# Shoppers Drug Mart (SC.TO)



## CanadianCapitalist (Mar 31, 2009)

Shoppers is down close to 10% today on news that the Govt. of Ontario announced drug reforms. I don't follow SC but it is a popular holding and would be interested in members take on the news.


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## Steve19 (Jun 29, 2009)

This is a topic I remember reading a while back that made investors worry about the long term horizon of SC. I'm also looking forward to hearing feedback.


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## Soils4Peace (Mar 14, 2010)

Management said they were not worried about the long term. Canadians won't suddenly become healthier in connection with this news so I am not worried either. This could be a good buying opportunity - a staple that is down 10%.


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## Brad911 (Apr 19, 2009)

I wrote about this development back in Sept 09; so the news shouldn't have been that big of an impact to investors unless they didn't really understand the political risk SC was exposed to. I added to my position this morning since the obvious sign to me was over-reaction to a development that was anticipated and something SC was heavily lobbying the government on.

Long-term I believe the company continues to have solid fundamentals.


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## CanadianCapitalist (Mar 31, 2009)

Thanks Brad. You seem to have a better handle on SC than many of the analysts who said they are shocked with the Ontario decision. I don't follow SC but I'm intrigued after this price drop.


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## boycapitalist (Feb 11, 2010)

Do you think it will start to climb back up in the very near future. Would getting in say tomorrow morning be a good idea?


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## financeguru (Jan 18, 2010)

Shoppers Drug Mart is a solid company with a solid and growing revenue stream and a dominant position in Ontario. The stock is good for a defensive portfolio and would be a great pick if i were bearish on the stock market going forward. That said , i think the consumer staples sector is going to lag other sectors in present bull market conditions. I would only get in if it fell another 5-8% where evaluations would justify the investment.


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## Brad911 (Apr 19, 2009)

I think if you got in under $40 like today then it's a good entry position. I'll gladly take 5-8% in a yearly return for a stock such as this. It's only one component of a diversified portfolio and has a very strong management team and well positioned locations.

CC: I wasn't surprised by the analyst views today. I was contacted by a few after I wrote that post in September and when they told me I was being unrealistic in my assessment I asked myself why any of them would have bothered writing me about it in the first place.

The decision today will have a financial impact on the company in some form, but I'm sure they'll increase margins in other aspects of their business and organize their pharmacies to seek alternative revenue sources. Long-term I'm optimistic about the company; but that said wouldn't commit more than 5% of my portfolio to it just like I wouldn't for any other company.


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## FrugalTrader (Oct 13, 2008)

Do you think the new pharamacy rules will affect SC's ability to increase dividends in the future?


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## humble_pie (Jun 7, 2009)

dividend is already modest. I'd worry more about its being cut.

stk risks another whupping when new legislation passes in quebec, so anybody who feels driven to own pharmacy could probably benefit from waiting.

shoppers strong retail division will likely be able to source revenue from a broad base, not just prescr sales.

not bad for a defensive stock, but i'll pass.


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## Sampson (Apr 3, 2009)

CanadianCapitalist said:


> Thanks Brad. You seem to have a better handle on SC than many of the analysts who said they are shocked with the Ontario decision. I don't follow SC but I'm intrigued after this price drop.


I also think Brad's take on it is very good. The stock price has not moved despite increased revenue growth (very strong growth at that), reflecting an expectation of this move. 

One could argue that there will be a decrease in what people are willing to pay for SC due to the reforms, but I personally don't think so. Much of Shoppers' growth has been from other operations - specifically their aggressive move to sell higher end cosmetics.

I don't think this will affect Shopper's growth in the long-term, and the dividend payout is so low at this point, I doubt there will be a cut.


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## humble_pie (Jun 7, 2009)

it's true that retail will help support shoppers through the short term upheaval.

i see a lot of discount laundry soap, dog food, garbage bags & light bulbs on sale in the back aisles of my neighbourhood shoppers. I haven't heard how the new cosmetics boutiques are doing & i had been temporarily believing that no standalone figs have yet been released ... 

if you're looking to buy high-end ladies' accoutrements why not a pure play like lululemon.


