Full-year revenue tops $60 billion milestone and corporate free cash flow increases to $1.3 billion.
TORONTO, Feb. 28, 2024 /CNW/ – George Weston Limited (TSX:WN) (“GWL” or the “Company”) today announced its consolidated unaudited results for the 12 weeks ended December 31, 2023(2).
GWL’s 2023 Annual Report includes the Company’s audited annual consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) for the fiscal year ended December 31, 2023. The 2023 Annual Report has been filed on SEDAR+ and is available at www.sedarplus.ca and in the Investor Centre section of the Company’s website at www.weston.ca.
“George Weston Limited’s operating companies delivered strong and consistent operating and financial results in the fourth quarter of 2023,” said Galen G. Weston, Chairman and Chief Executive Officer, George Weston Limited. “Our market leading businesses continue to serve their customers and tenants well, positioning our group of companies for continued value creation.”
Loblaw Companies Limited (“Loblaw”) delivered another quarter of strong operational and financial results as it maintained its focus on retail excellence. Loblaw’s value proposition, private label brands, and personalized PC Optimum™ offers continued to resonate with customers seeking quality and value. This resulted in traffic growth and continued market share momentum in food retail. Loblaw recorded an internal food inflation lower than Canada’s food CPI again this quarter, demonstrating the impact of its continuing investments in value. Additionally, Loblaw opened 8 more Maxi and No Frills discount stores in the fourth quarter. Drug retail sales reflected continued strength in front store beauty products, and strong sales of cough and cold medications. Canadians reacted very positively to the convenience and level of care offered across Loblaw’s 74 new pharmacy-based clinics, resulting in strong growth of new pharmacist led healthcare services. Operational excellence across Loblaw’s businesses supported sales growth, provided sequential shrink improvements, and continued Loblaw’s focused cost discipline, to drive earnings growth. Loblaw’s strategy, unique assets, and dedicated colleagues position it well to best serve the needs of Canadians today and in the future.
Choice Properties Real Estate Investment Trust (“Choice Properties”) delivered strong financial and operational performance for the quarter, reflecting the strength and resilience of its grocery-anchored and necessity-based retail portfolio and demand for its well-located industrial assets. In 2023, Choice Properties continued to execute on its strategic priorities, further improving the quality of its portfolio by completing over $600 million of real estate transactions and by delivering over $425 million of development projects, adding 1.8 million square feet of new commercial retail and industrial space and a new purpose-built residential rental building to its portfolio. Supported by stable and growing cash flows and a solid financial position, Choice Properties announced another annual distribution increase for unitholders.
The Company operates through its two reportable operating segments: Loblaw and Choice Properties, each of which are publicly traded entities. As such, the Company’s financial statements reflect and are impacted by the consolidation of Loblaw and Choice Properties. The consolidation of these entities into the Company’s financial statements reflect the impact of eliminations, intersegment adjustments and other consolidation adjustments, which can positively or negatively impact the Company’s consolidated results. Additionally, cash and short-term investments and other investments held by the Company, and all other company level activities that are not allocated to the reportable operating segments, such as net interest expense, corporate activities and administrative costs are included in GWL Corporate. To help our investors and stakeholders understand the Company’s financial statements and the effect of consolidation, the Company reports its results in a manner that differentiates between the Loblaw segment, the Choice Properties segment, the effect of consolidation of Loblaw and Choice Properties, and lastly, GWL Corporate.
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.
2023 FOURTH QUARTER HIGHLIGHTS
Revenue was $14,700 million, an increase of $558 million, or 3.9%.
Adjusted EBITDA(1) was $1,694 million, an increase of $104 million, or 6.5%.
Adjusted EBITDA(1) from the publicly traded operating companies(i) was $1,705 million, an increase of $123 million, or 7.8%.
Net loss available to common shareholders of the Company from continuing operations was $38 million ($0.30 per common share), an improvement of $76 million ($0.53 per common share), or 66.7%.
