The Canadian grocery scene has been quite impressive in recent years, thanks in part to the inflation-fuelled consumer rush toward lower-cost offerings. When it comes to leading grocers across the country, it’s really tough to top the likes of a Loblaw (TSX:L), which is fresh off another fantastic year of gains. Over the past year, shares have been up around 12.5%. However, since the lows of October 2023, shares are up over 20%, breaking through to new highs in the process.
Indeed, it’s off to the races again for the $42.5 billion grocery powerhouse. And I don’t think it matters if Canada is hit with a recession this year; Loblaw is still poised to do incredibly well as it looks to sustain its rally after consolidating for just shy of two years prior to its euphoric 2021 rally.
Could another solid year be in the cards for Loblaw shares?
Will shares of L see a repeat of the type of gains enjoyed in 2021? Probably not, but that doesn’t mean the firm can’t continue to deliver for investors over the quarters ahead. Personally, I think the $150 mark is likely to be eclipsed by year’s end as the company looks to enter an automatic share-buyback plan.
Though Loblaw has done extraordinarily well of late, it has made a few questionable moves that may have upset some of its long-time customers. Questionable price hikes on select goods may have made some rounds on social media in recent years. However, the moves don’t seem to be stopping Canadians from loading up the shopping cart at the local Loblaw-owned Superstore.
For your average Canadian, Loblaw still has one of the best value propositions in town, especially for fans of its value-conscious “No Name” label of products.
Loblaw is bringing back the 50% off stickers
Recently, Loblaw reversed its decision to ditch 50% off stickers on soon-to-be-expiring food after “feedback” from angry customers. It’s good news to see that the company is listening to its customers, but I continue to find the move perplexing. Loblaw should be looking for ways to delight its customers rather than seeking to subtly pad margins with expiring goods.
In any case, I think the matter will be forgiven and forgotten by customers, as Loblaw brings back those 50%-off labels on select goods. Though shopping at Loblaw stores has gotten a lot more expensive in recent years, I think it’s tough to find an alternative grocer that’s substantially cheaper. At the end of the day, Loblaw’s close proximity is an advantage that will stop Canadians from jumping ship to an alternative grocery retailer.
Loblaw stock: What about valuation?
Loblaw stock is cheap at 21.03 times trailing price to earnings. With a still bountiful 1.33% dividend yield, I’d continue to favour the name for investors seeking defensive exposure ahead of what’s sure to be a doozy of a year. I like to view Loblaw stock as a type of all-weather investment that can fare well, regardless of what the economy is in for. As for 2024, I’d look for shares to steadily move toward that $150 level.
