There are few companies on the Canadian market that have the strength of Loblaw Companies (TSX: L). Loblaw stock has been expanding rapidly in the last decade, and earnings were no different. Yet the question is whether the stock can keep it up. So, after an increase of 3% in earnings, does Loblaw stock look like a buy?
About Loblaw stock
The reason this company has done so well comes down really to its size. Loblaw stock is one of the largest food and pharmacy retailers in Canada. It’s a conglomerate that operates a variety of grocery, pharmacy, health, and beauty, apparel, general merchandise, financial services, and mobile products and services.
While well known for its grocery retail, the company provides a network of retail stores under various banners, including Loblaws, Real Canadian Superstore, No Frills, Shoppers Drug Mart, and more. The company has also expanded its presence in the e-commerce space, offering online grocery shopping and home delivery services through its websites and mobile apps. Customers can order groceries and other products online and have them delivered to their doorstep, providing convenience and flexibility.
Even more interesting has been its President Choice Financial brand. This offers banking and financial services, including credit cards, savings accounts, and insurance products. These services are often integrated with its retail operations, providing customers with additional benefits and rewards. So, let’s see how all this stacked up during earnings.
What happened?
Let’s turn our attention to the first quarter of 2024 for Loblaw stock. The company increased profit and revenue, with increased traffic to stores across the board. Furthermore, the company raised its quarterly dividend by a whopping 15%, which brings it to $2.052 per share annually.
Revenue for the quarter hit $13.58 billion, with net earnings at $459 million. It was an enormous jump from results of last year. Retail sales hit $13.29 billion, with same-store sales at food stores at $9.4 billion. Part of this came as the company continued to focus on “value” or keeping food costs low.
The thing is, while there was a major increase year over year, quarter over quarter, there wasn’t a large increase. Loblaw stock reported revenue of $14.53 billion in the fourth quarter, with retail sales at $14.18 billion. Net earnings were also higher at $541 million, showing that perhaps there is a bit of a slowdown for the stock.
Bottom line
Loblaw stock is certainly a strong company that isn’t going anywhere. However, I don’t believe a major rise in share price is necessary. Instead, the macro picture of an improving economy will be the likely catalyst that sends Canadians back to these locations.
Until then, it’s best that Loblaw stock continues to focus on value, as it continues to attempt to do. The company needs to compete in a very competitive marketplace where it’s long dominated the sector. Yet these results could be a sign of a slowdown as Canadians continue to go elsewhere for the best price.
Even so, Loblaw stock is strong, and it now offers a 4.37% dividend yield. So, if you’re willing to wait, it could still be a strong long-term winner.
