2019 Annual Report

2019 Annual Report

We are focused on our purpose: Live Life Well?

Our stores. Our colleagues. Our strategy. Everything we do reinforces the passion for customers that sits at the heart of our organization and our commitment to helping Canadians live their life well.

Day in and day out, through our five operating divisions, we strive to be the best in food, health and beauty. We believe that by rapidly expanding our use of data-driven insights and consistently delivering process and efficiency excellence, we will strengthen our core business while enabling ongoing investments in our future ? in areas like everyday digital retail, payments and rewards, and connected healthcare. As we drive towards this vision of our future, we are grounded by a commitment to social responsibility and compliance, and guided by a shared set of values and culture that inform the decisions of our outstanding colleagues.

Everyday Digital Retail We are an omni-channel retailer. We take pride in operating many of the country's top store banners while simultaneously layering in the kinds of digital experiences Canadians now expect.

Payments and Rewards Driven by the data from millions of weekly customer interactions, we are able to offer unique personalization and rewards to our customers.

Connected Healthcare Network We continue to build upon the combination of one of Canada's single largest Electronic Medical Records (EMR) platforms and Loblaw's network of pharmacies and healthcare professionals to empower Canadians with their own health information.

Process and Efficiency Excellence We have an ambitious strategy, which calls for investment in areas that matter most to our customers. Delivering on this strategy requires the adoption of more efficient processes and a continuous improvement mindset.

Data-Driven Insights We have a rich set of data that offers us unique insights into the needs and expectations of our customers. As we continue to enhance our data and analytical capabilities, our focus is on seeing, knowing and acting on their behalf, thereby helping them live their life well.

Best in Food, Health and Beauty We offer a variety of grocery options to meet all tastes and budgets, operate more than 1,750 pharmacies across the country, provide access to over 5,000 health and wellness professionals, and remain a top beauty destination for Canadians ? all designed to meet and surpass the needs of our customers.

Table of Contents

2 Financial Highlights 3 Chairman's Message 6 Our Divisions 8 Strategic Enablers 10 Corporate Social Responsibility 12 Corporate Governance

Practices 15 Board of Directors 15 Leadership

2019 ANNUAL REPORT 1 LOBLAW COMPANIES LIMITED

Financial Highlights

+1.1%

FOOD RETAIL SAME STORE SALES

+ 2.9%

REVENUE2 ($ millions)

+ 3.6%

DRUG RETAIL SAME STORE SALES

29.7%

ADJUSTED RETAIL SEGMENT GROSS MARGIN1

+ 4.4%

FRONT OF STORE

+ 2.9%

PHARMACY

+ 4.1%3

CONSOLIDATED ADJUSTED EBITDA1, 2 ($ millions)

7.6%3

CONSOLIDATED ADJUSTED EBITDA MARGIN 1, 2

2017 2018 2019 46,587 46,693 48,037

+6.4%5

ADJUSTED DILUTED NET EARNINGS PER COMMON SHARE1, 2 ($)

2017 2018 2019 28.5% 29.4% 29.7%

+7.4%

DIVIDEND DECLARED PER COMMON SHARE ($)

2017 2018 20194 3,521 3,528 4,912

2017 2018 20194 7.6% 7.6% 10.2%

2017 3.99

2018 4.06

2019 4.12

2 2019 ANNUAL REPORT LOBLAW COMPANIES LIMITED

2017 1.07

2018 1.16

2019 1.24

1 See the Non-GAAP Financial Measures section of the 2019 Annual Report ? Financial Review

2 Excluding the spin-out of Choice Properties business 3 Excluding the impact of IFRS 16 4 Including the impact of IFRS 16 5 Excluding the impact of IFRS 16 and spin-out related depreciation

Chairman's Message

Galen G. Weston Executive Chairman

Dear fellow shareholders,

We believe that Canada should aspire to be the happiest and healthiest country in the world. As a fourth generation Canadian company that helps one in three Canadians feed their families, care for loved ones, clothe themselves, or simplify their finances, we believe we have a vital role to play in achieving this goal.

We are in virtually every community across the country. So when we commit to something, we can make a difference. We know that no two Canadians live the same life, or even want the same life. Every one of us has our own unique struggles, joys, and aspirations. And at Loblaw, it's our job to provide the daily building blocks to help them create the best life and future that they can. For themselves and their families. For their friends and their communities.

Ultimately, the values, beliefs and actions of every one of our colleagues, start with one simple question: is this helping Canadians live their life well?

This is a rare privilege, and one that inspires us every day. We help Canadians live the life they want to live, as well as they can. In 2019, we turned this purpose into action every day, and I am pleased to share several highlights in the pages that follow.

We are retailers at our core, committed to running the very best stores in the country. In 2019, we once again offered Canadians the Best in Food, Health and Beauty. We invested $1 billion to renovate stores, to introduce new services to our customers, and to build the future-ready skill set of our store-level colleagues.

Our world-famous control brand, President's Choice?, continued to innovate and introduced a full range of fresh meal kit solutions. Our low price brand, no name?, now has over 300 products with the Simple CheckTM seal of approval, letting customers know that even our opening price point products are free of any ingredients of concern. And today, PC? and no name represent the #1 and #3 consumer brands1 in the country, filling Canadians' kitchen cupboards from coast to coast.

When it comes to health and beauty, we were just as present in the lives of our customers. In 2019, we administered well over 1.6 million flu shots, launched an online platform for the sale of medical cannabis nationwide, and opened another 14 enhanced beautyBOUTIQUETM locations, continuing to strengthen our position as the destination to help Canadians look and feel their best.

As a complement to these physical assets, we invested thoughtfully in our Everyday Digital Retail strategy. For the first time ever, our digital platforms delivered over $1 billion dollars in revenue in 2019 ? almost double that of the previous year. We launched our first standalone online grocery pick-up location in the Greater Toronto Area and we continued to build a network of hub-and-spoke pick-up locations at transit stations in major urban cities to supplement our delivery partnership with Instacart. Our online beauty business more than doubled in 2019, delivering

1 Loblaw calculation based in part on data reported by Nielsen through its MarketTrack service for the President's Choice and No Name brands for the 52-week period ending 01/05/2020, for the Total Tracked sales, according to the Nielsen standard product hierarchy. Copyright ? 2020, The Nielsen Company. 2019 ANNUAL REPORT 3 LOBLAW COMPANIES LIMITED

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