Loblaw (TSE:L) customers may be in for a little windfall after a new lawsuit turned out better than expected for anyone who’s bought bread from its grocery stores. Loblaw, along with its parent company George Weston (TSE:WN), are on the hook for $500 million to settle the suit. Yet, this didn’t hurt Loblaw nearly as badly as you might think, as it’s down only fractionally in Friday morning’s trading.
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The lawsuit was actually part of a larger net that snared several grocery operations in it and alleged that the grocery stores deliberately colluded to inflate the price of pre-packaged bread in Canada from 2001 all the way up to 2015.
Interestingly, the issue was self-reported; Loblaw was engaged in the price fixing, and Loblaw called the law down on itself, then worked to get the settlement in question. Loblaw and George Weston chairman Galen Weston declared the settlement “the right thing to do” and went forward accordingly. Moreover, that $500 million settlement represents the largest antitrust settlement in Canadian history, so it’s hard to see how it won’t ultimately be approved by the courts.
Almost Disturbingly Upright
The cynics out there are probably squirming in their chairs. This is oddly upright behavior for modern business, and it actually got more pronounced. Loblaw rolled out the Fresh Promise program, which noted that those who find their produce anything less than fresh will be replaced and refunded, within seven days. And no questions asked, either. Basically, noted supermarket division president Frank Gambioli, “…if it’s not fresh, it’s free.”
It would seem like an easy program to take advantage of, but something like this would likely make for a clear win for Loblaw. That’s especially true for groceries. Most grocery stores are at least somewhat fungible; a pound of hamburger is a pound of hamburger, and only quality and price step in as differences. Putting weight behind a promise of freshness and quality could be just the ticket to draw customers, who need to make sure their purchases go as far as they can.
Is TSE:L a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:L stock based on four Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 46.2% rally in its share price over the past year, the average TSE:L price target of C$168.99 per share implies 1.09% upside potential.