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> dividend is already modest. I'd worry more about its being cut.
> 
> stk risks another whupping when new legislation passes in quebec, so anybody who feels driven to own pharmacy could probably benefit from waiting.
> 
> ...


It's not a screaming buy. The risk is now baked into the price but I don't see any huge margin of safety here. If it falls lower, it might be worth another look...


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## humble_pie (Jun 7, 2009)

the interesting thing is that jean coutu is holding up well on the day, even though quebec is talked to be next to pass the same legislation ...


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## Brad911 (Apr 19, 2009)

FrugalTrader said:


> Do you think the new pharamacy rules will affect SC's ability to increase dividends in the future?


I definitely think so. In the article I discussed that the lack of any dividend increase (at that time) and the most recent one (which wasn't on par with their previous dividend growth history) was directly associated with the anticipation of this development from the Ontario government (and likely others). The cost cutting initiatives the company announced again shouldn't be "new news" to investors if they'd studied the company in detail; they've been focusing on cost controls for over 24 months now.

I think the company will do fine in the long-term but will be volatile as investors suddenly "wake up" to these developments. Why I advocate investors understand as many factors that affect these stocks as they can is precisely for these reasons. It should have come as no surprise in this environment when government revenues are squeezed and cost cutting/new revenues (such as the HST) are unveiled that the piece of the pie that corporations receive would be accessed for government use.


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## bigcake (Apr 3, 2009)

More than 2,300 neighbourhood stores closed down last year, 

About 75 per cent of the closures last year were in Ontario and Quebec

http://www.cbc.ca/consumer/story/2010/04/06/con-convenience-stores.html

It's a tough time for small retail now.


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## Leading Edge Boomer (Apr 5, 2009)

In the neighborhood I live there is a SDM and two small independent drug stores, with small front store space.This gov't edict will be very hard on the independents who do not have anywhere near the volume of OTC sales that the Shoppers does. They will not be able to make up for the lost revenue on generic drug sales through increased OTC sales. Some will go under and SDM will pick up their prescription business. 

So going forward Shoppers will land on their feet at the expense of the smaller independents.


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## Berubeland (Sep 6, 2009)

I have noticed a trend with Shopper's Drug Mart. In the past they were much more medical device/prescription oriented. For the last few years in the new stores they have dramatically increased the floor space devoted to perfumes and make-up and convenience items. As you go in the store the first person you encounter is the make up counter attendant. You then must walk through all the goodies to get to the prescription desk at the back. 

As well for those of you that follow sales they frequently have very good promotions. They leverage their brand with other brands as well. One promotion I remember is them giving a 10$ gift card for subway if you buy $50 worth of stuff. 

All in all I like this retailer. They are also very good for gifts. At christmas time they always roll out nice make up kits suitable for women. I even bought a perfume sampler kit there for my MIL this Christmas.


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## Boondock (Jun 1, 2009)

http://www.theglobeandmail.com/repo...ove-to-cut-prescription-costs/article1527045/

I wasn't clear on what the reforms were, and here was an article that seemed to explain the changes fairly well.


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## CanadianCapitalist (Mar 31, 2009)

Shoppers picks a fight that it will not win 



> You can't blame Jurgen Schreiber for being upset with the Ontario government. But as a shareholder, you should be horrified about the way he's handling it.
> 
> Smart people never pick a fight with powerful politicians, and in provincial politics they don't come much more powerful than the minister of health. You can't win that scrap at the best of times and this is far from the best of times.


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## andrewf (Mar 1, 2010)

I don't understand SDM strategy here. Some of the big boxes have said that they will continue to provide the same service level despite these changes. If SDM decreases its service level, it will lose market share to these GM and grocery big box pharmacies. SDM has been stepping on their toes by stealing customer traffic with loss-leader grocery items. I don't think they'd hesitate to return the favour.


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## FrugalTrader (Oct 13, 2008)

As well, if this legislation becomes popular with other provinces, it will be devastating to SDM earnings.


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## Addy (Mar 12, 2010)

Judging by the comments in this thread, I'm assuming by far the majority of earnings for SDM are prescription drugs?


