This company recently transferred its majority stake in Canada’s leading REIT to its parent company. As a result of that reorganization, it can now focus exclusively on expanding profits for its main retailing operations.
For example, the company recently launched a new enhanced delivery program modelled after the highly successful Amazon Prime service. It also continues to do a good job of attracting customers to the company’s customer rewards program.
Those moves should help maintain its high market share. What’s more, the stock is attractive in relation to the company’s overall earnings.
Why Spinoffs are Special
Discover the golden opportunities in spinoffs, takeovers and other special situations
Even if you're a conservative Canadian investor
you can profit handsomely and safely
LOBLAW COMPANIES LTD. $62(Toronto symbol L; www.loblaw.ca) is Canada’s largest food retailer with 1,082 supermarkets. Those stores operate under a variety of banners, including Loblaws, Zehrs, Provigo, Real Canadian Superstore and No Frills.
In March 2014, the company purchased the Shoppers Drug Mart chain for $12.3 billion in cash and shares. Shoppers now operates 1,335 drug stores across Canada.
Thanks to that purchase, Loblaw’s overall sales rose 44.3%, from $32.4 billion in 2013 to $46.7 billion in 2017.
If you exclude costs to integrate Shoppers and other unusual items, earnings soared 158.5%, from $696 million in 2013 to $1.8 billion in 2017. Due to the additional shares outstanding as a result of the Shoppers purchase, per-share earnings rose at a slower rate of 82.7%, from $2.48 to $4.53.
In the three months ended October 6, 2018, Loblaw earned $562 million. That’s up 2.4% from $549 million a year earlier. Due to fewer shares outstanding, per-share earnings gained 7.2%, to $1.49 from $1.39. Sales in the quarter rose 1.8%, to $14.45 billion from $14.19 billion.
Same-store sales for the company’s supermarkets rose 0.9% on slightly higher food volumes and prices. Same-store sales for Shoppers Drug Mart rose 2.5%. The gain reflects a 0.5% rise in prescription drug sales and a 4.3% increase in the sale of other merchandise.
Single loyalty plan is easier to administer
The company also continues to realize the benefits of merging its Loblaw loyalty rewards plan with Shoppers’ program.
Called PC Optimum, the combined plan now has 16 million members. By studying shopping habits, Loblaw can customize special offers to encourage repeat visits and higher spending per visit.
PC Optimum is part of Loblaw’s financial services business. It also issues credit cards, and sells insurance, Guaranteed Investment Certificates (GICs) and wireless telecommunication services.
In the third quarter, this division supplied just 2% of Loblaw’s total revenue, but 15% of its gross earnings. However, those earnings fell 17.3% in the quarter. That’s mainly because in the third quarter of 2017, the company ended its partnership with Canadian Imperial Bank of Commerce to provide savings and chequing accounts under the PC Financial brand.
Loblaw also aims to spur sales by expanding its PC Express program, which lets shoppers select grocery items online and pick them up at local stores. The company now offers that service at 513 locations, including 19 Shoppers stores in Ontario.
Following a successful test, Loblaw now plans to launch an enhanced delivery plan called PC Insiders.
For $9.99 a month (or $99 a year), participants receive free click-and-collect grocery shopping, plus free shipping from Shoppers Drug Mart and Joe Fresh clothing stores. They also earn higher reward points on purchases of certain items such as baby and beauty products. So far, the new program has attracted over 25,000 customers.
Inner Circle: Recent spinout should unlock value from core operations
A new move to simplify Loblaw’s holdings should also help draw investor attention to the improving prospects of its main retail operations.
In November 2018, Loblaw transferred its stake in Choice Properties REIT (Toronto symbol CHP.UN) to parent company George Weston Ltd. (Toronto symbol WN) through what it calls a “spin-out.”
Under the terms of the deal, Loblaw shareholders received 0.135 of a Weston common share for each L share they held. They will only pay capital gains taxes on their new Weston shares when they sell them.
Following the transfer, Weston owns 65.4% of the REIT, and Loblaw shareholders hold 16.8% of Weston shares.
Loblaw plans to maintain its current annual dividend rate of $1.18 a share (which yields 1.9%). In addition, Weston will raise its quarterly dividend by 5% to $0.515 a share. The new annual rate of $2.06 yields 2.2%.
If you combine those two payments, the total of $1.46 a share represents a 23.7% increase over Loblaw’s current dividend.
Choice Properties spinout also cuts Loblaw’s debt
The company’s balance sheet remains sound. As of October 6, 2018, its long-term debt was $12.3 billion. However, Loblaw’s debt included $5.7 billion of Choice Properties’ mortgages and other loans. With that liability removed, Loblaw’s debt falls to $6.6 billion. That’s a manageable 28% of its market cap. The company also held cash of $1.4 billion, or $3.80 a share.
Now that it no longer owns Choice Properties, the company’s projected earnings will probably dip from $4.60 a share in 2018 to $4.38 in 2019. The stock trades at just 14.2 times the 2019 estimate.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
Automatic Information: We receive and store certain types of information whenever you interact with us. For example, like many websites, we use "cookies," and we obtain certain types of information when your web browser accesses TSI Network.
Information from Other Sources: For reasons such as improving personalization of our service (for example, providing better product recommendations or special offers that we think will interest you), we might receive information about you from other sources and add it to our account information. We also sometimes receive updated delivery and address information from our shippers or other sources so that we can correct our records and deliver your next purchase or communication more easily.