Adjusted net earnings available to common shareholders of the Company(1) from continuing operations were $342 million, a decrease of $27 million, or 7.3%, due to the unfavourable year-over-year impact of the fair value adjustment on other investments and an increase in income tax expense.
Adjusted diluted net earnings per common share(1) from continuing operations were $2.51, a decrease of $0.08 per common share, or 3.1%.
Contribution to adjusted net earnings available to common shareholders of the Company(1) from continuing operations from the publicly traded operating companies(i) was $378 million, an increase of $18 million, or 5.0%.
Repurchased for cancellation 1.1 million common shares at a cost of $165 million.
GWL Corporate free cash flow(1) was $413 million, an increase of $212 million, or 105.5%.
2023 ANNUAL HIGHLIGHTS
Revenue was $60,124 million, an increase of $3,076 million, or 5.4%.
Adjusted EBITDA(1) was $6,953 million, an increase of $402 million, or 6.1%.
Adjusted EBITDA(1) from the publicly traded operating companies(i) was $7,000 million, an increase of $433 million, or 6.6%.
Net earnings available to common shareholders of the Company from continuing operations were $1,496 million ($10.75 per common share), a decrease of $282 million ($1.45 per common share), or 15.9%.
Adjusted net earnings available to common shareholders of the Company(1) from continuing operations were $1,467 million, an increase of $35 million, or 2.4%.
Adjusted diluted net earnings per common share(1) from continuing operations were $10.54, an increase of $0.73 per common share, or 7.4%.
Contribution to adjusted net earnings available to common shareholders of the Company(1) from continuing operations from the publicly traded operating companies(i) was $1,614 million, an increase of $88 million, or 5.8%.
Repurchased for cancellation 6.3 million common shares at a cost of $1,001 million.
Dividends paid to common shareholders of the Company were $381 million, an increase of $14 million, or 3.8%.
GWL Corporate free cash flow(1) was $1,283 million, an increase of $390 million, or 43.7%.
(i)
Publicly traded operating companies is the contribution to the Company’s financial performance from its controlling interest in Loblaw and Choice Properties after the effect of consolidation, each of which are publicly traded entities. Effect of consolidation includes eliminations, intersegment adjustments and other consolidation adjustments. See “Reportable Operating Segments” section of this News Release for further information.
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, all financial information reflects the Company’s results from continuing operations.
($ millions except where otherwise indicated)
Quarters Ended
Years Ended
For the periods ended as indicated
Dec. 31, 2023
Dec. 31, 2022
$ Change
% Change
Dec. 31, 2023
Dec. 31, 2022
$ Change
% Change
Revenue
$ 14,700
$ 14,142
$ 558
3.9 %
$ 60,124
$ 57,048
$ 3,076
5.4 %
Operating income
$ 1,076
$ 1,264
$ (188)
(14.9) %
$ 4,363
$ 4,553
$ (190)
(4.2) %
Adjusted EBITDA(1) from:
Loblaw
