# Loblaw (L)



## Taraz (Nov 24, 2013)

According to Google finance, the P/E ration for Loblaw is 575.15 as of today. I don't understand why this stock is has climbed so much over the last year (> 50%). Their net profit margin was 2.16% last quarter. 

Is this high valuation because they're sacrificing profits in an attempt to agressively gain market share, or are investors just crazy?


----------



## bgc_fan (Apr 5, 2009)

Taraz said:


> According to Google finance, the P/E ration for Loblaw is 575.15 as of today. I don't understand why this stock is has climbed so much over the last year (> 50%). Their net profit margin was 2.16% last quarter.
> 
> Is this high valuation because they're sacrificing profits in an attempt to agressively gain market share, or are investors just crazy?


I believe it is just some of the write downs and one time charges due to the acquisition of Shoppers. http://www.ctvnews.ca/mobile/busine...t-as-company-posts-q2-earnings-loss-1.1929430


----------



## guy369 (Apr 10, 2015)

I got in L.T yesterday as I think their earnings being released shortly will beat the street.

They have huge potential with Joe Fresh now being worldwide

Shoppers Drug Marts are always busy in my area.
...And for the same reason I bought Dollarama a few months ago; Canadians are in debt and are looking for places to save $$.
...Loblaws is such a place.


----------



## treva84 (Dec 9, 2014)

I was looking at L a month ago but they've had 3 consecutive years of negative net income growth / negative EPS ( culminating in -90% in 2014). They keep raising their dividend as well (currently yield is like 1.5%) with a payout ratio of 295% (which seems crazy; number according to TDW). It makes me think it's not sustainable, even with the low yield. 

I decided to pass as i) it was expensive and ii) have had at least 3 years negative growth. Perhaps though the negative income for 2014 related to the Shoppers acquisition, it'll interesting to see what their most recent earnings say.


----------



## andrewf (Mar 1, 2010)

You probably should be looking at EBIT performance/free cash flow. Looking at net income can be misleading. The big write off of acquisition-related expenses is skewing the ratios currently.


----------



## doctrine (Sep 30, 2011)

On an adjusted basis, P/E is around 18-19. Expensive, but at least better than EMP.A or MRU. Probably one of the cheaper consumer staples, but it traded well below an adjusted P/E of 15 for years and years; anyone buying now is definitely paying a premium for a company with very low underlying growth and very low margins that can disappear in a heartbeat.


----------



## CalgaryPotato (Mar 7, 2015)

I know the superstores by my house are way less busy than they were 5-10 years ago, I get the feeling Costco and Walmart are taking a lot of their business. I can see them contracting rather than expanding over the next few years.


----------



## Westerncanada (Nov 11, 2013)

Actually. .. they are the fastest groqing grocery chain in canada.. spending over a billion this year on new stores and currently have 50 scheduled to open. 


http://www.theglobeandmail.com/repo...art-of-12-billion-investment/article23354211/



I much prefer their parent company WN.TO (George Weston ltd) as they own loblaws, choice reits and Weston foods making them much more risk adverse to the CPG space.


----------



## supperfly17 (Apr 18, 2012)

Westerncanada said:


> Actually. .. they are the fastest groqing grocery chain in canada.. spending over a billion this year on new stores and currently have 50 scheduled to open.
> 
> 
> http://www.theglobeandmail.com/repo...art-of-12-billion-investment/article23354211/
> ...


Just because they are growing, that doesnt mean its a good thing. Just looking at their debt it has been significantly increasing since 2012. Actually more then doubled in two years. They did spend alot of money on Shoppers, but there is so much competition out there. I feel their grocery stores are quite expensive, and dont personally shop there. Good luck either way.


----------



## Westerncanada (Nov 11, 2013)

Statistically they are the cheapest grocery store next to walmart in all available tracking metrics. 

To each his own but personally id rather grow then the opposite..


----------



## bgc_fan (Apr 5, 2009)

Seems like things are going well for Loblaw. It seems to be benefiting from the Shopper's Drug Mart acquisition.

http://business.financialpost.com/i...-as-strategic-moves-pay-off-dividend-going-up


----------



## Ponderling (Mar 1, 2013)

yes L has been good to my non registered holdings. Bought in nearly 13. It and a few other consumer staples are aimed to be about 10% of my holdings in this account, and recently I sold about 40% of my L holdings to take profits, and buy into other sectors to balance up.


