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Loblaw Companies Ltd L Stock Quote

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Morningstar‘s Stock Analysis L

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Is it the right time to buy or sell?

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We View Loblaw's Strategic Move in Drug Retail as a Plus, but Shares Overvalued

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

No-moat Loblaw posted second-quarter results that reflected its ability to fend off ongoing inflationary pressures, although it operates in a space where price is the primary determinant amid ever more value-oriented consumer purchasing decisions. Despite experiencing a soaring food cost inflation rate of 9.6% (per management), Loblaw improved its profitability. In fact, gross and adjusted EBITDA margins expanded in the quarter—up 60 basis points to 32.3% and 70 basis points to 11.7%, respectively—driven by a favorable mix shift to higher-margin categories such as over the counter and cosmetics. But we don’t think this mix shift is permanent; we continue to expect fierce competition in the industry, which drives our long-term gross margin forecast of 30%-31%.

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Key Statistics L

Company Profile L

Business Description

Loblaw is one of Canada’s largest grocery, pharmacy, and general merchandise retailers, operating the most expansive store footprint in Ontario and maintaining sizable presences in provinces like Quebec and British Columbia. Key grocery banners include Loblaw, No Frills, and Maxi, while its pharmaceutical operations are the product of its 2014 acquisition of Shoppers Drug Mart. The firm carries a robust private-label assortment, with top sellers like President’s Choice and No Name. In addition to its retail operations, Loblaw oversees a financial-services business, which provides credit card services and guaranteed investment certificates, and also operates its PC Optimum loyalty program. The firm’s controlling shareholder is George Weston Limited, which owns 52.6% of the equity.

1 President’s Choice Circle
Brampton, ON, L6Y 5S5, Canada
T +1 416 922-2500
Industry Grocery Stores
Most Recent Earnings Jun 30, 2022
Fiscal Year End Jan 1, 2023
Stock Type
Employees 215,000