LOBLAW COMPANIES $72.20 - Toronto symbol L

LOBLAW COMPANIES $72.20 (Toronto symbol L; Shares outstanding: 412.6 million; Market cap: $29.4 billion; TSINetwork Rating: Above Average; Dividend yield: 1.4%; www.loblaw.ca) is Canada’s largest food retailer.

Loblaw plans to close 52 underperforming stores in the next year, including supermarkets, gas bars and stand-alone Joe Fresh clothing outlets. Following these closures, it will operate roughly 2,400 stores, including 1,250 Shoppers Drug Mart pharmacies.

The move will cut Loblaw’s yearly sales by $300 million, but it should add $35 million to $40 million to its annual gross profits. It also expects to save at least $200 million this year by merging its warehouses and other operations with Shoppers.

Loblaw earned $350 million in the three months ended June 20, 2015, up 17.8% from $297 million a year earlier. Earnings per share gained 14.9%, to $0.85 from $0.74, on more shares outstanding. Overall sales rose 2.2%, to $10.5 billion from $10.3 billion.

The stock is up 35% over the last year and trades at 20.7 times forecast 2015 earnings of $3.48 a share. The company’s 2016 earnings should reach $4.06 a share, and it trades at a more reasonable 17.8 times that forecast.

Loblaw is a buy

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