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## Soils4Peace (Mar 14, 2010)

Addy said:


> Judging by the comments in this thread, I'm assuming by far the majority of earnings for SDM are prescription drugs?


A little less than 50% of sales

Snippets from 2009 MD&A:
_Sales in 2009 were $9.986 billion
Prescription sales were $4.824 billion
... generic molecules represented 53.0% of prescriptions dispensed
Front store sales were $5.162 billion_

So about half of a half of their sales in Ontario will be cut in half as a result of this legislation. The Ontario stores stand to lose 1/8 of their sales, and we may see the same play out in other provinces.


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## andrewf (Mar 1, 2010)

Note difference between sales and profit. I suspect this was more profitable than avg.


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## Soils4Peace (Mar 14, 2010)

I couldn't find and earnings breakdown of front vs back, but I did find out that a little under half of the stores are in Ontario. Relative to population, they are big in Ontario, little in Quebec.

Looking at the store near me it is hard to tell how they are doing at the front. In one part of the store they have some _really really_ cheap stuff; some of it damaged, like it fell off a truck. And there is a make-up section to which I have paid little attention. The back is always reasonably busy.

Remember the front is mostly unskilled, the back is mostly skilled.


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## groceryalerts (May 5, 2009)

CanadianCapitalist said:


> Shoppers is down close to 10% today on news that the Govt. of Ontario announced drug reforms. I don't follow SC but it is a popular holding and would be interested in members take on the news.


I always heard reviews of this stock that it was a good long term buy.

In the SWOT analysis no one every mentioned government regulations!


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## Addy (Mar 12, 2010)

I'm still confused where the huge losses will be - is it because SDM will no longer be able to sell brand name drugs for more than generic? If this is the case, any insurance company I've dealt with has always paid the generic price unless there's a good excuse from the doc saying why you need the brand name. I must be missing something here... I tried reading up on it but still don't really understand.


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## andrewf (Mar 1, 2010)

Addy: Government set the price for generics as a fixed % of branded counterpart. This price was frequently too high. Generic manufacturers gave 'inducements' called professional allowances (read: kickbacks) for stocking their drugs. Government has now cut the fixed % price for generics to a lower price and prohibited these kick backs. This all comes out of the bottom line for SDM.


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## humble_pie (Jun 7, 2009)

morning tekkies & chartists

are we seeing any signs of an interim bottom

??


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## CanadianCapitalist (Mar 31, 2009)

Shoppers is trading around $35 now. Analysts (the same guys who were shocked by Ontario decision to change the rule of the generic drugs game and cut the rating to hold after the stock dropped below $40. Thanks guys) are expecting $2.80 in earnings this year and $2.90 next. I'm not interested in where SC will find a bottom in the near term.

What I'm interested is opinions on what price you think SC will be an absolute bargain at and why?

I personally don't have an opinion on (or a stake in) SC but a relatively well-run company like SC could be an interesting investment at the right price.


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## humble_pie (Jun 7, 2009)

CC for an impartial observer you are breathing hard ...

charts have been looking good recently but chart-reading is subjective.

i'd be a seller of puts. Would be. Maybe. If.

dividend not interesting enuf to buy stk outright in a buy/write.


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## financeguru (Jan 18, 2010)

Picking a bottom on this stock will be hard to do....i would dollar average in if i were to invest. I had earlier suggested that it needed to fall 5-8% further, which it has done - so i could possibly see myself putting half my total possible exposure at this point.

I'm kicking myself for not shorting this stock, everyone knew what was happening with Shoppers DrugMart.


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## humble_pie (Jun 7, 2009)

mille félicitations on the dendreon. But how do you see it doubling ?
wrong thread, i know. I'll get over there presently.

meanwhile sympathies to mrs kelly a shoppers' insider who in recent months bought 177 shares at prices ranging north of 43.56 and took delivery of 26,291 options convertible @ 44.09 ouch.

the td is emoting that the gop - as in grand old pharmacy - may suffer "death by a dozen cuts," meaning that the ontario situation is still evolving, shoppers is still working on its adaptation plans going forward, will not be happy if most other provinces follow suit. All this could produce a share price "drifting sideways or lower for much of 2010" says the big green.

the gop drifting sideways or lower?
earnings prediction 2.80/sh?
a candidate for option strategies.


