Opinions
Christine Poole
Loblaw Companies Ltd
L-T
TOP PICK
Sep 09, 2015
Stock price when the opinion was issued
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Has held in remarkably well; considered a defensive name when markets turn volatile with risk of economic slowdown. Traffic gravitated to its discount banners. Pharmacists' roles have expanded at SDM, which also helps drive traffic. Plans to open more pharmacy-based clinics across Canada. Executing very well. Not inexpensive at 22x forward PE, wait for a pullback.
Depends where you own it. If in a taxable account and you have to pay capital gains, he'd say no. If it's in a registered account, it becomes a very good question, and he'd say yes.
It was on its back forever, and look at it now. There's a lesson for all investors: a lot of stocks take their time to shine. Still has a 10% growth rate, trades at 22x PE (kind of expensive, but WMT trades at 33x and COST at 45x). He thinks the whole space is pricey, and he'd put $$ into other areas.
Likes its positioning in food retail and its pharmaceutical business. Expansion of pharmacists' duties is helping traffic. Discount banners have really been benefiting from softness in the economy, and they have plans to expand the discount footprint. Acquisition of TNT, an Asian chain, is going well.
He wouldn't buy it today. It is expensive with a greater multiple than Metro or Empire. It is low margin business and can be considered a defensive stock. Costco is a great name in the space. The question also asked his opinion on buying it before or after the split. He would probably buy it before.
Stock split doesn't change his view of the fundamentals, which he likes. Leading grocer. Advantaged by all its discount banners, and consumers are gravitating toward these with all the economic uncertainty. Store brands like President's Choice and no name are resonating well. Shoppers DM has high organic growth prospects. Biggest loyalty program in Canada. PC Financial is another good segment.
Likes family-led companies, as they go for the long game.
Food as well as drug retailer. Grocery square foot growth is moderating now that Target has exited. Retailers now have more pricing power to pass through increases to consumers. L-T are closing non-productive stores. With lower energy prices, consumers may be spending more at the grocery store. Implementing their SAP system is largely behind them and should show benefits. She likes the shopper’s component. She is seeing synergies and cross selling products. There will be more private label flow through. As they pay off debt we should see benefits to the bottom line.