over-year impact of the fair value adjustment of the trust unit liability.
• Adjusted net earnings available to common shareholders of the company from continuing operations were $377-million, an increase of $49-million, or 14.9 per cent.
• Adjusted diluted net earnings per common share from continuing operations were $2.68, an increase of 45 cents per common share, or 20.2 per cent.
• Repurchased for cancellation 1.5 million common shares at a cost of $241-million.
• George Weston corporate free cash flow from continuing operations was $365-million.

Consolidated results of operations

The company's results reflect the year-over-year impact of the fair value adjustment of the trust unit liability as a result of the significant changes in Choice Properties' unit price, recorded in net interest expense and other financing charges. The company's results are impacted by market price fluctuations of Choice Properties' trust units on the basis that the trust units held by unitholders, other than the company, are redeemable for cash at the option of the holder and are presented as a liability on the company's consolidated balance sheet. The company's financial results are positively impacted when the trust unit price declines and negatively impacted when the trust unit price increases.

Unless otherwise indicated, all financial information represents the company's results from continuing operations.

In the second quarter of 2023, the company recorded net earnings available to common shareholders of the company from continuing operations of $498-million ($3.55 per common share), a decrease of $142-million (81 cents per common share) compared with the same period in 2022. The decrease was due to the unfavourable year-over-year net impact of adjusting items totalling $191-million ($1.26 per common share), partially offset by an improvement of $49-million (45 cents per common share) in the consolidated underlying operating performance of the company described below.

The unfavourable year-over-year net impact of adjusting items totalling $191-million ($1.26 per common share) was primarily due to:

• The unfavourable year-over-year impact of the fair value adjustment of the trust unit liability of $374-million ($2.49 per common share) as a result of the decrease in Choice Properties' unit price;
• The unfavourable year-over-year impact of the prior year income tax recovery related to the remeasurement of deferred tax balances for the Choice Properties' disposition of six office assets to Allied Properties Real Estate Investment Trust in the second quarter of 2022 of $46-million (31 cents per common share), partially offset by:
  • The favourable year-over-year impact of the fair value adjustment on Choice Properties' investment in Allied of $118-million (79 cents per common share) as a result of the decrease in Allied's Class B unit price;
  • The favourable year-over-year impact of the fair value adjustment on investment properties of $102-million (70 cents per common share) driven by Choice Properties, net of consolidation adjustments in other and intersegment.

The improvement in the company's consolidated underlying operating performance of $49-million (45 cents per common share) was primarily due to:

• The favourable underlying operating performance of Loblaw;
• The favourable underlying operating performance of Choice Properties;
• A decrease in the adjusted effective tax rate primarily attributable to a decrease in current tax expense related to the company's participation in Loblaw's NCIB program and the non-taxable portion of the gain from real estate dispositions; partially offset by:
  • An increase in adjusted net interest expense and other financing charges.

Diluted net earnings per common share from continuing operations also included the favourable impact of shares purchased for cancellation over the last 12 months (12 cents per common share) pursuant to the company's NCIB.

Adjusted net earnings available to common shareholders of the company from continuing operations were $377-million, an increase of $49-million, or 14.9 per cent, compared with the same period in 2022 due to the improvement in the company's consolidated underlying operating performance described above.

Adjusted diluted net earnings per common share from continuing operations in the second quarter of 2023 were $2.68, an increase of 45 cents per common share, or 20.2 per cent, compared with the same period in 2022. The increase was due to the favourable performance in adjusted net earnings available to common shareholders from continuing operations and the favourable impact of share repurchases.

Outlook

The company's 2023 outlook remains unchanged and it continues to expect adjusted net earnings from continuing operations to increase due to the results from its operating segments, and to use excess cash to repurchase shares.

Loblaw

Loblaw will continue to execute on retail excellence while advancing its growth initiatives in 2023. Loblaw's businesses remain well placed to service the everyday needs of Canadians. However, Loblaw cannot predict the precise impacts of global economic uncertainties, including the inflationary environment, on its 2023 financial results.

For the full year 2023, Loblaw continues to expect:

• Its retail business to grow earnings faster than sales;
• Adjusted net earnings per common share growth in the low double digits;
• To increase investments in its store network and distribution centres by investing a net amount of $1.6-billion in capital expenditures, which reflects gross capital investments of approximately $2.1-billion offset by approximately $500-million of proceeds from real estate dispositions;
• To return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Choice Properties

Choice Properties is focused on capital preservation, delivering stable and growing cash flows and net asset value appreciation, all with a long-term focus. Choice Properties' high-quality portfolio is primarily leased to necessity-based tenants and logistics providers, which are less sensitive to economic volatility and therefore provide stability to its overall portfolio. Choice Properties continues to experience positive leasing momentum across its portfolio and is well positioned to handle its 2023 lease renewal exposure. Choice Properties also continues to advance its development program, with a focus on industrial opportunities, which provides it with the best opportunity to add high-quality real estate to its portfolio at a reasonable cost and drive net asset value appreciation over time.

Choice Properties is confident that its business model, stable tenant base, strong balance sheet and disciplined approach to financial management will continue to position it well for future success. However, Choice Properties cannot predict the precise impacts of the broader economic environment on its 2023 financial results. In 2023, Choice Properties will continue to focus on its core business of essential retail and industrial, its growing residential platform, and its robust development pipeline, and is targeting:

• Stable occupancy across the portfolio, resulting in 2- to 3-per-cent year-over-year growth in same-asset net operating income, cash basis;
• Annual FFO per unit diluted in a range of 98 cents to 99 cents, reflecting 2- to 3-per-cent year-over-year growth;
• Stable leverage metrics, targeting adjusted debt to EBITDAFV of approximately 7.5 times.

Declaration of quarterly dividends

Subsequent to the end of the second quarter of 2023, the company's board of directors declared a quarterly dividend on George Weston common shares, preferred shares, Series I, preferred shares, Series III, preferred shares, Series IV, and preferred shares, Series V, payable as follows:

• Common shares, 71.3 cents per share payable Oct. 1, 2023, to shareholders of record Sept. 15, 2023;
• Preferred shares, Series I, 36.25 cents per share payable Sept. 15, 2023, to shareholders of record Aug. 31, 2023;
• Preferred shares, Series III, 32.5 cents per share payable Oct. 1, 2023, to shareholders of record Sept. 15, 2023;
• Preferred shares, Series IV, 32.5 cents per share payable Oct. 1, 2023, to shareholders of record Sept. 15, 2023;
• Preferred shares, Series V, 29.6875 cents per share payable Oct. 1, 2023, to shareholders of record Sept. 15, 2023.

2023 second quarter report

The company's 2022 annual report and 2023 second quarter report are available in the investor centre section of the company's website and have been filed on SEDAR.

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