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## tojo (Apr 20, 2009)

The company recently lowered it's growth outlook. It always had a low yield, and despite the fact its at a multi-year low (stock price), still carries a crappy dividend. Low yield, no-growth = not touching this one....


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## andrewf (Mar 1, 2010)

As I predicted:

*Drug market battle looms*

_
Loblaw Cos. Ltd. (L-T38.150.350.93%) is already planning a greater push with its in-store pharmacies as drug store chains pull back, and analysts say other general retailers could follow suit.

...

“We see it as a big opportunity now for us to drive our drugstore business,” Allan Leighton, president of Loblaw, told a conference call. “There’s a huge amount of consumers out there who are going to be looking for improving service, and that’s what we intend to do.”

...

To offset the anticipated financial pain, Shoppers has already started chopping opening hours at its stores in London, Ont., where the provincial health minister’s riding is located. It’s planning staff and service cuts at its stores in Ontario.

“If you’re Loblaw or Costco, this is kind of a golden opportunity to perhaps grab market share that doesn’t come around very often,” said Ed Strapagiel, executive vice-president at Kubas Consultants. “It’s relatively difficult to move prescription drug customers from one store to another ... People who buy prescription drugs don’t tend to shop around.”

Mr. Strapagiel said that Shoppers may have to reconsider its plans in light of the intentions of Loblaw and others.

_


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## humble_pie (Jun 7, 2009)

did y'all see that ?
CC nailed the low.
30 april 2010.
to the penny.
to the hour.


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## CanadianCapitalist (Mar 31, 2009)

Pure luck, I assure you hum...

The G&M reported over the weekend that the Ontario Govt. might offer some concessions in the original decision in favour of the industry. Maybe, that's why the stock was up quite a bit on Friday?


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## philthygeezer (Aug 7, 2011)

*Have things changed for SC?*

How have the regulations set out for SC lately? Shoppers continues to make a very good return on assets despite closing all those stores.

So what's the deal? Worth the money?


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## andrewf (Mar 1, 2010)

Things have changed now... 


Loblaw to buy Shoppers Drug Mart for $12.4B


Congrats to those who were holding SC. 26% premium.


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## Sampson (Apr 3, 2009)

andrewf said:


> Congrats to those who were holding SC. 26% premium.


woo-hoo, my first buyout from the receiving side, fingers crossed now for BB.


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## andrewf (Mar 1, 2010)

Unusually, L climbed too. Usually the acquirer falls on acquisition news. I guess L has a higher P/E than SC--maybe that explains it?


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## james4beach (Nov 15, 2012)

*Loblaws buying Shoppers Drug Mart*

Wow... I am surprised by this. Shoppers alone is huge, I would have never guessed that another Canadian company would acquire it.
http://www.cbc.ca/news/business/story/2013/07/15/loblaws-shoppers.html

Personally Loblaws stores (Super store etc) and Shoppers Drug Mart are my two primary places for day to day shopping, of just about everything routine. I would have preferred that they stay separate, for better competition.

Also, congrats to SC shareholders! And wow what a picture perfect technical analysis example. The 3 year SC chart was beautiful:

- repeatedly higher lows and higher highs
- price is nearly always above the 200 day moving average
- 200 day average acting as a floor/support
- 50 day average nearly always above the 200 day average


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## Toronto.gal (Jan 8, 2010)

Congrats to all the L/SC shareholders!

Next big M&A?


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## CuriousReader (Apr 3, 2009)

dotnet_nerd said:


> I too was pleasantly surprised to see L pop this morning.
> 
> "Sell the news" as they say, I dumped it at 51.75 and will buy it back one day after the dust settles.


What's the best strategy here?
Cash out now and buy in later?


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## Addy (Mar 12, 2010)

CuriousReader said:


> What's the best strategy here?
> Cash out now and buy in later?


