Loblaw Companies (L) announced a strong increase in profits for the quarter ended June 19, as the eat-at-home trend continued. Canada’s largest grocer beat profit and revenue estimates.
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Revenue for Q2 2021 came in at C$12.49 billion, an increase of 4.5% from C$11.96 billion reported in Q2 2020, and beat analysts’ estimates of C$12.16 billion. Food retail (Loblaw) same-store sales declined by 0.1%, while drug retail (Shoppers Drug Mart) same-store sales increased by 9.6%.
Meanwhile, the food and pharmacy company earned a profit available to common shareholders of C$375 million (C$1.09 per diluted share), an increase of 122% from C$169 million (C$0.47 per diluted share) from Q2 2020.
On an adjusted basis, Loblaw earned C$1.35 per diluted share, an increase of 87.5% from the adjusted profit of C$0.72 reported in the second quarter of 2020, and beat the average analyst estimate of C$1.21 per share.
Loblaw’s Executive Chairman Galen G. Weston said, “In the second quarter, Loblaw delivered strong financial performance while lapping the heightened sales and significant COVID-related costs experienced at the beginning of the pandemic. We maintained our focus on delivering value and quality to Canadians while providing a safe shopping experience, and are well-positioned to meet the evolving needs of customers as the pandemic restrictions begin to lift.”
Costs related to COVID-19 were C$70 million, down from C$282 million a year earlier. (See Loblaw Companies stock charts on TipRanks)
Two days ago, RBC Capital analyst Irene Nattel reiterated a Buy rating on the stock while raising her price target to C$103.00 (from C$96.00) This implies 25% upside potential.
Overall, Loblaw scores a Moderate Buy consensus rating among analysts based on 4 Buys and 3 Holds. The average Loblaw price target of C$84.20 implies 2.2% upside potential to current levels.
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