$ 1,631
$ 1,491
$ 140
9.4 %
$ 6,639
$ 6,173
$ 466
7.5 %
Choice Proerties
$ 238
$ 223
$ 15
6.7 %
$ 940
$ 897
$ 43
4.8 %
Effect of consolidation
$ (164)
$ (132)
$ (32)
(24.2) %
$ (579)
$ (503)
$ (76)
(15.1) %
Publicly traded operating companies
$ 1,705
$ 1,582
$ 123
7.8 %
$ 7,000
$ 6,567
$ 433
6.6 %
GWL Corporate
$ (11)
$ 8
$ (19)
(237.5) %
$ (47)
$ (16)
$ (31)
(193.8) %
Adjusted EBITDA(1)
$ 1,694
$ 1,590
$ 104
6.5 %
$ 6,953
$ 6,551
$ 402
6.1 %
Adjusted EBITDA margin(1)
11.5 %
11.2 %
11.6 %
11.5 %
Net (loss) earnings
attributable to shareholders
of the Company from
continuing operations
$ (28)
$ (104)
$ 76
73.1 %
$ 1,540
$ 1,822
$ (282)
(15.5) %
Loblaw(i)
$ 285
$ 279
$ 6
2.2 %
$ 1,102
$ 1,007
$ 95
9.4 %
Choice Properties
$ (445)
$ (579)
$ 134
23.1 %
$ 797
$ 744
$ 53
7.1 %
Effect of consolidation
$ 142
$ 180
$ (38)
(21.1) %
$ (248)
$ 127
$ (375)
(295.3) %
Publicly traded operating companies
$ (18)
$ (120)
$ 102
85.0 %
$ 1,651
$ 1,878
$ (227)
(12.1) %
GWL Corporate
$ (20)
$ 6
$ (26)
(433.3) %
$ (155)
$ (100)
$ (55)
(55.0) %
Net (loss) earnings available
to common shareholders
of the Company from
continuing operations
$ (38)
$ (114)
$ 76
66.7 %
$ 1,496
$ 1,778
$ (282)
(15.9) %
Discontinued operations(ii)
$ —
$ —
$ —
— %
$ —
$ (6)
$ 6
100.0 %
Net (loss) earnings available
to common shareholders
of the Company
$ (38)
$ (114)
$ 76
66.7 %
$ 1,496
$ 1,772
$ (276)
(15.6) %
Diluted net (loss) earnings
per common share ($)
$ (0.30)
$ (0.83)
$ 0.53
63.9 %
$ 10.75
$ 12.16
$ (1.41)
(11.6) %
Continuing operations
$ (0.30)
$ (0.83)
$ 0.53
63.9 %
$ 10.75
$ 12.20
$ (1.45)
(11.9) %
Discontinued operations(ii)
$ —
$ —
$ —
— %
$ —
$ (0.04)
$ 0.04
100.0 %
Loblaw(i)
$ 332
$ 304
$ 28
9.2 %
$ 1,309
$ 1,194
$ 115
9.6 %
Choice Properties
$ 103
$ 92
$ 11
12.0 %
$ 409
$ 384
$ 25
6.5 %
Effect of consolidation
$ (57)
$ (36)
$ (21)
(58.3) %
$ (104)
$ (52)
$ (52)
(100.0) %
Publicly traded operating companies
$ 378
$ 360
$ 18
5.0 %
$ 1,614
$ 1,526
$ 88
5.8 %
GWL Corporate
$ (36)
$ 9
$ (45)
(500.0) %
$ (147)
$ (94)
$ (53)
(56.4) %
Adjusted net earnings available
to common shareholders
of the Company(1) from
continuing operations
$ 342
$ 369
$ (27)
(7.3) %
$ 1,467
$ 1,432
$ 35
2.4 %
Adjusted diluted net earnings
per common share(1) from
continuing operations ($)
$ 2.51
$ 2.59
$ (0.08)
(3.1) %
$ 10.54
$ 9.81
$ 0.73
7.4 %
(i)
Contribution from Loblaw, net of non-controlling interests.
(ii)
In 2021, the Company completed the sale of the Weston Foods bakery business. The Company’s interest in Weston Foods was presented separately as discontinued operations in the Company’s 2022 results. Details are included in the Company’s 2022 Annual Report available on the Company’s website (www.weston.ca).
Net loss available to common shareholders of the Company from continuing operations was $38 million ($0.30 per common share) in the fourth quarter of 2023, compared to net loss available to common shareholders of the Company from continuing operations of $114 million ($0.83 per common share) in the same period of 2022, an improvement of $76 million ($0.53 per common share).