I'm thinking of doing this, not sure if it's the right decision - hopefully others who know better will answer your question.


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## FrugalTrader (Oct 13, 2008)

Toronto.gal said:


> Congrats to all the L/SC shareholders!
> 
> Next big M&A?


Don't forget WN.TO owners! Come to think of it, George Weston Ltd (WN) has become quite the consumer company with significant/majority ownership of Weston Foods (bread, frozen foods, baked goods etc), Loblaws, Choice Properties REIT, and now Shoppers Drug Mart!


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## doctrine (Sep 30, 2011)

Almost forgotten and written off for years due to competition from Wal-mart and now Target, both Loblaws and Empire Corporation have big gains in the last year. 

It's almost better to describe the Shopper's acquisition as a merger. It's huge, and even with a share purchase, the Weston's interest in Loblaws is dropping from around 63% to 46%.


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## Sampson (Apr 3, 2009)

Personally I think it comes a little late.

The Canadian retailers (food and basic consumer goods) have real reason to fear the Walmarts and the Targets of the US for the simple reason of integration. The American retailers have it and their mixed source revenues prove it. How long has Loblaws been trying to get into the home goods market and what strides have they made, none. This acquisition puts them into the space, but will they be willing to keep some 'redundancy' in the management, and keep individuals who helped make Shoppers such a good business.

Time will tell. I think I will sell out of my SC here pretty soon.


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## My Own Advisor (Sep 24, 2012)

Next M&A?

Somebody taking over TA (TransAlta)


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## andrewf (Mar 1, 2010)

Sampson said:


> Personally I think it comes a little late.
> 
> The Canadian retailers (food and basic consumer goods) have real reason to fear the Walmarts and the Targets of the US for the simple reason of integration. The American retailers have it and their mixed source revenues prove it. How long has Loblaws been trying to get into the home goods market and what strides have they made, none. This acquisition puts them into the space, but will they be willing to keep some 'redundancy' in the management, and keep individuals who helped make Shoppers such a good business.
> 
> Time will tell. I think I will sell out of my SC here pretty soon.


No progress in general merchandise? Not sure what to make of that one...


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## Islenska (May 4, 2011)

So being an insider (part-time relief work for Shopper's) I dumped the stock making a tiny profit a year ago because generic rule change, gov't cutbacks, etc....etc..

It pays to be in the know!

But good for those that hung in, things come out of left field.............


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## sags (May 15, 2010)

We live a couple of blocks from a main road that has all of the retailers sitting right beside each other........or across the road.

The Loblaw superstore is one block from a new Shoppers, with another Shoppers just down the road, and it is beside a brand new Freshco store, with a new Target just up the road, and a Walmart superstore scheduled to be built down the road from the Loblaws superstore.

Way too many stores for an area with a declining school attendance rate which is closing schools and a lot of seniors living in the area.

Not surprising............The busiest places..............Food Basics, No Frills, and Giant Tiger............lol.

Add in the deli stores like Remark, Angelos, and Clancy Meats, and I honestly don't know how they earn enough to keep the lights on in some of these retailers. Drive 10 minutes away to another main road...............and there many of the same stores are again.

Banks too............TD Bank has 3 branches and a kiosk along a short stretch of road.

Everytime somebody builds something somewhere...............another bank branch goes in.

Crazy...............


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## CuriousReader (Apr 3, 2009)

Sampson said:


> Time will tell. I think I will sell out of my SC here pretty soon.


What are you waiting for?


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## My Own Advisor (Sep 24, 2012)

@sags,

Boomers love to shop. They are banking on that.


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## Eclectic12 (Oct 20, 2010)

Sampson said:


> Personally I think it comes a little late.
> 
> The Canadian retailers (food and basic consumer goods) have real reason to fear the Walmarts and the Targets of the US for the simple reason of integration. The American retailers have it and their mixed source revenues prove it.
> 
> How long has Loblaws been trying to get into the home goods market and what strides have they made, none ...


Really?