----------



## sags (May 15, 2010)

Loblaws just got caught dressing up outdated food and selling as new food.

Don't know if the revelations will hurt Loblaw sales much. Likely it isn't just Loblaws, but they are the ones in the headlines.


----------



## londoncalling (Sep 17, 2011)

I worked for Loblaw's once upon a time. This comes as no surprise. I don't know about others in this space but this is just one of many tricks. My favorite one was when they would turn the freezers off at night to save on power. Sometimes the ice cream would be soft and customers would complain. The reason given was it just got off the truck and was being put in the cooler.

Cheers


----------



## agent99 (Sep 11, 2013)

We bought Loblaws many years ago at about $71.00. Never sold, watched it plummet and just collected small dividend. Finally it came back! Not making any money, but not losing much either. Expecting it to do quite well if our local stores are any guide. Walmart store is a disaster. Loblaws is much better. And they of course have SDM and No Frills for budget minded. I recently had my eyes tested and a flu hot while shopping at Loblaws! One stop shopping!


----------



## gardner (Feb 13, 2014)

Loblaw is now back at 2015 price levels. I was considering starting a position. I'm curious what holders of L think about its prospects.


----------



## kelaa (Apr 5, 2016)

Groceries is not that lucrative of a business. Even if everything goes their way, it's not like they can rake in the profits. There is upwards wage pressure across many jurisdictions. There is some potential to a Amazon / online ordering disruption of the traditional business, but Loblaw is also trying out this space themselves. Potential drug pricing laws or government intervention (Ontario pharmacare or national pharmacare) can erode the pharmacy business profits. We own a small position mainly for diversification, without the expectation for any significant capital gains.


----------



## kd_trader (Mar 26, 2018)

kelaa said:


> Groceries is not that lucrative of a business. Even if everything goes their way, it's not like they can rake in the profits. There is upwards wage pressure across many jurisdictions. There is some potential to a Amazon / online ordering disruption of the traditional business, but Loblaw is also trying out this space themselves. Potential drug pricing laws or government intervention (Ontario pharmacare or national pharmacare) can erode the pharmacy business profits. We own a small position mainly for diversification, without the expectation for any significant capital gains.


Would them being tied in with Shoppers hold any value. Seeing as Shoppers and the Cannabis market may be closely tied for cannabis distribution. Or will this have zero effect on Loblaws?


----------



## kelaa (Apr 5, 2016)

I think they have publicly said they want to participate in the medical cannabis retail market. They haven't given any intentions of going for recreational retail. Even if the total cannabis market is on the order of 8 - 10 billion dollars, when you consider how much of it will remain underground, will be grown personally, and the rest divided among so many channels, I wouldn't say cannabis retail is a game changer at all.


----------



## gardner (Feb 13, 2014)

In Ontario, the current government has said that they intend to keep the retail cannabis business to themselves. If they cut out private retailers across Ontario, that is a pretty big slice of the national market not accessible to Loblaw at all. I certainly hope that the liberals don't go through with their plans for a govt retailer -- but it is entirely likely. Even the PCs haven't distanced themselves from the policy very enthusiastically. I suspect all the parties are looking at it as a revenue windfall that they have to grab onto and keep the private sector out of -- like the LCBO.


----------



## andrewf (Mar 1, 2010)

From what I've seen, they are only interested in the medical marijuana business, not recreational.


----------



## MatrixDweller (Apr 5, 2018)

One thing interests me with Loblaw but another makes me edgy.

The good: If we are entering a recession grocery businesses tend to do better as people with less money tend to conserve and cut entertainment costs in favour of staying in, bagging a lunch etc.

The bad: I am not sure what's going to happen with the bread price fixing fiasco. Supposedly Loblaw and Weston have immunity but I think they might be blowing smoke to hurt their competition. It could back fire on them.