The adjusting items in the fourth quarter of 2023 had a favourable year-over-year net impact on net loss available to common shareholders of the Company from continuing operations totaling $103 million ($0.61 per common share), primarily due to:
the favourable year-over-year impact of the fair value adjustment of the Trust Unit liability of $280 million ($1.86 per common share) as a result of the increase in Choice Properties’ unit price; and
the favourable year-over-year impact of the fair value adjustment on Choice Properties’ investment in real estate securities of Allied Properties Real Estate Investment Trust (“Allied”) of $43 million ($0.32 per common share) as a result of the increase in Allied’s unit price;
partially offset by,
the unfavourable year-over-year impact of the fair value adjustment on investment properties of $218 million ($1.55 per common share) driven by Choice Properties, net of the effect of consolidation.
Adjusted net earnings available to common shareholders of the Company(1) from continuing operations in the fourth quarter of 2023 were $342 million, a decrease of $27 million, or 7.3%, compared to the same period in 2022. The decrease was driven by:
the unfavourable year-over-year impact of $45 million at GWL Corporate primarily due to the unfavourable year-over-year impact of the fair value adjustment on other investments and an increase in income tax expense as a result of GWL’s participation in Loblaw’s Normal Course Issuer Bid (“NCIB”) program and lapping certain recoveries realized for prior taxation periods;
partially offset by,
the favourable year-over-year impact of $18 million from the contribution of the publicly traded operating companies.
Adjusted diluted net earnings per common share(1) from continuing operations were $2.51 per common share in the fourth quarter of 2023, a decrease of $0.08 per common share, or 3.1%, compared to the same period in 2022. The decrease was due to the performance in adjusted net earnings available to common shareholders(1) from continuing operations as described above, partially offset by the favourable impact of shares purchased for cancellation over the last 12 months ($0.11 per common share) pursuant to the Company’s NCIB.
CONSOLIDATED OTHER BUSINESS MATTERS
The Company completed the following GWL Corporate financing activities:
NCIB – Purchased and Cancelled Shares In the fourth quarter of 2023, the Company purchased and cancelled 1.1 million shares (2022 – 1.7 million shares) for aggregate consideration of $165 million (2022 – $270 million) under its NCIB. As at December 31, 2023, the Company had 134.4 million shares issued and outstanding, net of shares held in trusts (December 31, 2022 – 140.6 million shares).
In the fourth quarter of 2023, the Company entered into an automatic share purchase plan (“ASPP”) with a broker in order to facilitate the repurchase of the Company’s common shares under its NCIB. During the effective period of the ASPP, the Company’s broker may purchase common shares at times when the Company would not be active in the market.
Refer to Section 3.6, “Share Capital” of the MD&A in the Company’s 2023 Annual Report for more information.
Participation in Loblaw’s NCIB The Company participates in Loblaw’s NCIB in order to maintain its proportionate percentage ownership interest. In the fourth quarter of 2023, GWL received proceeds of $238 million (2022 – $49 million) from the sale of Loblaw common shares.
REPORTABLE OPERATING SEGMENTS
The Company operates through its two reportable operating segments: Loblaw and Choice Properties. Effective in the fourth quarter of 2023, the effect of consolidation includes eliminations, intersegment adjustments and other consolidation adjustments. Cash and short-term investments and other investments held by the Company, and all other company level activities that are not allocated to the reportable operating segments, such as net interest expense, corporate activities and administrative costs are included in GWL Corporate. Effect of consolidation and GWL Corporate comparative figures have been restated to conform to the current year presentation.
Loblaw has two reportable operating segments, retail and financial services. Loblaw’s retail segment consists primarily of food retail and drug retail. Loblaw provides Canadians with grocery, pharmacy and healthcare services, health and beauty products, apparel, general merchandise and financial services.
Choice Properties owns, manages and develops a high-quality portfolio of commercial and residential properties across Canada.
Excerpt of Segment Information
The accounting policies of the reportable operating segments are the same as those described in the Company’s 2023 audited annual consolidated financial statements. The Company measures each reportable operating segment’s performance based on adjusted EBITDA(1). No reportable operating segment is reliant on any single external customer.
