The ratings reflect Loblaw Companies Ltd.'s position as one of Canada's largest national supermarket chains. The ratings also take into account Loblaw's strong cash flow generation capability, its continued strength in operating margins, and an innovative and world-class private-label brand program. These factors are offset by the company's high leverage, resulting from an ongoing aggressive store expansion policy. First-quarter sales increased 6% to C$4.5 billion, with lease-adjusted operating income increasing 12.7% to C$319.5 million. Comparable store sales grew 4%, aided partially by slight food price inflation, which has begun to surface of late. Cost containment and strong performances across all major retail banners in the quarter enabled the company to strengthen lease-adjusted operating margin to 7.0% in 2001 versus 6.6%