----------



## andrewf (Mar 1, 2010)

Bigger risks are the transition to ecommerce and disruptive entrants like Amazon and Aldi. Costco are also growing steadily, but their marketshare potential is limited.


----------



## bgc_fan (Apr 5, 2009)

andrewf said:


> Bigger risks are the transition to ecommerce and disruptive entrants like Amazon and Aldi. Costco are also growing steadily, but their marketshare potential is limited.


I don't know about that. There will always be a place for conventional grocery stores. I would say location is a key component. There are limited Costco stores in major cities in comparison to conventional stores. On-line is limited as you can't really buy fresh meat, produce or refrigerated perishables. Buying Whole Foods helps with some distribution issues, but similarly to Costco, there are limited locations. Buying Shoppers actually helps Loblaws with the whole presence issue. There are a lot of drug stores with long hours which works for those emergency or last minute purchase, which is something that Amazon or Costco can't really provide.


----------



## andrewf (Mar 1, 2010)

You can totally buy perishables online. Instacart offers deliveries from Loblaws and soon Costco is urban markets throughout Canada. Grocery Gateway has been doing it for decades.


----------



## bgc_fan (Apr 5, 2009)

andrewf said:


> You can totally buy perishables online. Instacart offers deliveries from Loblaws and soon Costco is urban markets throughout Canada. Grocery Gateway has been doing it for decades.


I think your argument just showed that Loblaws can compete with Amazon.


----------



## andrewf (Mar 1, 2010)

I didn't say they couldn't. Just that there are risks. The bread thing is a sideshow.


----------



## bgc_fan (Apr 5, 2009)

andrewf said:


> I didn't say they couldn't. Just that there are risks. The bread thing is a sideshow.


Sure there are other risks other than the bread issue. I just think that on-line concerns are overblown. People will point to Sears and Toys 'R Us as examples of how Amazon and on-line shopping kills businesses, but in reality they were mismanaged companies whose shareholders decided to suck all the equity from the companies so they couldn't adapt. As it was, Toys 'R Us actually had the same revenue before and after Amazon. Okay, so there was not much growth, but what sunk the company was the debt acquired during its take-over.

What the bricks and mortar have for advantage is their distribution chain, it is just a question of leveraging it. I always found it peculiar that during the original dotcom boom, grocery stores didn't offer internet orders with home delivery to compete with those grocery delivery services. But, they seem to have evolved with click and pick up, and outsourcing the risks of internet business with Instacart, but even then, there is some limited coverage. And if you don't think that having a distribution network is important, think again on why Amazon bought Whole Foods.


----------



## OnlyMyOpinion (Sep 1, 2013)

I own some L. It's been the only laggard in my portfolio for several years now - modest dividend, limited/no dividend and share value growth.
I see it rated as a buy in TDDI right now. Those are usually based on a 12mo outlook.
I've overlooked it to date because its such a small part (0.5%) of my portfolio. I wouldn't add to it.


----------



## dubmac (Jan 9, 2011)

L-T is down - and dropping from it's high's over the past 6 months - it's approaching a 2 yr low.
I've been looking at this sector (grocery stores etc) for some diversity in holdings.
Does anyone know why it'd dropping so much - it surprises me that it is dropping given the wider trends.


----------



## fstamand (Mar 24, 2015)

Good time to buy.


----------



## dubmac (Jan 9, 2011)

fstamand said:


> Good time to buy.


perhaps...but what is going on to cause the trend?
Why is it dropping? Competition? increased costs, regulation in the pharmaceutical biz (it owns shopper's drug mart), labour costs? etc. I looked at Morningstar & it looks like all these variables are dragging on this one. Not sure where it will level off.


----------



## newfoundlander61 (Feb 6, 2011)

I originally purchased Loblaws *@$67.26* in Feb 2020 for some stability and a somewhat lower risk holding producing dividend income and the chance of increased share price over time. I never imagined a super market stock would go up so much as it had with todays price around *$103.99, *Total Return of *31.31%*.


----------



## KaeJS (Sep 28, 2010)

newfoundlander61 said:


> I originally purchased Loblaws *@$67.26* in Feb 2020 for some stability and a somewhat lower risk holding producing dividend income and the chance of increased share price over time. I never imagined a super market stock would go up so much as it had with todays price around *$103.99, *Total Return of *31.31%*.