Quarters Ended
Dec. 31, 2023
Dec. 31, 2022
($ millions)
Loblaw
Choice
Properties
Total
Segment
Measure
Effect of
consol-
idation
GWL
Corporate
Total
Loblaw
Choice
Properties
Total
Segment
Measure
Effect of
consol-
idation
GWL
Corporate
Total
Revenue
$ 14,531
$ 355
$ 14,886
$ (186)
$ —
$ 14,700
$ 14,007
$ 315
$ 14,322
$ (180)
$ —
$ 14,142
Operating income
$ 941
$ 191
$ 1,132
$ (45)
$ (11)
$ 1,076
$ 869
$ 404
$ 1,273
$ (16)
$ 7
$ 1,264
Net interest expense
and other financing
charges
195
636
831
(171)
—
660
172
983
1,155
(238)
(1)
916
Earnings (loss)
before income taxes
from continuing
operations
$ 746
$ (445)
$ 301
$ 126
$ (11)
$ 416
$ 697
$ (579)
$ 118
$ 222
$ 8
$ 348
Operating income
$ 941
$ 191
$ 1,132
$ (45)
$ (11)
$ 1,076
$ 869
$ 404
$ 1,273
$ (16)
$ 7
$ 1,264
Depreciation and
amortization
680
—
680
667
1
668
Adjusting items(i)
10
47
57
(45)
(182)
(227)
Adjusted EBITDA(i)
$ 1,631
$ 238
$ 1,869
$ 1,491
$ 223
$ 1,714
(i)
Certain items are excluded from operating income to derive adjusted EBITDA(1).
Years Ended
Dec. 31, 2023
Dec. 31, 2022
($ millions)
Loblaw
Choice
Properties
Total
Segment
Measure
Effect of
consol-
idation
GWL
Corporate
Total
Loblaw
Choice
Properties
Total
Segment
Measure
Effect of
consol-
idation
GWL
Corporate
Total
Revenue
$ 59,529
$ 1,335
$ 60,864
$ (740)
$ —
$ 60,124
$ 56,504
$ 1,265
$ 57,769
$ (721)
$ —
$ 57,048
Operating income
$ 3,696
$ 1,001
$ 4,697
$ (284)
$ (50)
$ 4,363
$ 3,334
$ 1,083
$ 4,417
$ 159
$ (23)
$ 4,553
Net interest
expense and
other financing
charges
803
204
1,007
(116)
(2)
889
683
339
1,022
(119)
10
913
Earnings before
income taxes
from continuing
operations
$ 2,893
$ 797
$ 3,690
$ (168)
$ (48)
$ 3,474
$ 2,651
$ 744
$ 3,395
$ 278
$ (33)
$ 3,640
Operating income
$ 3,696
$ 1,001
$ 4,697
$ (284)
$ (50)
$ 4,363
$ 3,334
$ 1,083
$ 4,417
$ 159
$ (23)
$ 4,553
Depreciation and
amortization
2,906
3
2,909
2,795
3
2,798
Adjusting items(i)
37
(64)
(27)
44
(189)
(145)
Adjusted EBITDA(i)
$ 6,639
$ 940
$ 7,579
$ 6,173
$ 897
$ 7,070
(i) Certain items are excluded from operating income to derive adjusted EBITDA(1).
