Topic: How To Invest

LOBLAW COMPANIES $66.80 – Toronto symbol L

LOBLAW COMPANIES $66.80 (Toronto symbol L; Shares outstanding: 412.4 million; Market cap: $27.6 billion; TSINetwork Rating: Above Average; Dividend yield: 1.5%; is Canada’s largest food retailer, with about 1,200 supermarkets. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills. George Weston Ltd. (see below) owns 46% of the company.

In the three months ended October 10, 2015, Loblaw earned $408 million, or $0.99 a share, up 10.0% from $371 million, or $0.90, a year earlier. Sales rose 2.5%, to $13.9 billion from $13.6 billion. Excluding gasoline, same-store sales rose 3.1% at Loblaw and 4.9% at the 1,300-store Shoppers Drug Mart chain, which the company bought for $12.3 billion in March 2014.

Loblaw continues to integrate its operations with Shoppers Drug. It expects these moves to save it at least $222 million in 2016.

Savings from the acquisition are also helping Loblaw repay the money it borrowed to buy Shoppers. The company ended the latest quarter with total debt of $9.8 billion (or a manageable 35% of its market cap), down from $11.4 billion at the end of 2014. It also held cash of $1.3 billion.

The stock trades at a reasonable 16.7 times Loblaw’s forecast 2016 earnings of $4.01 a share.

The $1.00 dividend yields 1.5%.

Loblaw is a buy.


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