I look at the big box Loblaws, SuperCentre, Sobey's around town and see busy parking lots with lots of BBQs, seasonal stuff, garden stuff, small appliances etc. being purchased on a regular basis. Then too, the Loblaws/SuperCentre gas pumps are busy a lot of the time when I drive by. I don't recall Walmart selling gas and suspect Target won't either. 

That's hardly "no success".


If they have so much to fear - why did Sam's Club get shutdown in Canada?


Walmart's been in Canada for nineteen years already so I suspect the Canadian retailers are already familiar with their competition (also likely why so many big box Loblaws, Sobey's, Canadian Tire etc. have been built).

Also - what's Target going to bring to the party that Walmart, Sam's Club and Costco didn't?


Cheers

*P.S.*

Are Walmart and Target planning on offering banking anytime soon?
If not, that's another area that Loblaws makes money.


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## andrewf (Mar 1, 2010)

Walmart has a credit card... but they have been slow to get a bank up and running. PC Financial is head and shoulders ahead of the other retailers in terms of in-store banking. Taking on Shoppers (and an extra thousand locations) will undoubtedly make that position even stronger.


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## HaroldCrump (Jun 10, 2009)

Target will have a credit card as well.
Their credit card (at least in the US) gives you an instant discount at the checkout counter, instead of "rewards" you can claim later.
If someone plans to shop at Target regularly, it makes sense to get their CC, otherwise you will be subsidizing those that do.


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## andrewf (Mar 1, 2010)

I still haven't made it to a Target store in Canada. What I hear from those that have is that the store is pretty underwhelming.


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## Echo (Apr 1, 2011)

andrewf said:


> Walmart has a credit card... but they have been slow to get a bank up and running. PC Financial is head and shoulders ahead of the other retailers in terms of in-store banking. Taking on Shoppers (and an extra thousand locations) will undoubtedly make that position even stronger.


I wonder what this means for the Shoppers-RBC relationship that started last year? - http://www.rewardscardscanada.com/new-rbc-shoppers-optimum-banking-account/


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## Sampson (Apr 3, 2009)

I knew I would be taken to task...

General merchandise accounts for 5% (at best 20%) of store sales (depending on the type of store, supercentre vs. drugstore etc), this is primarily a grocer after all. For every barbecue that is sold, aisles of towers, coffee grinders, pillows, pots and pans go unsold. Unlike the distribution model for food and perishables they have mastered, product remains on shelves for much longer and often (read ever month and season) prices are SLASHED in an already discounted segment (this must be to compete against a Walmart that has even better, let's call it World's best product distribution model).

While the non-food portion of the store has the most room for growth, and obviously has grown quickest within it's business (since food margins are already thin as bones) - you could argue they have made in-roads, but not high margin, extremely profitable in-roads.

The Shoppers acquisition certainly bolsters, and complements the business overall, but if Loblaws is to continue stellar profit growth, they'll have to take their Shoppers model of high margin cosmetics etc into the existing stores. I don't see this happening. With 'competing' stores, no layoffs planned, how will the integration and profit squeeze happen? I don't care so much about the Finances division, good profit margins (10-15%), but less that 5% of revenues, insignificant at this stage, despite being in the game for so long - but certainly a better story than the general merchandise, where they have spent about 2 decades getting this up and running.

They will always be a grocer, and won't have problems getting people into the store, but in a model of one-stop shopping where they compete against a cost-cutting, lowest price approach, difficult. It could all work well and perhaps they compete effectively against the others, but this is too uncertain of an investment for me.


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## Eclectic12 (Oct 20, 2010)

andrewf said:


> Walmart has a credit card... but they have been slow to get a bank up and running.
> 
> PC Financial is head and shoulders ahead of the other retailers in terms of in-store banking. Taking on Shoppers (and an extra thousand locations) will undoubtedly make that position even stronger.


Does Walmart have any plans to setup a bank?

I am only aware of Safeway in the US, sub-contracting with CIBC (i.e. same setup as PCF) to provide a bank account. Safeway pulled the plug after a few years.

So the Walmart CC may be more of a standard thing (i.e. like the Sears, Hudsons Bay, Amazon, Target, Gap, Old Navy etc.) with no plans to setup a bank.