Effect of consolidation includes the following items:
Quarters Ended
Dec. 31, 2023
Dec. 31, 2022
($ millions)
Revenue
Operating
Income
Net Interest
Expense
and Other
Financing
Charges
Revenue
Operating
Income
Net Interest
Expense
and Other
Financing
Charges
Elimination of intercompany rental revenue
$ (190)
$ (20)
$ —
$ (184)
$ (27)
$ —
Elimination of internal lease arrangements
4
(9)
(29)
4
(15)
(25)
Asset impairments, net of recoveries
—
(7)
—
—
4
—
Elimination of intersegment real estate transactions
—
(34)
—
—
—
—
Recognition of depreciation on Choice Properties’
investment properties classified as fixed assets by
the Company and measured at cost
—
(15)
—
—
(2)
—
Fair value adjustment on investment properties
—
40
1
—
24
6
Unit distributions on Exchangeable Units paid by
Choice Properties to GWL
—
—
(74)
—
—
(73)
Unit distributions on Trust Units paid by Choice
Properties, excluding amounts paid to GWL
—
—
51
—
—
51
Fair value adjustment on Choice Properties’
Exchangeable Units
—
—
(502)
—
—
(859)
Fair value adjustment on Trust Unit liability
—
—
382
—
—
662
Total
$ (186)
$ (45)
$ (171)
$ (180)
$ (16)
$ (238)
Years Ended
Dec. 31, 2023
Dec. 31, 2022
($ millions)
Revenue
Operating
Income
Net Interest
Expense
and Other
Financing
Charges
Revenue
Operating
Income
Net Interest
Expense
and Other
Financing
Charges
Elimination of intercompany rental revenue
$ (752)
$ (19)
$ —
$ (733)
$ 2
$ —
Elimination of internal lease arrangements
12
(97)
(120)
12
(97)
(104)
Asset impairments, net of recoveries
—
(7)
—
—
4
—
Elimination of intersegment real estate transactions
—
(39)
—
—
(4)
—
Recognition of depreciation on Choice Properties’
investment properties classified as fixed assets by
the Company and measured at cost
—
(29)
—
—
(13)
—
Fair value adjustment on investment properties
—
(93)
3
—
286
1
Reversal of Loblaw gain on the sale of disposition of
property to Choice Properties
—
—
—
—
(19)
—
Unit distributions on Exchangeable Units paid by
Choice Properties to GWL
—
—
(296)
—
—
(293)
Unit distributions on Trust Units paid by Choice
Properties, excluding amounts paid to GWL
—
—
207
—
—
205
Fair value adjustment on Choice Properties’
Exchangeable Units
—
—
321
—
—
170
Fair value adjustment on Trust Unit liability
—
—
(231)
—
—
(98)
Total
$ (740)
$ (284)
$ (116)
$ (721)
$ 159
$ (119)
Loblaw Operating Results
($ millions except where otherwise indicated)
For the periods ended as indicated
Quarters Ended
Years Ended
Dec. 31, 2023
Dec. 31, 2022
$ Change
% Change
Dec. 31, 2023
Dec. 31, 2022
$ Change
% Change
Revenue
$ 14,531
$ 14,007
$ 524
3.7 %
$ 59,529
$ 56,504
$ 3,025
5.4 %
Operating income
$ 941
$ 869
$ 72
8.3 %
$ 3,696
$ 3,334
$ 362
10.9 %
Adjusted EBITDA(1)
$ 1,631
$ 1,491
$ 140
9.4 %
$ 6,639
$ 6,173
$ 466
7.5 %
Adjusted EBITDA margin(1)
11.2 %
10.6 %
11.2 %
10.9 %
Depreciation and amortization
$ 680
$ 667
$ 13
1.9 %
$ 2,906
$ 2,795
$ 111
4.0 %
Revenue Loblaw revenue in the fourth quarter of 2023 was $14,531 million, an increase of $524 million, or 3.7%, compared to the same period in 2022, driven by an increase in retail sales and in financial services revenue.
