Loblaw’s Profit Rises 26% in Q3

Loblaw Companies (TSE: L), Canada’s largest grocer, announced lower sales in the fourth quarter than a year ago, but they were better than expected.

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Demand for groceries and other essentials remains strong. Loblaw also announced a net-zero carbon emissions commitment.

Revenue & Earnings

Revenue for Q4 2021 came in at C$12.76 billion, an increase of 2.8% from the revenue of C$13.29 billion reported in Q4 2020. It beat analysts’ estimates of C$12.64 billion.

Food retail (Loblaw) same-store sales increased by 1.1% while drug retail (Shoppers Drug Mart) same-store sales grew by 7.9%.

The food and pharmacy company earned a profit available to common shareholders of C$744 million (C$2.20 per diluted share) in the quarter, an increase of 140% from C$345 million (C$0.98 per diluted share) from Q4 2020.

On an adjusted basis, Loblaw earned C$1.52 per diluted share in the quarter, an increase of 24.6% from the adjusted profit of C$1.22 reported in the fourth quarter of 2020.

Costs related to COVID-19 were approximately C$8 million, down from C$42 million a year earlier.

Loblaw aims to achieve net-zero carbon emissions for its operational footprint by 2040, and achieve net-zero for Scope 3 emissions, including those generated by suppliers, by 2050.

Management Commentary

Loblaw president and chairman Galen G. Weston said, “Loblaw showed strength in the fourth quarter as we delivered improved results across the board. We are effectively managing through a challenging environment of supply chain constraints and higher costs. With a clear strategic agenda, we remain confident in our ability to create value over the long term.”

Wall Street’s Take

On February 18, RBC Capital analyst Irene Nattel kept a Buy rating on Loblaw and set a price target of C$118. This implies 17.5% upside potential.

Overall, Loblaw scores a Moderate Buy consensus rating among analysts based on three Buys and two Holds. The average Loblaw Companies price target of C$110.71 implies 10.3% upside potential to current levels.

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