We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
Cookies are alphanumeric identifiers that we transfer to your computer's hard drive through your web browser to enable our systems to recognize your browser and to provide features like "Remember Me" for our paying subscribers. Cookies are also used during the ordering process to help ensure your order is handled correctly. We do not extract any information about individual users or their computers as a part of this process.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, cookies allow you to take full advantage of some of TSI Network's most useful features, and may be required to access certain areas of our website.
Internet Protocol (or IP) addresses are collected for all visitors to this site. This information is used for the purposes of traffic analysis.
Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
Purchases of Merchandise: TSI Network websites may offer individuals the opportunity to purchase branded or other merchandise online. In connection with those purchases, customers may be asked to submit personal information, such as shipping addresses and credit card information, which is required to complete the transaction. TSI Network may also offer a Membership program, through which purchasers of its products may receive discounts on their online purchases. Membership registration may involve the submission of personal information to TSI Network and assignment of a user ID and password.
Agents: We employ other companies and individuals to perform functions on our behalf. Examples include fulfilling orders, delivering packages, sending postal mail and email, removing repetitive information from customer lists, analyzing data, providing marketing assistance, processing credit card payments and providing customer service. They have access to personal information needed to perform their functions, but may not use it for other purposes.
Promotional Offers: We may make our postal mailing list available to organizations offering products or services that might interest you. If you prefer NOT to receive these offers, please send an email with your name and address to email@example.com with "Do Not Rent Name" in the subject line. We do NOT make our email list available outside our organization.
Protection of TSI Network and Others: We release account and other personal information when we believe release is appropriate to comply with law; enforce the terms of the Legal notices that accompany this policy; or protect the rights, property or safety of TSI Network, our users or others. This includes exchanging information with other companies and organizations for fraud protection and credit risk reduction.
In addition to these limited disclosures of personal information, TSI Network may provide its affiliates or unaffiliated third parties with aggregate information about visitors to our sites. For example, we might disclose the median ages of visitors to our websites, or the numbers of visitors to our websites that come from different geographic areas. Such aggregate information will not include information of any individual visitors to our websites.
TSI Network may provide personal and other information to a purchaser or successor entity in connection with the sale of TSI Network, a subsidiary or line of business associated with TSI Network, or substantially all of the assets of TSI Network or one of its subsidiaries, affiliates or lines of business.
With Your Consent: Other than as set out above, you will receive notice when information about you might go to third parties, and you will have an opportunity to choose not to share the information.
Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
TSI Network requires persons and companies to which it discloses personal information to restrict their use of such information to the purposes for which it has been provided by TSI Network, to adequately protect the information, and not to disclose that information to others. TSI Network cannot be responsible, however, for any damages caused by the failure of unaffiliated third parties to honour their privacy obligations to TSI Network. Similarly, TSI Network is not responsible for the privacy policies and practices of other websites that are linked to our websites.
We’re always happy to receive feedback, comments and ideas from TSI Network visitors, and we encourage you to add your perspective to any issue by leaving your comments on the site.
To make sure users get the most out of the site’s comments function, we’ve provided a few guidelines:
Do not post threatening, harassing, defamatory, or libelous material.
Do not intentionally make false or misleading statements.
Do not offer to sell or buy any product or service.
Do not post material that infringes copyright.
Do not post information that you know to be confidential or sensitive or otherwise in breach of the law.
TSI Network will not accept responsibility for information posted in the comments.
Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
By commenting on TSI Network, you agree that you retain all ownership rights in what you post on the site, and that you will relieve us from any and all liability that may result from those postings.
Special Note for Parents
TSI Network does not sell products for purchase by children. If you are under 18, you may use TSI Network's site only with involvement of a parent or guardian
How do we protect your personal information?
TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
How do we maintain the integrity of your personal information?
TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: firstname.lastname@example.org.
How do I withdraw my consent to use Personal Information? Access, Correction, Inquiries and Complaints
If you wish to request access to, or correction of, your personal information in our custody or control, or find out how we've used or disclosed that information, please make your request in writing to us. We may need to verify your identity before searching for or providing you with personal information. In some circumstances, we may not be able to provide access to your personal information, for example if it contains the personal information of other persons, if it constitutes confidential commercial information, or if it is protected by solicitor-client privilege. If we deny your request for access to, or refuse a request to correct, your personal information, we will advise you of the reasons for this refusal.
If you do not want to receive promotional offers, please notify TSI Network by sending an email to email@example.com.
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
As discussed, you can always choose not to provide information even though it might be needed to make a purchase or to take advantage of TSI Network features.
You can add or update certain information as explained in the section "How Can I Change My Information?"
If you do not want to receive email or other mail from us, please notify TSI Network by sending an email to firstname.lastname@example.org.
Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
You are trying to access subscribers-only content. If you are already a subscriber, use the form below to log in.
Subscribers will have unlimited access to the magazine that helps people live more sustainable, self-reliant lives, with feature stories on tending the garden, managing the homestead, raising healthy livestock and more!
You are trying to access subscribers-only content. If you are already a subscriber, use the form below to log in.
Subscribers will have unlimited access to the magazine that helps the small-scale poultry enthusiast raise healthy, happy, productive flocks for eggs, meat or fun - from the countryside to the urban homestead!