Retail sales in the fourth quarter of 2023 were $14,157 million, an increase of $463 million, or 3.4%, compared to the same period in 2022. The increase was primarily driven by the following factors:
food retail sales were $9,774 million (2022 – $9,514 million) and food retail same-store sales grew by 2.0% (2022 – 8.4%) for the quarter;
the Consumer Price Index (“CPI”) as measured by The Consumer Price Index for Food Purchased from Stores was 4.9% (2022 – 11.2%) which was higher than Loblaw’s internal food inflation; and
food retail traffic increased and basket size decreased.
drug retail sales were $4,383 million (2022 – $4,180 million) and drug retail same-store sales grew by 4.6% (2022 – 8.7%) for the quarter;
pharmacy and healthcare services same-store sales growth was 8.0% (2022 – 5.4%). On a same-store basis, the number of prescriptions dispensed increased by 3.4% (2022 – 2.2%) and the average prescription value increased by 3.4% (2022 – 2.3%); and
front store same-store sales growth was 1.7% (2022 – 11.5%).
Financial services revenue in the fourth quarter of 2023 was $487 million, an increase of $70 million compared to the same period in 2022. The increase was primarily driven by higher sales attributable to The Mobile Shop, higher interest income from growth in credit card receivables and higher interchange income and other credit card related revenue from an increase in customer spending.
Operating Income Loblaw operating income in the fourth quarter of 2023 was $941 million, an increase of $72 million, or 8.3%, compared to the same period in 2022.
Adjusted EBITDA(1) Loblaw adjusted EBITDA(1) in the fourth quarter of 2023 was $1,631 million, an increase of $140 million, or 9.4%, compared to the same period in 2022. The increase was due to an increase in retail of $114 million, and an increase in financial services of $26 million.
Retail adjusted EBITDA(1) in the fourth quarter of 2023 increased by $114 million, driven by an increase in retail gross profit of $221 million, partially offset by an increase in retail selling, general and administrative expenses (“SG&A”) of $107 million.
Retail gross profit percentage in the fourth quarter of 2023 was 31.1%, which was in line with the full-year gross profit percentage of 31.0%, and was higher by 50 basis points compared to the same period in 2022 (2022 – decreased by 30 basis points). The increase was driven by lapping of high-intensity prior year promotional activities and the scaling of the external freight business, partially offset by higher shrink.
Retail SG&A as a percentage of sales was 20.3%, an increase of 10 basis points compared to the same period in 2022, driven by the year-over-year impact of labour costs including expenses related to the ratification of union labour agreements, partially offset by operating leverage from higher sales.
Financial services adjusted EBITDA(1) increased by $26 million compared to the same period in 2022, primarily driven by higher revenue as described above and lower operating costs, including benefits associated with the renewal of a long-term agreement with Mastercard, partially offset by higher contractual charge-offs and loyalty program costs from growth in the credit card portfolio and the year-over-year unfavourable impact of the expected credit loss provision.
Depreciation and Amortization Loblaw depreciation and amortization in the fourth quarter of 2023 was $680 million, an increase of $13 million compared to the same period in 2022. The increase in depreciation and amortization in the fourth quarter of 2023 was primarily driven by an increase in depreciation of leased assets and information technology (“IT”) assets, accelerated depreciation of $7 million as a result of network optimization, and an increase in depreciation of fixed assets related to conversions of retail locations, partially offset by the impact of prior year accelerated depreciation due to the reassessment of the estimated useful life of certain IT assets. Depreciation and amortization in the fourth quarter of 2023 included the amortization of intangible assets related to the acquisitions of Shoppers Drug Mart Corporation (“Shoppers Drug Mart”) and Lifemark Health Group (“Lifemark”) of $115 million (2022 – $115 million).
Loblaw Other Business Matters
Network Optimization During the fourth quarter of 2023 and on a full-year basis, Loblaw recorded charges of $25 million and $70 million associated with network optimization, respectively. Included in the charges was accelerated depreciation of $7 million and $24 million, as described above, and other charges. Loblaw finalized plans for 2024 that are expected to result in the conversion of 30 Provigo stores to Maxi discount stores in Quebec. Charges associated with store conversions will be recorded as incurred and are expected to include equipment, severance, lease related and other costs and will not be considered an adjusting item.
Choice Properties Operating Results