Cheers


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## andrewf (Mar 1, 2010)

Samson, I think you are underestimating the amount of GM/non-food they sell. And the margins they sell it at, especially things like apparel and seasonal merchandise.

If GM accounts for 20% of sales in a store, there's a good chance it accounts for 50% of gross profit. $1 in GM sales can contribute the same gross profit as $3+ of food sales. The reason why retailers like Walmart get into groceries is not because it is especially profitable. It's because it drives traffic to the GM.


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## Eclectic12 (Oct 20, 2010)

Sampson said:


> I knew I would be taken to task...
> 
> General merchandise accounts for 5% (at best 20%) of store sales (depending on the type of store, supercentre vs. drugstore etc), this is primarily a grocer after all.
> 
> For every barbecue that is sold, aisles of towers, coffee grinders, pillows, pots and pans go unsold. Unlike the distribution model for food and perishables they have mastered, product remains on shelves for much longer and often (read ever month and season) prices are SLASHED in an already discounted segment (this must be to compete against a Walmart that has even better, let's call it World's best product distribution model).


Is the "clearout" price a non-profitable price?

If the shirt Loblaws is selling for $14 cost under $6 and is "cleared out" for $10, there's still profit there.
http://www2.macleans.ca/2013/05/01/what-does-that-14-shirt-really-cost/


With a good chunk of the BBQ's being manufactured in China, then shipped to Canada - I suspect similar is happening there as well.




Sampson said:


> While the non-food portion of the store has the most room for growth, and obviously has grown quickest within it's business (since food margins are already thin as bones) - you could argue they have made in-roads, but not high margin, extremely profitable in-roads.


 ... it makes you wonder why Walmart is bothering with the expansion of their grocery footprint.




Sampson said:


> They will always be a grocer, and won't have problems getting people into the store, but in a model of one-stop shopping where they compete against a cost-cutting, lowest price approach, difficult. It could all work well and perhaps they compete effectively against the others, but this is too uncertain of an investment for me.


*shrug* - the claim when Walmart came to Canada was that because of the cost-cutting, lowest price approach, all but a few would be out of business in five to ten years yet they've survived a decade beyond it. Add to that the smaller regional players like Sobey's as Metro expanding and the shutdown of Sam's Club, so I suspect that the future is not as bleak as you are thinking.


Cheers


Cheers


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## MRT (Apr 8, 2013)

Never mind the revenue side, what about the cost reductions and leveraging that could be realized in terms of benefits, pensions, real estate, HR, payroll, etc. even as they remain separately-run companies?

Even if there is ZERO benefit in terms of revenues (and I doubt that will be the case), couldn't the positives on the cost side alone could be significant?


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## Echo (Apr 1, 2011)

Eclectic12 said:


> Does Walmart have any plans to setup a bank?


I think you just need to apply for a bank license from OSFI in order to issue a credit card. Rogers just did this and plans to self-issue a c/c, but I doubt we'll see a Rogers bank.


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## andrewf (Mar 1, 2010)

I think a big source of savings will be in Shoppers supplying drugs to Loblaws. There's likely a lot of room for supply chain efficiencies and control brand sourcing


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## Sampson (Apr 3, 2009)

I'll get to numbers when I have a chance, but come on, rhetoric or anecdote is not going to show us anything.

The acquisition is good since Shopper's makes most of their money in a different way, and buying a profitable business even at the valuations they paid is not a bad idea, I'll leave it at that.

At andrewf, 20% isn't from their Supercentres, the estimates I've seen there are the lower end (i.e. 5%). Of course this makes all the difference. Occupying 20% of the store if less than 20% of in-store revenues or 20% of in-store profit is generated there is simply IMHO a mistake.


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## Sampson (Apr 3, 2009)

andrewf said:


> I think a big source of savings will be in Shoppers supplying drugs to Loblaws. There's likely a lot of room for supply chain efficiencies and control brand sourcing


I was a little worried after Ontario announced the changes to drug benefit legislation, but this just wipes all that under the rug.


