The ratings on Loblaw Companies Ltd. reflect its position as one of Canada's largest national supermarket chains. The ratings also take into account the company's strong cash flow generation capability, continued strength in operating margins, and innovative and world-class private-label brand program. These strengths are offset by Loblaw's high leverage, resulting from an ongoing aggressive store expansion policy. Second-quarter (ended June 30, 2002) sales increased 6.4% to C$5.3 billion from C$4.98 billion, and lease-adjusted second-quarter operating income increased 12.8% to C$396.8 million from C$351.8 million. Comparable-store sales grew 410% in the second quarter, maintaining the pace of last year's increase. Cost containment, strong performances across all major retail banners, and some food inflation in the second quarter of 2002 enabled
