The news could have been better at Canadian supermarket chain Loblaw (TSE:L), but it could have been substantially worse. Its recently-revealed earnings report delivered some positives, but also a few bits of downside thrown in. Investors were not feeling especially optimistic, and shares slipped just over 2.5% in Wednesday morning’s trading.
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Earnings certainly had some bright spots. Net earnings came in at $777 million, around $2.53 per diluted share. And that compared nicely to the third quarter of 2023 when it brought in just $621 million, about $1.95 per diluted share. Revenue ticked up as well to $18.54 billion versus the $18.27 billion from the prior year.
Further, same-store food sales were up 1.3% and likely would have done better, but Canadian Thanksgiving this year was not timed in a fashion most would have preferred, according to reports. Same-store drug retail sales, meanwhile, were up 2.9%, though front-store same-store sales slipped 0.5%. Essentially, an article from European Supermarket Magazine noted, Loblaw took a hit from lost sales in electronics and other discretionary spending, which Canadians, much like Americans, seemed to rein in a bit.
Continuing to Pare Back
Customer traffic is on the rise at Loblaw stores, even if said customers are more focused on value deals and necessities rather than high-value electronics and the like. But Loblaw was sufficiently enthusiastic to hike its guidance for the full year to “low double-digits,” up from the original assessment of “high single-digits.”
In aid of that, a Globe and Mail report noted, Loblaw declared it would be willing to “…eliminate exclusivity clauses in store leases.” This would allow other grocery store chains to set up shop near Loblaw locations, but there was a caveat: Loblaw said that other retailers would have to be willing to remove their own exclusivity arrangements from store lease contracts.
Is Loblaw a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:L stock based on three Buys assigned in the past three months, as indicated by the graphic below. After a 51.78% rally in its share price over the past year, the average TSE:L price target of C$197.89 per share implies 8.3% upside potential.
