Loblaw Posts Better-Than-Expected Results In 1Q

Loblaw Companies (L) announced better-than-expected financial results for the quarter ended March 27, driven by an online sales boom. Canada’s largest grocer reported a quarterly profit 30% higher than a year ago, boosted by better numbers in its financial services business.

Loblaw Companies’ revenue for 1Q 2021 came in at C$11.87 billion, an increase of 0.6% from the revenue of C$11.80 billion reported in 1Q 2020. The company beat analysts’ estimates of C$11.72 billion, according to IBES data from Refinitiv. Food retail (Loblaw) same-store sales increased 0.1%, while drug retail (Shoppers Drug Mart) same-store sales declined 1.7%.

Meanwhile, the food and pharmacy company earned a profit available to common shareholders of C$313 million (C$0.90 per diluted share), an increase of 30.4% from C$240 million (C$0.66 per diluted share) in 1Q 2020. Loblaw’s financial services sector saw a reduction of C$20 million in its provisions for expected credit losses in the quarter, compared to a C$50 million increase in the first quarter of 2020.

On an adjusted basis, the company earned C$1.13 per diluted share, an increase of 16.5% from the adjusted profit of C$0.97 reported in the first quarter of 2020. It exceeds the average analysts’ estimate of C$0.87 per share.

Loblaw’s Executive Chairman Galen G. Weston said, “A year into the pandemic, our stores, supply chain, and digital assets have demonstrated resilience and innovation and are better prepared than ever to serve the needs of Canadians. Our strong financial results reflect continued momentum and positive consumer response to the value and services in our stores and our expanding online solutions.”

Loblaw Companies experienced a substantial boost in e-commerce sales in the first quarter, as they grew 133% from the first quarter of 2020. (See Loblaw Companies stock analysis on TipRanks)

Last week, BMO Capital analyst Peter Sklar reiterated a Hold rating on the stock and a $57.77 (C$71.00) price target (3.5% upside potential). Sklar said that the growth of online grocery is weighing on margins.

Overall, Loblaw Companies scores a Moderate Buy consensus rating among analysts based on 3 Buys and 4 Holds. The average analyst price target of C$76.57 implies an 11.7% upside potential from current levels. Shares have increased by 10% year-to-date.