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## andrewf (Mar 1, 2010)

Sampson said:


> I'll get to numbers when I have a chance, but come on, rhetoric or anecdote is not going to show us anything.
> 
> The acquisition is good since Shopper's makes most of their money in a different way, and buying a profitable business even at the valuations they paid is not a bad idea, I'll leave it at that.
> 
> At andrewf, 20% isn't from their Supercentres, the estimates I've seen there are the lower end (i.e. 5%). Of course this makes all the difference. Occupying 20% of the store if less than 20% of in-store revenues or 20% of in-store profit is generated there is simply IMHO a mistake.


Do you have any evidence to support your assertions? From what I've gathered, I don't think what you're saying accurately describes the general merchandise situation at L. It seems to me that you're just speculating.


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## Sampson (Apr 3, 2009)

andrewf said:


> DIt seems to me that you're just speculating.


We all are at this point of the discussion. No one's assertions have been supported.


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## Eclectic12 (Oct 20, 2010)

Sampson said:


> We all are at this point of the discussion. No one's assertions have been supported.


Not quite sure this is true considering I posted a link to demonstrate that the "clearout" price does not necessarily mean there's no profit involved.

To add to that, you've stated that


> ... They [Loblaws ] will always be a grocer ...


 that will have trouble competing. Yet according to wiki:



> In 2006, Loblaw and Canadian fashion designer Joe Mimran teamed up to launch Joe Fresh. Promoted as chic but highly affordable clothing, the new line sold in supermarket and superstore aisles. *Joe Fresh sales soon exceeded the company's own projections* and Loblaw began expanding into children's wear, shoes, lingerie, beauty and bath products. In 2010, the first standalone store opened in Vancouver and Loblaw announced plans for 20 outlets across Canada. More recently, Loblaw unveiled a number of Joe Fresh permanent and pop-up stores in New York City and surrounding region ...


If they are now running a series of standalone clothing stores in two countries and have a chain of 34 Alberta liquor stores - that does not sound like only "a grocer" that is quaking in it's boots about American competition coming to Canada. Carefully watching/matching the competition, sure but not down for the count.

Never mind the bank, the leased space to gyms, cooking schools, ownership of real estate so that where their plans didn't pan out, there were able to lease the space to other companies, etc.

https://en.wikipedia.org/wiki/Loblaw_Companies
https://en.wikipedia.org/wiki/Real_Canadian_Liquorstore


Here's another take on the deal.
http://business.financialpost.com/2...lion-shoppers-deal-a-slam-dunk-for-investors/

Cheers


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## andrewf (Mar 1, 2010)

They also sell Joe through JC Penny.


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## Eclectic12 (Oct 20, 2010)

andrewf said:


> They also sell Joe through JC Penny.


Not bad for product that supposedly stays on the shelves too long and is cleared out after slashing already discounted prices ... :biggrin:


As for direct numerical evidence - unless someone has research reports that delve into this stuff, it looks like direct evidence is not easily available. The annual report as well as the financial statements are distinguishing between "Retail" (i.e. groceries and non-groceries") and "Financial Services" (i.e. bank / CC). Even for that reporting, comparisons aren't easy.


Cheers


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## andrewf (Mar 1, 2010)

Loblaws/Weston, being majority controlled by a family, holds its cards close to its chest.


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## sags (May 15, 2010)

It's too bad we don't have a retail analyst as colorful and interesting as Howard Davidowitz in Canada to cover the retail sector.

The guy is an expert, funny and minces no words.

Here is a recent interview discussing JC Penny. A web search shows he recently had an audio interview about the looming "critical collapse" of Sears.

Interesting what he says about customers and coupons............

http://www.youtube.com/watch?v=xR_9_0c3WRo


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## andrewf (Mar 1, 2010)

^ He's definitely animated. I do agree with him though about betting the company. What do you think he'd say about this deal?


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## doctrine (Sep 30, 2011)

andrewf said:


> Loblaws/Weston, being majority controlled by a family, holds its cards close to its chest.


After the merger, they will be down to a 46% stake (from ~60%+). This is still effectively a majority but not mathematically anymore.


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