BRAMPTON - Sales in the third quarter of 2008 were $9,493 million compared to $9,137 million in the same period in 2007, an increase of 3.9%. Net earnings were $155 million, a 32.5% increase compared to $117 million in the same period last year. EBITDA(2) of $501 million represented a 16.5% increase over last year. Basic net earnings per common share were $0.56, compared to $0.43 in the third quarter last year. The following items influenced the Company's operating income in the third quarter of 2008 compared to the same period in 2007:

<< - Charges related to restructuring costs in 2008 of $3 million compared to $24 million in 2007. The effect on basic net earnings per common share was a charge of $0.01 (2007 - $0.05).

- Charges related to the net effect of stock-based compensation and the associated equity forwards of $9 million in 2008 compared to a charge of $19 million in 2007. The effect on basic net earnings per common share was a charge of $0.04 (2007 - $0.08). The non-cash charge on equity forwards resulted from a decrease in the Company's share price during the third quarter of 2008. >>

Excluding the above items, operating income, EBITDA(2) and basic net earnings per common share in the third quarter of 2008 improved compared to the third quarter of 2007.

Commenting on the Company's performance, Galen G. Weston, Loblaw Companies Limited Executive Chairman said: "Third quarter performance showed some signs of progress towards our goal of becoming an effective selling organization. We also continued to realize benefits from our improved buying, cost management and operating procedures. However, we are preparing for a challenging close to the current year and start to the next, driven by the uncertain economy and continued competitive pressures."

<< (1) To be read in conjunction with "Forward-Looking Statements". (2) See Non-GAAP Financial Measures.

Highlights of the Quarter



- The Company remains on track and is progressing well in all areas of its five point plan to drive profitable sales momentum: Back-to-Best great food renewal in Ontario, western Canada refurbishment, local market merchandising, foundational infrastructure focus, and private label innovation.

- Total sales were $9,493 million in the third quarter of 2008 compared to $9,137 million in the same period last year, an increase of 3.9%. Same-store sales in the quarter increased by 3.0%. Sales and same- store sales growth in the third quarter of 2008 were negatively impacted by approximately 0.7% as a result of a shift of the Thanksgiving holiday into the fourth quarter of 2008. Total sales growth in both food and drugstore were good in the quarter. General merchandise sales declined compared to the third quarter of 2007 due to unseasonable weather and the markdown of merchandise to sell through seasonal inventory. Gas bar sales continued to be strong in the third quarter as a result of fuel price inflation as well as volume growth. Positive customer count growth was achieved in the third quarter of 2008, while item count growth remained flat versus the same period last year. The Company's analysis indicated that moderate internal retail food price inflation was experienced in the third quarter of 2008.

- Operating income increased by $61 million, or 24.4%, to $311 million in the third quarter of 2008, compared to $250 million in the third quarter of 2007. Operating margin was 3.3% for the third quarter of 2008 compared to 2.7% in 2007. Lower restructuring and net stock- based compensation costs, higher sales and the impact of the Company's cost reduction initiatives contributed to the increase in operating income and operating margin.

- Basic net earnings per common share increased 13 cents or 30.2% to $0.56 for the third quarter of 2008, compared to $0.43 in the same quarter last year. EBITDA(1) for the quarter was $501 million, representing an increase of 16.5% compared to $430 million in the second quarter of 2007. EBITDA margin(1) increased to 5.3% from 4.7% in 2007.

- Free cash flow(1) for the third quarter of 2008 was $87 million compared to $117 million in the third quarter of 2007. The change was primarily due to a decrease in cash flows from operating activities, specifically working capital of $58 million and a decrease in capital expenditures of $19 million compared to the third quarter of last year. On a year-to-date basis, free cash flow(1) was negative $265 million compared to $67 million in 2007. The year-to-date change is primarily due to a decrease in cash flows from working capital of $299 million, partially offset by a decrease in capital expenditures of $43 million.

- During the third quarter of 2008, the Company completed two financing transactions which generated $518 million. In June 2008, a preferred share public offering for net proceeds of $218 million (net of transaction costs) was closed and in September 2008, $300 million of credit card receivables were securitized. The proceeds enabled the Company to repay short term borrowings from its $800 million credit facility. As at October 4, 2008, $273 million was drawn on this five year committed credit facility.

- The Company's ongoing investment in lower food prices, to drive customer value perceptions, continues to have a negative impact on earnings. Reasonable progress was achieved in the third quarter of 2008 to help support these investments:

- The Company achieved improved year-over-year shrink and on-shelf availability in the third quarter from the continued rollout and training of enhanced "shop-keeping" procedures.

- Buying synergies and more disciplined vendor management are resulting in lower purchase costs for both merchandise and not-for-resale items. >>

The Company remains focused on delivering profitable sales momentum, driven by our efforts in food renewal, store enhancements, innovation, infrastructure, and improving value for our customers. While continued progress in cost and operating efficiencies are expected to support these investments, it is anticipated that the unpredictable economy and aggressive competitive environment will further challenge results for the remainder of 2008 and into 2009.