I did the exact same as you, but one year later.
My last purchase was February 22, 2021*, with an ACB of 63.68...

Never thought I'd see $100 within the next 5 years, let alone in the same year... I am up 61.69% not including dividends... Crazy.


----------



## newfoundlander61 (Feb 6, 2011)

Its up so much it may never go back to our purchase prices which is just fine by me.


----------



## londoncalling (Sep 17, 2011)

Well done. I had this on my shortlist in the spring of 2021 around the same time as @KaeJS purchase but passed as I thought the stock was fair valued. Vaccinations were starting to roll out and that would result in more restaurant spending and less at grocers over the summer. Was hoping to get in at a better price. Not sure when that will be. I can take some consolation in the fact that I own Choice Property which owns the real estate of Loblaw's properties. I hear a lot of talk about how Amazon and Walmart are going to displace the grocers but apparently the market doesn't see that as an immediate threat.


----------



## KaeJS (Sep 28, 2010)

londoncalling said:


> Well done. I had this on my shortlist in the spring of 2021 around the same time as @KaeJS purchase but passed as I thought the stock was fair valued. Vaccinations were starting to roll out and that would result in more restaurant spending and less at grocers over the summer. Was hoping to get in at a better price. Not sure when that will be. I can take some consolation in the fact that I own Choice Property which owns the real estate of Loblaw's properties. I hear a lot of talk about how Amazon and Walmart are going to displace the grocers but apparently the market doesn't see that as an immediate threat.


I don't think Amazon and Walmart will take over grocers.

I also own CHP.UN =)


----------



## newfoundlander61 (Feb 6, 2011)

Loblaws stock has moved up alot since I took a full position in it @$67.26, never thought it would do much except trade in a narrow range and be somewhat a stable holding in the portfolio.


----------



## MrMatt (Dec 21, 2011)

KaeJS said:


> I don't think Amazon and Walmart will take over grocers.


I buy 70% of my groceries from Walmart, 15% from Costco and 5% specialty stuff from Amazon.
The last 10% or so is last minute pickups from the closest store (I think it's owned by Metro).

I think Loblaws needs to work at it to fend off Walmart.
Walmart has better pickup than Loblaws, so I use it.


----------



## milhouse (Nov 16, 2016)

An article in the G&M made me think of this thread and how Loblaws has made some savvy acquisitions and isn't just about groceries. 
Loblaws is buying a health clinic group called Lifemark Health Group which has over 300 clinics across the country. Combine that with Shoppers Drug Mart, QHR which does electronic medical records, investment in Maple Corp a telemedicine provider, and more and it seems like they're making a big push in health. Should be interesting how they integrate these health solutions. And it's kind of similar to what Telus is doing with their health division.
Grocery specific, their T&T acquistion was pretty savvy to help capture a large chunk of the asian grocery market which I don't think Walmart or any of the other grocers will be able to match.


----------



## bgc_fan (Apr 5, 2009)

milhouse said:


> An article in the G&M made me think of this thread and how Loblaws has made some savvy acquisitions and isn't just about groceries.
> Loblaws is buying a health clinic group called Lifemark Health Group which has over 300 clinics across the country. Combine that with Shoppers Drug Mart, QHR which does electronic medical records, investment in Maple Corp a telemedicine provider, and more and it seems like they're making a big push in health. Should be interesting how they integrate these health solutions. And it's kind of similar to what Telus is doing with their health division.
> Grocery specific, their T&T acquistion was pretty savvy to help capture a large chunk of the asian grocery market which I don't think Walmart or any of the other grocers will be able to match.


When Loblaws bought Shoppers they were already transitioning into the "health/wellness" market. Some stores already had Goodlife gyms in them, and I remember some stores hosted cooking classes. This latest acquisition is just adding to that portfolio. 

Here's an old 2013 article about this: Making supermarkets the hub of health care
Then there's a more recent 2020 article about their PC health app: Loblaw Aims to Transform Canadian Health Care

Makes sense if they are trying to differentiate themselves from Walmart or Metro or Sobey's.


----------

